Stock Market

IRCON has miles to go, investors can skip offer

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The Union government plans to offload over 10.5 per cent of its stake in IRCON International to raise upto Rupees 467 crore.

While the company has a strong order book, its past financials are not encouraging.

Investors therefore may wait until the company demonstrates sustainable revenue and profit growth. BUSINESSIRCON International is a ‘miniratna’ public sector unit’, which undertakes construction of roads, highways, bridges, tunnels, commercial and residential properties, and development of industrial areas.

It is present in Malaysia, Sri Lanka, Bangladesh, South Africa and Algeria.

It earned 15 per cent of revenue from exports in FY18.

In the coming quarters, the company plans to enhance its presence in international markets and focus on high-value projects. FINANCIALSAs of FY18, the company had an order book of Rupees 22,407 crore, which gives revenue visibility of over five years.

Railway projects contribute 86.7 per cent to its order book.

The company’s cash and bank balance was Rupees 4,691 crore at the end of March 2018 with debt-equity ratio of 0.9.

Revenues grew to Rupees 4,028 crore in FY18 from Rupees 2,493 in FY16.

Net profit grew to Rupees 412 crore in FY18 from Rupees 393 crore in FY16. VALUATIONAt the upper end of the price band, on earnings per share (EPS) of Rupees 43.6, the issue is commanding a price-earnings (P/E) multiple of 10.9.

Its return on equity (RoE) was 10.9 per cent in FY18. Well-placed listed construction companies such as KNR Constructions, PNC Infratech, and Dilip Buildcon trade at P/E of 11.6, 14.9, 23.7 and 30.2 respectively.

As of FY18, KNR Constructions, PNC Infratech, and Dilip Buildcon had RoE of 26.1 per cent, 15.4 per cent and 28.2 per cent respectively. IRCON’s past financials are not encouraging.

However, considering its robust order book, investors may track the company’s performance after listing.




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