Suyog Gurbaxani Funicular Ropeways
Suyog Gurbaxani Funicular Ropeways is coming out with an initial public offering (IPO) of 65,55,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 45 per equity share.
The issue will open on November 01, 2021 and will close on November 08, 2021.
The shares will be listed on BSE SME Platform.
The share is priced 4.50 times higher to its face value of Rs 10.
Book running lead manager to the issue is Aryaman Financial Services.
Compliance Officer for the issue is Chirag Kalra.
Profile of the company
The company is an infrastructure development and constructions company engaged in building & operating the Funicular Ropeways Systems. The company is currently involved in an Infrastructural Development project through a Build, Operate and Transfer mode (BOT) wherein, it has completed the construction of a Funicular Ropeway System project (also known as Incline Ropeways) at Saptashrungi Gad Temple situated at Vani, Nashik, Maharashtra. Saptashrungi Gad Temple is a popular destination for devotees where people come from all over India for taking the blessings of Goddess and this temple experiences a large number of visitors throughout the years and also experiences some of the peak seasons at the time of Navratri festivals which happens two times in a year. The company’s project is spread over in an area of 10 acres, which houses the funicular ropeway system, a shopping mall, a parking facility and a hotel facility.
The company’s Saptashrungi Project primarily has a Funicular Ropeway System consisting of 2 Air Conditioner funicular vehicles / coaches which can carry 60 passengers/ devotees at a time. The Shopping complex, forming a part of its project, provides the facility of more than 50 shops providing various buying avenues to the visitors including food shops. The parking facility built in the vicinity of the funicular ropeway, has a capacity of more than 150 vehicles including four wheelers and two wheelers. Lastly, it also has constructed a hotel which houses 28 guest rooms & dormitories, a multi cuisine restaurant and a coffee shop.
Proceed is being used for:
Industry Overview
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. 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 $26.08 billion and $24.72 billion, respectively, between April 2000 and March 2021. In FY21, infrastructure activities accounted for 13% share of the total FDI inflows of $81.72 billion.
The infrastructure sector has become the biggest focus area for the Government of India. India plans to spend $1.4 trillion on infrastructure during 2019-23 to have a sustainable development of the country. The Government has suggested investment of Rs 5,000,000 crore ($750 billion) for railways infrastructure from 2018-30. India and Japan have joined hands for infrastructure development in India's Northeast states and are also setting up an India-Japan Coordination Forum for Development of Northeast to undertake strategic infrastructure projects for the region.
A Build Operate Transfer (BOT) Project is typically used to develop a discrete asset rather than a whole network and is generally entirely new or Greenfield in nature (although refurbishment may be involved). In a BOT Project the project company or operator generally obtains its revenues through a fee charged to the utility/ government rather than tariffs charged to consumers. In common law countries a number of projects are called concessions, such as toll road projects, which are new build and have a number of similarities to BOTs. Ropeways, cable cars and innovative mobility solutions like funicular railways have been brought under the ambit of Ministry of Road Transport and Highways. The move will give a big fillip to infrastructure building in remote, inaccessible areas and hilly terrains of the country and its potential in India is a goldmine.
Pros and strengths
Integrated in-house execution capabilities: The company has in-house capabilities to provide end-to-end solutions for BOT Ropeway projects, ranging from conceptualization, commissioning to operations, maintenance and management of the project. It also has advanced capabilities in terms of how it design projects and the technology it uses. With the completion of the Saptashrungi Project, it strives to be an integrated infrastructure development and construction company engaged majorly in the operation of building funicular ropeways and related infrastructure. The company has also developed in-house capability for the entire engineering, safety and construction activities for its current and future BOT projects. This enables it to not only reduce its dependence on third party sub-contractors but also exercise greater control over the quality and timely execution of its infrastructure development projects.
Ability of obtain funding for Projects: The company enjoys goodwill with various leading banks and financial institutions in India. The company’s ability to raise significant project finance as a newly incorporated Company has enabled it to fund its current project at competitive terms with the Government of Maharashtra. In the course of its borrowings it has established cordial relations with its Bankers and have maintained a satisfactory track record with them. Its Saptashrungi Project has been financed by leading bank like State Bank of India with a current sanctioned loan amounting to Rs 2,400 lakh. The company’s ability to raise secured and unsecured loans from various banks & financial institutions is a significant comfort to its business operations and also gives it a competitive advantage over other players in the industry.
