Indifra
- Indifra has come out with an initial public offering (IPO) of 21,60,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 65 per equity share.
- The issue will open on December 21, 2023 and will close on December 26, 2023.
- The shares will be listed on NSE Emerge platform.
- The share is priced 6.50 times higher to its face value of Rs 10.
- Book running lead manager to the issue is Beeline Capital Advisors.
- Compliance Officer for the issue is Ruchika Jain.
Profile of the company
Indifra caters to various gas distribution companies for management of their gas distribution pipelines. Under this vertical, in past, the company has catered to Adani Gas Limited. As on December 14, the company caters to Charotar Gas Sahakari Mandali Limited (CGSML), for gas pipeline management services. It started gas pipeline management services with CGSML the leading gas distribution company in the region and the world’s first co-operative Natural Gas Provider, in year 2022 with a proposition to collaborate and provide comprehensive gas pipeline management services in Charotar region of Gujarat. The successful execution of projects for CGMSL and Adani Gas Limited further enhanced its reputation as a reliable and preferred vendor amongst gas distribution companies. The company's commitment to delivering high-quality services, adherence to strict timelines, and continuous investment in cutting-edge technology sets it apart in the industry.
In FY 2017, the company seized upon an opportunity to expand its business horizon by venturing into the sales of electrical appliances. Recognizing the increasing demand for high-quality products that enhance the comfort and convenience of customers, the company became a key distributor for V Guard, a renowned brand in the electrical appliances industry, catering to the needs of customers in the Gujarat region.
By leveraging its existing network and expertise in the gas pipeline management sector, the company strategically capitalized on the synergies between the two businesses. The company’s electrical appliances portfolio includes voltage stabilizers, induction cooktops, inverters, batteries, ceiling fans, domestic switch gears and distribution boards (DBs), air coolers, water heaters, modular switches, solar water heaters, air source heat pump water heaters, energy-saving fans, and room heaters. The company’s revenue mix consists major business verticals i.e. (i) Pipeline and Infrastructure Management Contracting Services and (ii) Distribution of electrical appliances.
Proceed is being used for:
- Meeting working capital requirements
- General corporate purpose and funding investments for acquisitions
- Meeting public issue expenses
Industry Overview
Indian economy is driven through multiple economic sectors and infrastructure is one of the major sector contributions to continuous growth. Infrastructure development is crucial to achieve the India 2047 vision for a $40 trillion economy and be reclassified from a developing economy to a developed economy. In the aftermath of COVID-19 and the digitisation of the world, the focus rests not only on physical infrastructure, but on digital and social infrastructure as well. In order to meet India’s aim of reaching a $5 trillion economy by 2025, infrastructure development is the need of the hour. The government has launched the National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India’ and the production-linked incentives (PLI) scheme to augment the growth of the infrastructure sector.
In Union Budget 2022-23, the government has given a massive push to the infrastructure sector by allocating Rs. 10 lakh crore ($130.57 billion) to enhance the infrastructure sector. The government expanded the ‘National Infrastructure Pipeline (NIP)’ to 9,335 projects. 217 projects worth Rs 1.10 lakh crore ($15.09 billion) were completed as of 2020. Private sector is emerging as a key player across various infrastructure segments, ranging from roads and communications to power and airports. Private investment into physical and social infrastructure is key to putting India in a high growth trajectory, which will make it a $5 trillion economy by 2024-25. Yearly private equity (PE) and venture capital (VC) investment in India is expected to surpass $65 billion in 2025. In 2020, India’s logistics sector was one of the largest worldwide worth $215 billion and increased at a CAGR of 10%. Indian logistics market is estimated to touch $320 billion by 2025.
The government’s flagship initiatives like the National Infrastructure Pipeline, Gati Shakti, Sagarmala, Bharatmala, UDAN and Maritime India Vision 2030, among others, have created a lot of opportunities in the infrastructure sector. The $1.3 trillion national master plan for infrastructure, Gati Shakti, has been a forerunner to bring about systemic and effective reforms in the sector, and has already shown a significant headway. In fact, 102 critical projects under the Gati Shakti masterplan worth $7.67 billion are to be completed by 2024, making 2023 a critical year for effective execution and celerity of completion. Global investment and partnerships in infrastructure, such as the India-Japan forum for development in the North East are also indicative of more investments. These initiatives come at a momentous juncture as the country aims for self-reliance in future-ready and sustainable critical infrastructure.
