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Jayant Infratech

• Jayant Infratech is coming out with an initial public offering (IPO) of 924000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 67 per equity share.

• The issue will open on June 30, 2022 and will close on July 05, 2022.

• The shares will be listed on SME Platform of BSE.

• The share is priced 6.70 times higher to its face value of Rs 10.

• Book running lead manager to the issue is Gretex Corporate Services.

• Compliance Officer for the issue is Sagar Subhash Gulhane. 

Profile of the company

Incorporated in the year 2003, the company is engaged in the field of Railway Infrastructure Development involving design, drawing, supply, Erection and Commissioning of 25KV, 50Hz Single Phase Traction Overhead Equipment. The key clients of the Company include various zones of the Indian Railways like Eastern Railway, South Eastern Railway, South East Central Railway, Northern Railway, East Coast Railway, North Frontier Railway, East Central Railway, Central Organisation for Railway Electrification (CORE) as well as large Public and Private Sector. Its major work encompasses electrification of new & existing Railway tracks helping nation to reduce dependability of fossil fuels thereby reducing the carbon print foot. Its services include concept to commissioning of Railway Infrastructure right from design to energization.

The company has completed hundreds of Kms of electrification & erected several traction substations in a span of 20 years. The company is based out in Chhattisgarh and this gives it an opportunity to offer its services to coal mines. Usually, coal mines in Chhattisgarh have to develop siding which is used to load and transport coals from mines to its respective customers. A siding, in rail terminology, is a low-speed track section distinct from a running line or through route such as a main line, branch line, or spur. It may connect to through track or to other sidings at either end. Sidings often have lighter rails, meant for lower speed or less heavy traffic, and few, if any, signals. It has over the years developed many siding in the state to facilitate coal mines.

Proceed is being used for:

• Payment of Security Deposit for renting of Office Space.

• Working Capital Requirements.

• General Corporate Purposes.

Industry overview

The Indian Railways (IR) has set a target of 100 per cent electrification of its network by December 2023, said economic survey 2021-22. The Indian Railways (IR) has set a target of 100 per cent electrification of its network by December 2023, said economic survey 2021-22. To achieve this target with creation of other infrastructure in the sector, the government has increased the CAPEX (Capital expenditures) by five-fold in the last seven years. India has the fourth largest railway network with over 22,593 operating trains (9141 freight and 13,452 passenger) with a daily passenger count of 24 million passengers and 203.88 million tonnes of freight. India's railway network is recognised as one of the largest railway systems in the world under single management. The railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an energy efficient and economic mode of conveyance and transport. Indian Railways is the preferred carrier of automobiles in the country.

Government of India has focused on investing in railway infrastructure by making investor-friendly policies. It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains. At present, several domestic and foreign companies are also looking to invest in Indian rail projects. Revenue growth has been strong over the years. Indian Railways’ revenue reached $ 23.30 billion in FY22 (Until March 10, 2022). The gross revenue stood at $ 16.89 billion in FY21 (until March 10, 2021). In case of freight earnings, it experienced a year-on-year growth of 21.81%. It stood at $ 17.68 billion in FY22 (until March 2022) as compared to FY21 which was at 16.04 billion. Passenger earnings for Indian Railways was at Rs. 50,669.09 crore ($ 7.25 billion) in FY20. The total passenger revenue stood at $ 4.66 billion until March 10, 2022 as compared to FY21 which was at $ 2.03 billion. This was a 162.46% growth. The gross revenue stood at Rs. 85,588.96 crore ($ 11.44 billion) in FY22 (until September 2021).

Pros and strengths

Engaged in an Industry of paramount national importance and undisputed growth potential: Electrified railway lines are the most cost efficient and pollution free means of railway transportation. The Company has over the years mastered the skills of providing the basic infrastructure for operating the electrified railway routes. Besides keeping in view the rising crude oil prices and international concerns on global warming due to the pollution emanating from the smoke coming out of diesel locomotives. The Country’s dependence on the diesel locomotives has to be reduced at the earliest. As the company is providing the highly skilled service of developing the basic transmission lines from where the electric locomotives draw the energy. It goes without saying that its growth potential is undisputed and unparallel in light of the fact that more than 50% of the railway routes are still non electrified in order to improve the situation and to make 100% of the Railway Routes Electrified. The Indian Government through the Ministry of Railways has made concrete plans to complete the task of 100% electrifications of the routes in the next 5 years.

