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PSP Projects shares fall 5.24% on listing

LiveMint logoLiveMint 29-05-2017 Nasrin Sultana

Mumbai: Construction company PSP Projects Ltd debuted at 5.24% discount on the exchanges over its issue price of Rs210 per piece. The stock opened at Rs199 a share and touched a high and a low of Rs199 and 189.05 respectively. In intraday it fell as much as 10%.

At 10.03am, the scrip was trading at Rs192 on BSE, down 8.6% from previous close while India’s benchmark Sensex Index fell 0.01% to 31,029.01 points.

Issue of the Gujarat-based construction company, which aimed to raise Rs211 crore was oversubscribed 8.58 times with price band of Rs205-210 per share.

Its qualified institutional buyers (QIBs) portion was oversubscribed 8.38 times, non-institutional investors 10.39 times and retail investors portion 6.47 times.

The initial public offer (IPO) comprised fresh issue of up to 72 lakh shares and offer for sale of up to 28.80 lakh shares by existing shareholders. The anchor book allocation of the company saw subscription from investors such as Reliance Mutual Fund, SBI Mutual Fund, Axis Mutual Fund, Sundaram Mutual Fund and Birla Sun Life Insurance.

Proceeds of the funds raised throught the IPO will be used for working capital and funding capital expenditure requirements of the company.

“PSP Projects is planning to leverage its expertise and look at opportunities in higher ticket size projects which offer better margins. Over FY12-16, the company had EBITDA margins of 8%, which improved in 9MFY17 to 13.6%. Better client optimization and project mix would help improve profitability and cash flows,” Centrum Wealth Research said in a note on 15 May.

As of 31 March 2017 its standalone total order book stands at Rs729.2 crore which comprised 17 institutional projects, four industrial projects, four government projects and two government residential projects.

Further, subsidiaries and joint ventures have total order book of Rs90.9 crore and Rs107.4 crore respectively as of 31 March 2017. The company offers diversified range of construction and allied services across industrial, institutional, government, government residential and residential projects in India.

Over FY12-16, it reported revenue and net profit compound annual growth rate of 27% and 31%, respectively. It has reported positive free cash flows from operations for the last 5 years.

“PSP manages its working capital requirements well and has negative working capital and net debt since last 5 years. Going forward, with strong order book, diversification of geographies and growth in the construction industry, PSP is likely to deliver healthy financial performance,” said Nirmal Bang Securities Private Ltd in a 17 May report.

Historically PSP has executed 70% of its total projects in Gujarat. Its clientele includes the government of Gujarat, Sabarmati River Front Development Corp. Ltd, Cadila Healthcare among others.

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