Pros and strengths
Well-defined organizational structure: The company has a qualified and experienced management team empowered to take timely decisions, which makes the operations of its business smoother and ensures efficiency in all aspects of its operations. The company’s senior management has pioneered its growth and fostered a culture of innovation, entrepreneurship and teamwork within its organization. The company recruits talented employees, facilitating their integration into its organization culture and encouraging the development of their skills and expertise for becoming the next generation leaders. The company’s experience, knowledge and human resources will enable it to drive the business in a successful and profitable manner.
Existing supplier relationship: The company’s existing supplier relationship protects the business in terms of supply and pricing of the products and services, the quality of the products and services offered etc. The company, being a small and medium-sized organization, relies on personal relationships with its suppliers. Further, it also leverages the past experience of its management in maintaining effective supplier relationships ensuring uninterrupted supply chain management.
Asset light business model: The company is structured on a unique business model with service centric approach. It is an asset light company, which provide it the advantage during the selection of its suppliers. This help it same time, increase efficiency and ensure timely delivery.
Risks and concerns
Significant revenue comes from few customers: The company has a limited customer base as it generates its sales from limited number of clients. Its top ten customers contribute to 64.71%, 91.67%, 92.99% and 81.59% of its total sales for the period/year ended June 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021 respectively. Any decline in its quality standards, growing competition and any change in the demand, may adversely affect its ability to retain them. Although, the company will not face substantial challenges in maintaining its business relationship with them or finding new customers, it cannot assure that it shall generate the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations. However, the composition and revenue generated from these customers might change as it continues to add new customers in the normal course of business.
Dependent on a single industry and a small number of key assets: The company is a services provider to the gas distribution companies in India, with its services offerings of gas pipeline management. Presently, it is dependent on the gas companies outsourcing these services to it. The company’s services are availed by the gas distribution companies to reduce the capital expenditure of projects, and simultaneously get the expertise of pure play companies in the pipeline management industry. The gas distribution companies shall continue to out-source the specialised activities of gas pipeline management to match up to the global trends, however, there is no assurance that such a trend would continue over long periods. Any change in these trends whereby the gas distribution companies provide these services in-house, including for reasons of liability enforcement, risk profile, changes in the regulatory stipulations shall adversely affect its financial conditions and results of operations.
Huge working capital requirement: The company’s business requires significant working capital, part of which would be met through additional borrowings in the future. In many cases, significant amounts of working capital are required to finance the procurement of material before payments are received from customers. The company’s working capital requirements may increase, under certain conditions, where payment terms do not include advance payments or include delayed payments from customers. Additionally, its working capital requirements have increased in recent years due to the general growth of its business. All these factors may result, or have resulted, in increases in its working capital needs.
Outlook
Indifra provides infrastructure management contracting, gas pipeline laying and electrical equipment distribution services. The company provides gas supply companies with the management of their gas supply pipelines. As of December 2023, the company is providing gas pipeline management services to CGSML. The company has also worked for Adani Gas Limited. The company also provides voltage stabilizers, induction cooktops, inverters, batteries, ceiling fans, domestic switch gears and DBs, air coolers, water heaters, modular switches, solar water heaters, air source heat pump water heaters, energy-saving fans and space heaters. On the concern side, the company’s top 10 customers contribute a significant portion of its revenue from operations and the loss of business from one or more of them may adversely affect its revenues and results of operations. Moreover, the company is dependent on a single industry and a small number of key assets. Any change in trend towards outsourcing of such services may impact its business and operations.
The company has come out with an IPO of 21,60,000 equity shares of Rs 10 each at a fixed price of Rs 65 per share to mobilize Rs 14.04 crore. On performance front, the total revenue from operations for the year ended on FY 2022-23 was Rs 1001.05 lakh as compared to Rs 1091.29 lakh during the FY 2021-22. Revenue from operations decreased mainly on account of decrease in works contracts income. Moreover, profit after tax increased to Rs 99.08 lakh in FY 2022-23 from Rs 39.94 lakh in the FY 2021-22. As a part of its growth strategy, the company focusses on increasing sales volume through expansion, diversification and spread in geographical outreach. Its growth in the local market can fetch it new business expansion and opportunities. It is currently providing its services to several clients Domestically. The company’s emphasis is on the scaling of its operations in other markets, which shall provide it with attractive opportunities to grow its client base and revenues. Apart from expanding business and revenues it has to look for areas to reduce costs and achieve efficiency in order to remain a cost competitive company. The company’s focus has been to reduce the operational costs to gain a competitive edge.
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