Salasar Tech Engineering Ltd. - IPO Note
Fixed price: Rs. 108
Issue Date: 12th – 17st July
Salasar Techno Engineering Ltd (STEL) is one of the leading provider of customized steel fabrication and infrastructure solution provider in India for telecommunication towers, transmission towers, substation structures and solar module mounting structures. In addition to manufacturing, STEL also undertake civil foundation work, erection of towers at site through sub-contractor. They are one of the major private sector telecom tower installation and maintenance service providers. STEL has technical tie-up with Ramboll (a Denmark Co) which has technical expertise in telecom tower structural design. They cater to a large customer base across various industries and prominent among them are Reliance Jio, American towers, Indus towers, Bharti Infratel, BHEL, KEC international, Power Grid and others.
a) Order book of Rs 350Cr to provide revenue visibility going ahead
b) Business agreement with Ramboll to provide competitive technology advantage
c) Strong track record and sound financial strength
d) Doubling of the galvanizing facility from internal accrual
e) Presence across different segment to protect against cyclicality in any given sector
Details of the Issue:
The public issue of STEL consists of fresh issue of Rs 35.87 cr.
Objects of the Issue:
The object of the issue is mainly to raise working capital requirement including margin money and for general corporate purposes.
Valuation and Recommendation:
Over FY13- FY17 the revenues of STEL have grown at a CAGR of 16% however, growth in Gross profit, EBIDTA and net profit were 27%, 24.5% and 43.2% respectively. Gross and EBIDTA margin improved from 26% to 38% and 8% to 10.6% respectively from 2013 to 2017. STEL has consistently improved its return ratios over a period of time. ROCE was 13.5% in FY13 versus 22.9% in FY17 and ROE has improved from 9.7% in FY13 to nearly 21.6% in FY17. On the valuation front, at the issue price of Rs 108, STEL is offered at PE of 7x on a fully diluted basis. We recommend subscribing to the issue.
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