Know Your IPO : Silverpoint Infratech

Silverpoint Infratech (SIL), a West Bengal-based company, is all set to come up with its initial public offering (IPO) to raise an amount of Rs 12 crore at a fixed price of Rs 15. The issue will open on Aug 12 this year and will close on Aug 14. Through this offer, the company has proposed to issue 80 lakh equity shares. The issue is an offer for sale (OFS) by the existing shareholders Saffron Vinimay (40 lakh) and Shivmangal Commercial (40 lakh), so the raised fund will not come to the company. Out of the offered size of 80 lakh equity shares, 4.16 lakh equity shares are reserved for the market makers. The lead managers for this issue are Inventure Merchant Banker Services.

SIL is involved in the business of land development, construction services, road construction, civil & structural construction services and infrastructure sector projects. The company's client list includes Binani Cement, PACL India, Prakash Constrowell, NKC Projects, Jain Infraprojects, VKS Projects Shri Mahavir Ferro Alloys etc.

The company has posted healthy results in FY12 as compared to FY11. Its revenues grew by 115% to Rs 236.41 crore in FY12 on a YoY basis. Revenues for the 10-month period of FY13 (up to January 2013) stood at Rs 216 crore. During this period, the operating expenses showed a drastic jump of 924% to Rs 109.51 crore. This is mainly due to huge increase in cost of services provided by the company. The cost of services in FY11 was just 10% of the revenues, which grew to 46% of revenues in FY12. Moreover, the net profit for the company grew to Rs 53.46 lakh in FY12 from Rs 22.64 lakh in FY11.

Through this issue, SIL would be listed on the BSE SME platform and sell around 80 lakh equity shares.

The company has quoted an issue price of Rs 15 per share. With this issue price, the company's share price will trade at a PE of 131.11x of its FY12 EPS of Rs 0.11. Whereas, SIL's peer companies in the listed space like Jaypee Infratech, RPP Infra Projects, Era Infra Engineering and NCC were trading at a trailing 12-month PE of 5.20x, 6.76x, 16.96x and 12.29x respectively. 

Considering these, the issue price of SIL seems quite expensive. Along with this, the company has no brand recognition. Though, the company has showed a good topline and bottomline during FY12, its previous financial years (FY10 and FY09) showed a decline in its profit. Considering all these factors, we recommend investors not to subscribe to this issue.