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Abhishek Integrations

• Abhishek Integrations is coming out with an initial public offering (IPO) of 9,90,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share.

• The issue will open on June 8, 2021 and will close on June 11, 2021.

• The shares will be listed on the Emerge platform of NSE.

• The share is priced 5 times higher to its face value of Rs 10.

• Book running lead manager to the issue is Beeline Broking.

• Compliance Officer for the issue is Hetal Karshanbhai Vaghela.

Profile of the company

The company is ‘Class A’ Gujarat Government approved contractor and having team of around more than 490 employees on its payrolls. The company is engaged in the developing, operating and maintaining of electrical and mechanical work and its installation at various Airports in India, Fire fighting solutions as a system integrator, perimeter light fittings at Airports. Its expertise is to provide end to end solution to AAI in the installation, designing, commission, testing, implementation, management and operational support for all kinds of electrical and mechanical work, fire fighting solution, perimeter lighting, Operation and maintenance of GLF/Airfield Lighting System, security work, supply of electrical and GLF spares to AAI. It is exclusive engaged in work awarded by Airport Authority of India (AAI).

At present, the company is having around 22 projects on hands of AAI. The projects are located at Ahmedabad, Allahabad, Aurgabad, Bhopal, Gaya, Gondia, Indore, Jabalpur, Jaipur, Jaisalmer, Madurai, Patna, Pune, Tezpur and Vadodara. It has also awarded project by AAI for operation and Maintenance of electrical and Maintenance located at Port Blair –South Andaman. The company exclusively works with AAI and planning to work with AAI and other government/semi government authorities in many other regions in India and outside India. It has also awarded tender for supply of electrical and GLF spares to AAI in the region of Patna, Ahmedabad and Gondia.

Proceed is being used for:

• Meeting incremental working capital requirements.

• General corporate purpose.

• Meeting public issue expenses.

Industry overview

The services sector is not only the dominant sector in India’s GDP, but has also attracted significant foreign investment, has contributed significantly to export and has provided large-scale employment. India’s services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction. The services sector is a key driver of India’s economic growth. The Government of India recognises the importance of promoting growth in services sector and provides several incentives across a wide variety of sectors like health care, tourism, education, engineering, communications, transportation, information technology, banking, finance and management among others. The sector contributed 55.39% to India’s Gross Value Added at current price in FY20. GVA at basic prices at current prices in the second quarter of 2020-21 is estimated at Rs. 42.80 lakh crore ($ 580.80 billion), against Rs. 44.66 lakh crore ($633.57 billion) in the second quarter of 2019-20, showing a contraction of 4.2%. According to RBI, in September 2020, service exports stood at $ 17.28 billion, while imports stood at $ 10.13 billion.

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. India was ranked 44 out of 167 countries in World Bank's Logistics Performance Index (LPI) 2018. India ranked second in the 2019 Agility Emerging Markets Logistics Index. According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDIs in the construction development sector (townships, housing, built up infrastructure and construction development projects) and construction (infrastructure) activities stood at $ 25.78 billion and $ 17.22 billion, respectively, between April 2000 and September 2020. The logistics sector in India is growing at a CAGR of 10.5% annually and is expected to reach $ 215 billion in 2020.

Pros and strengths

Capturing the growth potential and government focus on sector: Infrastructural growth in India has gained momentum with the reforms and benefits extended by the government. Government have taken various steps for the infrastructural growth of the country through increased allocation, facilitation of incremental lending to the infrastructural sector and discounted lending rates to infrastructure sectors. With the increased focus of the government in the infrastructural sector can be a major growth opportunity for the company. Its services of installation, designing, supply, testing and commission of fire protection systems/instruments and detections systems is essential in all this kinds of infrastructural projects.

Timely completion of projects: Timely completion of the project as per the schedule and terms of the contract is of utmost importance for us. The company has a good track record for timely completion of projects with possibly minimum cost overruns. Timely completion of projects also helps company in reducing the possibilities of any penalty or liquidated damage being imposed upon by the clients and maintaining good reputation among the clients and gaining repeated orders.

Long term relationship with the clients: The company focuses on providing the customers (AAI) with the desired and standard quality of work. By providing the desired quality and standards of work, the company aim to achieve highest level of customer satisfaction. Because of its good reputation with the clients, it gets positive support from the clients.

Risks and concerns

Dependent on few numbers of customers, suppliers: The company’s top ten customers contribute 76.47%, 100% and 100% for its total sales for the year ended March 31, 2021, 2020 and March 31, 2019 respectively. All the projects on hands are awarded by AAI. The company exclusively works with AAI. Further, its top ten suppliers delivered 98.83%, 100% and 100% of the total materials purchased for the year ended March 31, 2021, 2020 and 2019 respectively. Any decline in its quality standards, growing competition and any change in the demand, may adversely affect its ability to retain them. It cannot assure that it shall generate the same quantum of business, or any business at all, and the loss of business from AAI may adversely affect its revenues and results of operations.

Require high working capital: The company operates in a working capital intense industry therefore its business demands substantial funds towards working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favorable terms, at a future date, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.

Face competition: The industry, in which company is operating, is highly and increasingly competitive and its results of operations and financial condition are sensitive to, and may be materially adversely affected by, competitive pricing and other factors. Competition may result in pricing pressures, reduced profit margins or lost market share or a failure to grow its market share, any of which could substantially harm its business and results of operations. There can be no assurance that it can effectively compete with its competitors in the future, and any such failure to compete effectively may have a material adverse effect on its business, financial condition and results of operations.

Outlook

Incorporated in 2017, Abhishek Integrations is engaged in Developing, Operation and Maintenance of HT & LT Electrical and Mechanical and its installation at Terminal Buildings of Airports, installation and maintenance of Fire Fighting solutions as a system integrator, operation and maintenance of GLF/Airfield Lighting System, Substation including perimeter light fittings at Airports, LT switchgears at various Airports located in PAN India. At present, it is having around 22 projects on hands of Airport Authority of India (AAI). The projects are located at Ahmedabad, Allahabad, Aurgabad, Bhopal, Gaya, Gondia, Indore, Jabalpur, Jaipur, Jaisalmer, Madurai, Patna, Pune, Tezpur and Vadodara. In addition, its core capabilities of design, engineering, procurement, construction and commissioning which makes it one stop solution in EPC services of various kind of fire protection and detections systems. On the concern side, the operation and maintenance, installation and commissioning of company’s projects involves various implementation risks including construction delays, delay or disruption in supply of raw materials, unanticipated cost increases, force majeure events, cost overruns or disputes with its counter-parties. Besides, its business is significantly affected by the availability, cost and quality of the materials and bought out items.

The company is coming out with a maiden IPO of 9,90,000 equity shares of Rs 10 each at a fixed price of Rs 50 per equity share to mobilize Rs 4.95 crore. On the performance front, other income of the company was Rs 0.25 lakh and Rs 0.10 lakh for FY 2020-21 and FY 2019-20 which is on account interest on term deposit. Profit after Tax (PAT) increased from Rs 3 lakh in the FY 2019-20 to Rs 11.89 lakh in FY 2020-21 showing increase of 296.87%. The company intends to continue its focus in enhancing the project execution capabilities so as to derive benefits of client (AAI) satisfaction by timely completion and improvement in the operating margins. It also intends to continue its focus on performance and project execution in order to achieve maximum return from its resources. It also plans to continue its strategy of diversifying across states and increase orders outside the state of Gujarat for the growth plan of its business.