Atal Realtech
Atal Realtech is coming out with an initial public offering (IPO) of 15,04,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 72 per equity share.
The issue will open on September 30, 2020 and will close on October 07, 2020.
The shares will be listed on Emerge Platform of NSE.
The share is priced 7.20 times higher to its face value of Rs 10.
Book running lead manager to the issue are Aryaman Financial Services and Galactico Corporate Services.
Compliance Officer for the issue is Sushil Ladda.
Profile of the company
The company was incorporated as Atal Realtech Private Limited on August 25, 2012 under the Companies Act, 1956 with the Registrar of Companies, Mumbai. The status of the company was changed to public limited and the name of the company was changed to Atal Realtech Limited vide Special Resolution dated December 12, 2019.The fresh certificate of incorporation consequent to conversion was issued on January 21, 2020 by the Registrar of Companies, Mumbai.
The company was incorporated in the year 2012 for undertaking various construction activities, majorly acting as a sub-contractor to Prakash Constrowell (now known as Setubandhan Infrastructure). It is a construction company providing integrated civil works contracting and engineering services for structural construction and infrastructure sector projects and is a registered contractor with the Government of Maharashtra Public Works Department in Class I-A. The company engages in contracting and sub-contracting for various government and private projects which includes construction of commercial structures and industrial structures. The company is situated at Nashik and many of its project sites are located in the State of Maharashtra, though it has undertaken projects in other parts of India. Majority of the construction activity being undertaken by it includes civil & structural construction and infrastructure contracts under sub contracting by main contractors, who have been allotted the project by a principle employer. Further, it has undertaken a few projects directly as a Contractor for certain private construction companies and real estate developers.
The company’s focus area includes (i) Civil construction projects, which include structures such as sports complex projects (Indoor and Outdoor Sport Stadiums), multi-purpose hall, commercial structures, industrial structures, Hospitals, Cold Storages, Educational Institution, mass housing projects; (ii) Water Supply and Drainage Projects; (iii) Road and Bridges Projects; and (iv) Major and Minor Irrigation Projects. Besides, the company’s revenue model also includes trading of certain construction materials. Besides undertaking contracted and / or sub-contracted projects, the company is also engaged in trading activities, wherein it supply construction materials to its various clients as per their specific requirements.
Proceed is being used for:
Industry overview
Infrastructure plays a huge role in propelling other industries and India’s overall development. The government therefore focuses on the development of infrastructure and construction services through focused policies such as open FDI norms, large budget allocation to infrastructure sector, smart cities mission, etc. Investment of $31.7 Billion has been proposed by 99 cities under the Smart City initiative. The government targets to build 5 crore homes over the next five years. Construction development and construction (infrastructure) activities accounted for approximately 6% and 3.5% of the percentage of total FDI equity inflows between April 2000 and March 2019. The value of equity inflows for construction development and construction (infrastructure) between April 2000 and March 2019 stands at $25 billion and $14.8 billion respectively. Construction industry in India will remain buoyant due to increased demand from real estate and infrastructure projects. Indian Real Estate sector is expected to reach a market size of $180 billion by 2020 and $1 trillion by 2030. Its contribution to the country’s GDP is expected to be approximately 13%.
India’s construction industry is expected to grow at an annual average of 6.6% between 2019 and 2028. The share of urban population is expected to be 50% of the total population by 2050. Present levels of urban infrastructure are inadequate to meet the demands of the existing urban population. There is need for re-generation of urban areas in existing cities and the creation of new, inclusive smart cities to meet the demands of increasing population and migration from rural to urban areas. Future cities of India will require smart real estate and urban infrastructure. To provide quality urban services on a sustainable basis in Indian cities, the need of the hour is that urban local bodies (ULBs) enter into partnership agreements with foreign players, either through joint ventures, private sector partners or through other models. The share of construction in Gross Value Added (GVA) was about 7.3 for India in 2017-18. As of 2017, the construction industry employed 49.8 million people. Investments valued at $965.5 million will be required by the infrastructure sector by 2040.
Pros and strengths
Established execution track record: The company has gained significant experience and has established track record and reputation for efficient project management, execution and timely completion. It has, since inception; successfully completed more than 20 projects under various contracting and / or sub-contacting agreements. Its expertise in successful and timely implementation of projects provides it with significant competitive advantages. In terms of resources, it has access to large number of construction equipments out of which some are owned and some are on hire, through which it seek to minimize its operating and asset cost. This is also aided by its skilled employees who have the necessary qualification and experience in the evaluating projects and in the use and handling of modern construction equipment and machinery. In terms of raw material, it shares a good working condition with all its suppliers to readily avail the raw material. It also has access to contractual labour for its projects. Its experience, among other factors, enables it to get the projects.
