Shantidoot Infra Services coming with an IPO to raise upto Rs 4.02 crore

Shantidoot Infra Services

• Shantidoot Infra Services is coming out with an initial public offering (IPO) of 4,96,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 81 per equity share.
  
• The issue will open on September 6, 2022 and will close on September 9, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 8.10 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 Anshu Anshuman.
  

Profile of the company

The company operates from the state of Bihar which is developing state on various parameters of development indicators like health, education, basic infrastructure, etc. Considering, slow growth of all these developmental inputs retarded private sector players, from both in and outside, to invest their resources in Bihar. In such developmental milieu, the company’s Promoter Avijeet Kumar a visionary with foresight and ground level experience of executing a wide array of social developmental & welfare projects conceptualized, to establish a Company mainly engaged in construction of institutional buildings like schools, colleges, hospitals, offices, hotels, etc.

Apart from undertaking new projects the company also carries out projects of re-designing, re-modeling and renovating institutions as per the need of its clients. It categorizes its projects mainly into two segments viz., Government sector and Private sector. It has developed an established project management approach to accommodate and manage the unique requirements of every project which are not only flexible but, at the same time, adhere to the standard national / international building norms. It emphasizes on core strength and policies with focus on assimilating ever developing technology and deliverance to the satisfaction of its clients. With a passion to set high standards of services, the management always takes measures to scale up as and when required only to deliver the best. It work diligently and has a wide range of skill sets to cater to required needs and to reach the client sensitivity and centricity.

Proceed is being used for:

• Working capital requirements.
  
• General corporate purposes.
  

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), FDI in construction development (townships, housing, built-up infrastructure and construction development projects) and construction (infrastructure) activity sectors stood at $26.17 billion and $26.30 billion, respectively, between April 2000-December 2021. In FY21, infrastructure activities accounted for 13% share of the total FDI inflows of $81.72 billion.

The Construction industry in India consists of the Real estate as well as the Urban development segment. The Real estate segment covers residential, office, retail, hotels and leisure parks, among others. While Urban development segment broadly consists of sub-segments such as Water supply, Sanitation, Urban transport, Schools, and Healthcare. FDI in the construction development sector (townships, housing, built up infrastructure and construction development projects) and construction (infrastructure) activities stood at $26.16 billion and $25.95 billion, respectively, between April 2000 and September 2021. 100% foreign direct investment in the construction industry in India under automatic route is permitted in completed projects for operations and management of townships, malls / shopping complexes, and business constructions. 100% Foreign direct investment in the construction industry is allowed under the automatic route for urban infrastructures such as urban transport, water supply, sewerage, and sewage treatment. The construction Industry in India is expected to reach $1.4 trillion by 2025.

Pros and strengths

Direct relationship with suppliers: The company has developed direct relationship with companies / firms for supply of materials. It helps in minimizing procurement cost by removal of retailers or middlemen. It also protects its business regarding term & conditions and quality of the products supplied. Further it also leverage the past experience of its management in maintaining effective supplier relationship ensuring uninterrupted supply of raw material.

Quality assurance and standards: The company’s goodwill depends on quality of its construction sites. Its ability to maintain and improve the quality enables it to generate reputation with zero complaints. Selection of right quality of material, high tech equipments, skilled labour and following most suitable correct processes in construction reflects into the best quality of its end result and satisfactory client. Its dedicated efforts towards the maintaining quality have helped it gain a competitive advantage over others.

Established relationship with subcontractors: The company has established good relations with its Sub contractors with whom it has worked since long time. Thus, it knows what to expect of the subcontractors, it makes its project planning go much easier. Its relationship with its Sub contractors help it to achieve operational efficiency.

Risks and concerns

Face significant risk: The company has constructed and delivered Projects. There has not been any material past instances of unscheduled delays with respect to its completed projects and phases thereof that have caused any material cost overruns. However; the company’s business is extremely dynamic in nature and there could be unscheduled delays and cost overruns in relation to its ongoing or forthcoming projects. During the time there can be changes to the national, state and local business conditions and regulatory environment, local market conditions, perception of prospective clients with respect to the convenience and attractiveness of the project and changes with respect to competition from other companies. Further, any changes to the business environment such as non-availability of raw materials or increase in cost of construction materials during such time may affect the cost and revenues associated with the project and may ultimately affect the timelines of a project.

Geographical concentration: The company’s entire revenues have been derived from projects situated in the state of Bihar and Jharkhand. Also, its on-going projects and currently upcoming projects are situated in the state of Bihar and Jharkhand, and thus any of its future revenues are also based on the development and market in this geographical location. Such geographical concentration of its real estate business in the state of Bihar and Jharkhand, heightens its exposure to adverse developments related to competition, as well as changes in the applicable governmental regulations, economic conditions, demographic trends, employment and income levels and interest rates in these regions which may affect its business prospects, financial conditions and results of operations. Further, the company’s operations could also be affected by lack of skilled, semi-skilled and unskilled labour or increased cost thereof. Also, any localized social unrest, natural disaster or breakdown of services and utilities in and around Bihar and Jharkhand could have material adverse effect on its business, financial position and results of operations.

Face 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.

Outlook

Incorporated in 2019, Shantidoot Infra Services is a specialized provider of construction services to the education, healthcare and hospitality sectors. The company is headquartered in Patna and currently operating a business in the Indian states of Bihar and Jharkhand. It also carry out projects of re-designing, re-modelling and renovating institutions as per the need of the clients. The company categorises the projects mainly into the government sector and the Private sector. The company secure private sector contracts, in general, through one-to-one negotiation and Government contracts through bids as per the public notice issued by government departments. It has dedicated research team to keep in sync with the recent technologies & trends in the turnkey infrastructure & construction project industry, making sure new age construction solutions for its customers. On the concern side, 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. As the company is engaged into construction of projects, its business would adversely be affected by variation in availability, cost and quality of raw materials and labour.

The company is coming out with a maiden IPO of 4,96,000 equity shares of Rs 10 each at a fixed price of Rs 81 per share to mobilize Rs 4.02 crore. On performance front, the company’s total revenue increased by Rs 346.32 lakh or 83.29% to Rs 762.13 lakh for the financial year 2021- 22 from Rs 415.81 lakh for the financial year 2020-21. The company’s profit after tax increased by 1545.84% to Rs 140.39 lakh for the financial year 2021-22 from Rs 8.53 lakh for the financial year 2020-21, reflecting a net increase of Rs 131.86 lakh. Meanwhile, going forward, the company plans to establish its presence in the other states of India. Its emphasis is on expanding the scale of its operations, which will provide attractive opportunities to grow its client base and revenues. The company aims to be recognized as a reputable and prominent brand in India in the field of turnkey infrastructure and construction projects particularly in the education healthcare and hospitality sector. It also intends to maximize the opportunities by improving reputation, timely delivery, use of direct sales force, relationship building to reach the targeted market.