Cordial client relations: The company’s current Saptashrungi Project was awarded to it by the PWD Nashik, Government of Maharashtra. In course of its work, it has developed significant relationship with various Government departments and its successful completion and management of the project will increase its trust factor with these Government departments. It has been able to prove its ability to complete an integrated project in accordance with their requirements, thus creating a positive vendor relationship with the Government of Maharashtra. This will assist it in obtaining contracts for all future tenders, applications and proposals for various such religious / tourist sites which have a potential for funicular ropeway. Being a successful vendor for the Government of Maharashtra will also enable it to apply and obtain projects with other State Governments for funicular ropeway and infrastructure development.
Risks and concerns
Limited operating history: The company was incorporated in 2010 and took the Built, Operate and Transfer project to build Funicular Ropeway, operations of which has been commenced on July 03, 2018. Also, though the company is in the process of identifying and applying for other infrastructure projects, no such application has been made as on date of this Prospectus. Accordingly, it has completed only one project giving it a limited operating history and it may not provide a meaningful basis to evaluate its business, financial performance and prospects. Accordingly, its results of operations for any prior periods do not serve as an indication of the future performance. The company’s business and prospects should be considered in light of the risks, uncertainties, expenses and challenges that it will face as an early-stage company operating in the industry.
Operates in highly regulated sector: The company operates its funicular ropeways business in a highly regulated sector and are subject to extensive regulations and stringent registration conditions. It is required to obtain specific registration from the authorities in each jurisdiction. The process of obtaining such registrations differs in each jurisdiction. Most of the applicable regulations are stringent and they may continue to be stricter in the future. The penalties for non-compliance with these regulations can vary from revocation or suspension of the registration to imposition of fines. If the company fails to obtain or comply with the conditions in such registrations and other related approvals, in a timely manner or at all, its business, results of operations, cash flows and financial condition could be adversely affected.
Revenue is dependent on Saptashrungi Gad temple project: Currently, the company is handling only one project and it does not have any other project contract in hand. Since it started its operation, it derives its entire operational revenue from a single project. If it is unable to add additional projects to its portfolio, it will affect its financials adversely. Any perceived decline in its quality standard and any change in demand may adversely affect its ability to retain or acquire customers and consequently affect its future growth and financial stability. The company cannot assure that it shall generate the same quantum of business, or any business at all from its existing projects, and any loss of business from it may adversely affect its revenues and results of operations. While it is constantly striving to increase inflow of devotees / tourists who will utilise its integrated services and reduce dependence on returning devotees, there is no assurance that it will be able to broaden its customer base in any future periods or that its business or results of operations will not be adversely affected by a reduction in devotees / tourists.
Outlook
Suyog Gurbaxani Funicular Ropeways Limited is an infrastructure development & constructions company engaged in building & operating the Funicular Ropeways Systems. The company currently employs a Build, Operate, and Transfer Mode (BOT) for its business operations. It has completed the construction of a Funicular Ropeway System project (also known as Incline Ropeways) at Saptashrungi Gad Temple situated at Vani, Nashik, Maharashtra. On the concern side, the company operates in a highly regulated sector, that is infrastructure and if it fails to comply with the regulations prescribed by the authorities of the jurisdictions in which it operates, its business, results of operations, cash flows and financial condition could be adversely affected. The company had reported certain Negative Cash flow in the past years, details of which are given below. Sustained negative cash flow could impact its growth and business.
The company is coming out with an IPO of 65,55,000 equity shares of Rs 10 each at a fixed price of Rs 45 per share to mobilize around Rs 29.50 crore. On performance front, the company’s revenue from operations decreased by Rs 871.59 lakh or negative 66.08%, from Rs 1,319.02 lakh in fiscal 2020 to Rs 447.43 lakh in fiscal 2021. Meanwhile, the company loss increased by Rs 605.32 lakh or 321.83%, from a loss of Rs 188.09 lakh in fiscal 2020 to a loss of Rs 793.40 lakh in fiscal 2021. The company’s strategy is to build upon its competitive strengths in the funicular ropeway infrastructure sector to become a market leader in India. It intends to continue to be active in the Western Indian state of Maharashtra. The company intends to continue to focus on businesses that are located in, or are designed to serve, growth regions and on maintaining a balance between the generation of stable cash flows from its operations and the pursuit of growth opportunities to maximize long-term profitability.