Engineering expertise and access to sophisticated equipment: The company is equipped with resources, in terms of technical knowledge, machinery and labour to handle various kinds of construction process, ranging from residential buildings, schools, guest houses, hospital, road, bridges and also infrastructure works like excavations and laying of pipelines. Its team consists of several individuals who not only have lots of experience in the construction field but also has the technical knowledge. It has a pool of engineers to help with the technical aspect of the work and experienced site staff / project managers to ensure proper work management. Other than this, it has access to contractual labour for the construction work. AutoCAD engineers also help it with reviewing the designing structure. Other than these it also has a good employee base working at its corporate office for several administration works. Along with a well equipped work force it also has a large fleet of equipments owned by it and has the ability to obtain equipments easily for projects in various locations. Due to these factors, it becomes relatively easier for it to streamline the work process, thus enabling it to deliver its projects in an efficient and timely manner.
Ability to undertake projects on turnkey and design-build: In addition to construction projects which are generally on contractual / sub-contractual basis as per the design and specification provided by the clients, it also has the resources, manpower and ability to undertake projects on a turnkey basis, in which it provides a range of specialized construction and operational services including design-build services to clients in various segments. Its experience in executing turnkey and design-build projects demonstrates its ability to provide a variety of services to clients and, accordingly, enables it to pre-qualify for projects in which clients seek contractors who can provide turnkey or design build solutions.
Risks and concerns
Substantial portion of revenues depends upon few clients: For the financial year ended March 31, 2020 and for the financial year ended March 31, 2019, the company’s top ten largest clients accounted for approximately 100.00% and 96.85% of its revenues from operations, respectively. The loss of a significant client or clients would have a material adverse effect on its financial results. It cannot assure you that it can maintain the historical levels of business from these clients or that it will be able to replace these clients in case it lose any of them. Furthermore, major events affecting its clients, such as bankruptcy, change of management, mergers and acquisitions could adversely impact its business. If any of its major clients becomes bankrupt or insolvent, it may lose some or all of its business from that client and its receivable from that client would increase and may have to be written off, adversely impacting its income and financial condition.
Dependent on third parties for supply of raw materials: Raw material costs are dependent on commodity prices, which are subject to fluctuations. There can be no assurance that strong demand, capacity limitations or other problems experienced by company’s suppliers will not result in occasional shortages or delay in their supply of raw materials. If it experiences a significant or prolonged shortage of raw materials from any of its suppliers and it cannot procure the raw materials from other sources, It would be unable to meet its project execution schedules in timely fashion, which would adversely affect its sales, margins and customer relations. Further, in the absence of any long term supply agreements, it cannot assure that a particular supplier will continue to supply raw materials to it in the future. In the event the prices of such raw materials were to rise substantially or if imports were to rise substantially or if imports were to be restricted in any manner, the company may find it difficult to make alternative arrangements for suppliers of its raw materials, on the terms acceptable to it, which could materially affect its business, results of operations and financial condition.
Depends largely on senior management: The company’s success depends on the continued services and performance of the members of its senior management team and other key employees. Its continued success also depends upon its ability to attract and retain a large group of skilled professionals and staff, particularly project managers, engineers, and skilled workers. The loss of the services of its senior management or its inability to recruit, train or retain a sufficient number of skilled professionals could have a material adverse effect on its operations and profitability. Competition for senior management in its industry in which it operate is intense, and it may not be able to retain its existing senior management or attract and retain new senior management in the future.
Outlook
Incorporated in 2012, Atal Realtech is a construction company mainly engaged in contracting and sub-contracting various government and private projects. Apart from construction, company is also engaged in trading activities, wherein they supply construction materials to their various clients as per their specific requirements. They are registered contractor with the Government of Maharashtra Public Works Department and offers integrated civil works contracting and engineering services for structural construction and infrastructure sector projects. It has gained significant experience and has established track record and reputation for efficient project management, execution and timely completion. Further, the company is managed by a team of competent personnel having knowledge of core aspects of its Business. On the concern side, the industry in which the company operates is capital intensive in nature, and involves relatively long gestation periods. It requires substantial financing for its business operations and the failure to obtain additional financing on terms commercially acceptable to it may adversely affect its ability to grow and its future profitability. Besides, the company cannot assure you that it will always finish the construction or development of its projects in accordance with the requisite specifications or that the construction of its projects will be free from any and all defects. If the work is unsatisfactory, the work has to be redone as per the instructions of principle employer without any extra cost.
The company is coming out with a maiden IPO of 15,04,000 equity shares of Rs 10 each at a fixed price of Rs 72 per equity share to mobilize Rs 10.82 crore. On the performance front, in fiscal 2020, the company’s revenue from operations increased marginally by Rs 57.62 lakh or 1.00%, from Rs 5,757.08 lakh in fiscal 2019 to Rs 5,814.70 lakh in fiscal 2020. The company has maintained a steady top line amid the initial effects of the global pandemic situation and also due to reduction in trading income in this fiscal. The company’s Profit after Tax increased by Rs 45.68 lakh or 21.08% from Rs 231.85 lakh in fiscal 2019 to Rs 262.32 lakh in fiscal 2020. The company plans to grow its business primarily by growing the number of client relationships, as increased client relationships will add stability to its business. It intends to focus on building its in house design capabilities and execution capabilities, including, building its on the job expertise through participation in design projects, recruiting qualified personnel and building a strong technical knowledge based organisation for undertaking varied projects.