Exemplary Track Record in Execution of the Projects: In the past the projects undertaken by the company were completed in the allotted time to the fullest satisfaction of the clients in terms of the Quality. Further the company has the distinction of being awarded with a citation from the central organization of railway electrification. Allahabad for completing a project in a record period of eight months, however the allotted completion schedule was twelve months. During the last two decades there has not been a single instance where the company’s units have been charged for failure to complete the projects in time because of deficiency in service on account of the units.

Satisfied Chain of Vendors: The company has to procure its raw materials like masts, copper wire, insulators, isolators, transformers, tubes and other allied OHE fittings from various approved vendors. Over the years the company has been able to develop extremely cordial relationship with the vendors who have always stood by the company in times of need. The company on its part has always tried to be punctual and transparent in keeping its commitment towards its vendors.

Risks and concerns

Shortage or non-availability of power facilities: The company’s business processes require substantial amount of power facilities. The quantum and nature of power requirements of its industry and Company is such that it cannot be supplemented/ augmented by alternative/ independent sources of power supply since it involves significant capital expenditure and per unit cost of electricity produced is very high in view of increasing oil prices and other constraints. It is mainly dependent on State Government for meeting its electricity requirements. Any defaults or non-compliance of the conditions may render its liable for termination of the agreement or any future changes in the terms of the agreement may lead to increased costs, thereby affecting the profitability. Further since it is majorly dependent on third party power supply; there may be factors beyond its control affecting the supply of power.

Strong competition: The market in which the company is doing business is highly competitive on account of organized players. Players in this industry generally compete with each other on key attributes such as technical competence, experience, pricing and timely delivery. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. Moreover, the unorganized sector offers their products at highly competitive prices which may not be matched by it and consequently affect its volume of sales and growth prospects. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and its financial condition.

Dependent on third party transportation providers: The company is engaged in the field of Railway Infrastructure Development involving design, drawing supply, erection, and commissioning sector of India, its success depends on the smooth supply and transportation of the raw materials required for electrification process from the manufacturers to its unit which are subject to various uncertainties and risks. In addition, raw materials may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of raw materials which may also affect its business and its results of operation negatively. A failure to maintain a continuous supply of raw materials in an efficient and reliable manner could have a material and adverse effect on its business, financial condition and results of operations.

Outlook

Jayant Infratech primarily undertakes Railway Infrastructure Development work. It is a technology-driven company with excellence in Railway Electrification and Infrastructure projects. The company is engaged in designing, drawing, supplying, erection, and commissioning of 25KV, 50Hz Single Phase Traction Overhead Equipment. Large public and private sector companies such as Eastern Railway, South Eastern Railway, South East Central Railway, Northern Railway, East Coast Railway, and North Frontier Railway are the key clients served by the firms. The company has kept its focus on the Electrification sector of the Railways keeping in view the vast scope of work in the existing and the untapped areas. As a result, the company has been able to build its resources capable of executing large, medium and small electrification projects in the most efficient and timely manner. On the concern side, the company operate mainly in oversaturated railway zones of India which result in delay in work progress due to non-availability of traffic block. This results to increase its labour cost and overhead cost and due to this its business adversely affects. Besides, the company require several approvals, licenses, registrations and permits in ordinary course of its business. Additionally, it needs to apply for renewal of approvals which expire, from time to time, as and when required in the ordinary course.

The company is coming out with a maiden IPO of 924000 equity shares of Rs 10 each at a fixed price of Rs 67 per share to mobilize around Rs 6.19 crore. On performance front, the company’s total revenue decreased by Rs 1,136.27 lakh or 32.00% to Rs 2414.60 lakh for the period ended on December 2021 from Rs 3,550.87 lakh for the financial year 2020-21. Its profit after tax increased by 19.31% to Rs 112.63 lakh for the period ended on December 31, 2021 from Rs 139.58 lakh for the financial year 2020-21, reflecting a net decrease of Rs 26.96 lakh. Meanwhile, the company intend to focus on use of targeted marketing initiatives such as digital and print advertisements, as well as marketing through traditional channels such as outdoor advertising. Its marketing and advertising initiatives shall be directed to increase brand awareness, acquire new customers, drive customer traffic across its retail channels and strengthen brand recall value. It also intend to invest adequate time and resources for training its employees, which would foster mutual trust, improve the quality of customer service and place further emphasis on continued retention.