Hyderabad-based power infrastructure service provider Power Mech Projects has filed its draft red herring prospectus (DRHP) to raise over Rs 144.5 crore through a fresh issue of shares besides an offer for sale by its financial investor Motilal Oswal Private Equity. The PE investor would be selling bulk of its holding in the public issue.
It would add up as another PE-backed firm to file for a public issue. The bevy of companies lining up for IPO is led by those who count PE firms as existing investors. In most cases the PE investor is part or fully exiting in the proposed issues.
PE-backed firms to have filed DRHPs for IPOs include CL Educate, PNC Infratech, Ortel, Monte Carlo and Adlabs Entertainment. Some like Snowman Logistics and Sharda CropChem have already completed their public issues.
Here's a snapshot on the proposed IPO:
- Issue of 4.27 million shares including offer for sale by Motilal Oswal PE of around 2.14 million shares.
- The company expects to raise over Rs 145 crore through the fresh issue; overall issue size could be around Rs 300 crore.
- Kotak Mahindra Capital, India Infoline and Motilal Oswal are the book running lead managers.
- Power Mech Projects is into power infrastructure services and provides erection, testing and commissioning of boilers, turbines and generators (ETC-BTG) and balance of plant (BOP) works, civil works and operation and maintenance (O&M) services.
- Besides power sector, it serves clients in industries including petrochemicals, steel and cement.
- Bulk of its revenues comes from erection work.
- In June 30, 2014, it entered into an agreement with Chengdu Pengrun New Energy Development Company Limited to establish a joint venture entity in Hong Kong for the distribution of equipment and spare parts, including boilers, turbines and generators, for O&M projects in India.
- Aggregate order book as of June 30, 2014 was Rs 3,191.7 crore.
- In addition to its corporate headquarters in Hyderabad, it has four regional offices in Ghaziabad (NCR), Nagpur, Mumbai and Kolkata.
- It has also executed various international power projects in the Middle East, North Africa, South Asia and South America. In FY14, 6.43 per cent of total revenue from operations was generated from projects executed outside India. In March 2013, it established a branch office in Abu Dhabi to focus on power projects in the Middle East and Africa.
- As of August 31, 2014, it had 2,283 full time employees, of which a large number was qualified engineers. It also employed more than 30,000 contract labourers.
- Between FY10 and FY14, its total income increased at a CAGR of 39.37 per cent from Rs 321 crore to Rs 1,211 crore. Its profit after tax for FY14 was Rs 68 crore.
Use of proceeds
- Of the total, the company will use Rs 120 crore for funding working capital requirements and Rs 24.5 crore for repayment of debt.
Motilal Oswal Private Equity had invested Rs 40 crore in the company starting in 2009 and currently holds 19.89 per cent stake. It is selling over four-fifths of its holding in the IPO and will own 2.55 per cent stake post issue.
Based on the limited details of the proposed issue, the PE investor could be making a multi-bagger. Watch out this space for updates on the issue as pricing for the shares is finalised.
(Edited by Joby Puthuparampil Johnson)