Vikran Engineering IPO — Should You Subscribe Or Not? Read Anand Rathi's Report For Key Details

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Anand Rathi Report

Vikran Engineering Ltd.'s initial public offering will open for subscription on Aug. 26 and concludes on Aug. 29. The Maharashtra based engineering and infrastructure solutions company has fixed the price band in the range of Rs 92 to Rs 97 per equity share.

Investors can place bids starting from a minimum of 148 shares and in multiples thereafter.

The Rs 772-crore IPO comprises of a fresh issue of up to Rs 721 crore and an offer-for-sale of Rs 51 crore.

Pantomath Capital Advisors Ltd., Systematix Corporate Services Ltd. are the book-running lead managers for the public issue while Bigshare Services Pvt. Ltd is the registrar to the offer.

Objects of the Issue:

• Million Funding working Capital requirements & General purpose

Strengths:

• One of the fast-growing engineering, procurement and construction companies, with timely execution of power transmission and distribution and water infrastructure sector.

• Diversified Order Book across business verticals and consistent financial performance.

• Pan India presence with strong supply chain.

• Asset light model.

• In-house technical and engineering capabilities, process control and quality assurance.

• Experienced promoters and management team, having domain knowledge.

Key Strategies:

• Continue to strengthen the core competencies in power transmission and distribution and water infrastructure sectors.

• Selectively expanding the geographical footprint globally.

• Expand the EPC portfolio into other EPC sectors.

• Capitalizing on Government initiatives and policies.

Valuation:

Vikran Engineering is a rapidly growing engineering and infrastructure solutions company, offering end-to-end EPC services across diverse verticals, with a strong emphasis on power and water infrastructure.

Leveraging its technical expertise and execution capabilities, the company has established a robust and diversified portfolio of projects. The company's projects include underground water distribution and surface water extraction, overhead tanks, and distribution networks.

They have a strong order book of Rs 2000+ Cr (2x FY25 Revenues) which gives them growth visibility for the next 2 years. Given the government’s focus on recycling the water and their push on power infrastructure, the company is well positioned to capitalize on future tenders.

On the valuation front, based on annualized FY25 earnings, the company is seeking a P/E of 32.1 times, and a post-issue market capitalization of approximately Rs 501.7 crore, making the issue appear fully priced.

With a consistent track record of executing large-scale projects along with assetlight model for marquee government and public sector clients and PAN India presence, Vikran Engineering Limited is well-positioned to capitalize on opportunities in the high-growth infrastructure sector.

Considering its scalability, financial strength, and sectoral tailwinds, we assign a ‘Subscribe for Long term’ rating for the IPO

Key Risk:

• Competitive bidding: The Company depends heavily on winning projects through bidding, which is highly competitive. Losing bids or pricing too aggressively can hurt revenues and margins, while preparing bids requires significant resources with no assurance of success.

• Client dependence: A large share of revenue (21–29% in the past three years) comes from one client, creating risk if the client ends projects early.

• Execution challenges: Project completion may face delays, cost overruns, supply shortages, or unforeseen events, impacting profitability.

• High working capital needs: The business requires substantial working capital, and delays in client payments or limited access to financing could strain liquidity.

• Bank guarantees: The Company must provide bank guarantees; inability to arrange them or their invocation may weaken cash flows.

• Subcontractor reliance: Non-performance or inefficiency of subcontractors can disrupt execution.

• Cost estimation errors: Inaccurate cost estimates can make bids uncompetitive or reduce profitability.

• Dependence on key people: The business relies on senior management, and losing them or failing to attract skilled talent could affect operations.

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