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An emerging EPC Player... 

Ceigall India Ltd. (CIL), founded in 2002, specializes in constructing state and national highways, elevated corridors, bridges, flyovers, and rail overbridges, along with highway maintenance. The company's operations are divided into Engineering, Procurement & Construction (EPC), Hybrid Annuity Model (HAM), and Operation & Maintenance (O&M) projects, covering ten states in India. CIL has completed over 34 projects, including 16 EPC, one HAM, five O&M, and 12 Item Rate projects. Currently, it is managing 18 ongoing projects, comprising 13 EPC and five HAM projects. CIL's clients include public sector entities like IRCON, MES, and BSRDCL.

* With the GoI maintaining a strong emphasis on infrastructure development and a substantial budget allocation for capital expenditure (3.4% of GDP), the company is well-positioned to capitalize on industry growth.

* The company has consistently grown in revenue and profitability, with revenue, EBITDA, and PAT achieving a CAGR of 63.5%, 66.9%, and 55.5%, respectively, from fiscal 2022 to 2024.

* In FY24, the EBITDA margin and PAT margin stood at 17% and 10%, respectively. Return ratios have remained strong, with RoE at 33.6% and RoCE at 31.9% for the same period.

* As of June 2024, CIL holds an order book valued at Rs.9,471cr., which is 3.2 times its FY24 revenue, ensuring strong revenue visibility for the coming years. The order book comprises 61% EPC and 39% HAM projects.

* With NHAI projects constituting 80% of CIL’s order book, which will lead to an unhindered execution of projects and thereby supporting the working capital cycle.

* CIL has a consolidated debt-to-equity ratio of 1.3x in FY24. By utilizing Rs.413.4 cr. of IPO proceeds for debt payment, the company's debt/equity reduces to 0.5x.

* At the upper price band of Rs.401, CIL is available at a P/E ratio of 23x (FY24), which is expensive compared to its peers. However, its strong order book (21% CAGR during FY22–24), favorable market cap to order book ratio (0.8x), and order book to sales ratio of 3.1x compared to industry average of 2.5x, all support premium valuation. Additionally, the Company is positioned to benefit from sector growth and has a proven track record of completing projects ahead of schedule. Thus, we assign a "Subscribe" rating for the long term.

Purpose of IPO

The offering includes both a fresh issue of Rs.684.25cr and an Offer-for-Sale (OFS) of Rs.568.41cr. The objective of the offer is the repayment and/or prepayment of portion of certain outstanding borrowings availed by the company & its subsidiary, Ceigall Infra Projects Pvt. Ltd (Rs.413.4cr), funding purchase of equipment (Rs.99.8cr) and other general corporate purpose.

Key Risks

* Delays in land acquisition and approvals may affect timely performance of contracts.

* Volatility in raw material costs can disrupt project cost and impact overall profitability.

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SEBI Registration Number: INH200000345