Konstelec Engineers
- Konstelec Engineers is coming out with initial public offering (IPO) of 41,00,000 shares of Rs 10 each in a price band Rs 66-70 per equity share.
- The issue will open on January 19, 2024 and will close on January 23, 2024.
- The shares will be listed on NSE Emerge Platform.
- The face value of the share is Rs 10 and is priced 6.60 times of its face value on the lower side and 7.00 times on the higher side.
- Book running lead manager to the issue is Beeline Capital Advisors.
- Compliance Officer for the issue is Shatabdi Sudam Salve.
Profile of the company
Konstelec Engineers was incorporated on December 05, 1995 as a private Limited Company and started business operations as Design Engineering Company. Over the years, it has expanded its services, constantly upgraded its technologies, systems, and processes and diversified its business operations. As an EPC company, the company specializes in delivering full-scale project management, procurement support, and detailed engineering services for various kinds of electrical infrastructure projects across India and abroad. With a skilled team, strong project execution capabilities, and a client-centric focus, it is committed for delivering high-quality, safe, and innovative solutions that meet its clients' specific needs. The company’s expertise covers the entire project lifecycle, ensuring timely delivery and successful outcomes for even the most complex projects.
At present, the company is in the business of Engineering, Procurement, and Construction/ Commissioning (EPC) contractors and are engaged in the business of offering full range of EPC services in India and abroad. The company’s services find applications across several processing and various kinds of manufacturing industries such as oil & gas, refinery, steel, cement, pharmaceuticals, textile, hospital, health care and commercial complexes, domestically and internationally. The company has designed, developed, and executed several complex and integrated projects requiring cutting-edge electrical, instrumentation and automation systems. The company’s key offerings include engineering design and drawings, procurement, operations and maintenance, project management and construction and commissioning. It provides one-stop solution to its clients for various kinds of engineering projects. The company’s expertise includes Electrical Installation, Solar Power Plant Setup, Instrumentation & Automation.
The company is an EPC company and specialize in delivering full-scale project management, procurement support, and detailed engineering services for various kinds of electrical infrastructure projects across India and abroad. It acquires direct infrastructure project contracts through tender biddings or direct orders from the clients. For any contract it procures the products on behalf of the client and provide design, construction and allied services to its clients, as a bundle. Moreover, the company has in-house capabilities to deliver a project from conceptualization to completion with fast turnaround time from acquisition to launch to completion, which focuses on de-risking and improving return on investment. It offers professional solutions, encompassing design and engineering services, to cater to the needs of its valued customers. The company’s team comprises highly skilled and dedicated professionals who are always prepared to deliver their utmost efficiency.
Proceed is being used for:
- Meeting working capital requirements
- General corporate purposes
- 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. Historically, more than 80 per cent of the country's infrastructure spending has gone toward funding for transportation, electricity, and water& irrigation. The launch of a quadrilateral economic forum by India, the US, Israel & the UAE in November 2021 has further added to the influx of infrastructure growth perspectives. Alternatively, the introduction to the ‘Infrastructure for Resilient Island States’ program in November 2021 has shown a significant opportunity to improve the lives of vulnerable nations across the globe by enabling Indian infrastructure growth to flourish in tri-folds.
The outlook of the Indian infrastructure sector looks optimistic in line with Prime Minister Narendra Modi’s vision to make India a ‘Developed Nation’ by 2047 as infrastructure is a crucial pillar to ensure good governance across sectors. The country's infrastructure sector is growing at a significant pace in areas such as roads, highways and civil aviation. The PM Gati Shakti master plan is going to change the face of India’s infrastructure. Infrastructure is a sector that will continue to attract strong capital inflows, especially with structural reforms, digitisation of logistics and infrastructure-focused wealth funds to aid investment. These Investments have the potential to create a true multiplier effect to take the economy on a higher growth trajectory. The collective development of India’s infrastructure propels India’s economic growth. With increased demand for labour, goods and capital expenditure on infrastructure, there is an increase in industrial growth.
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
Strong project management: The company takes pride in its efficient and meticulous project management capabilities. By leveraging cutting-edge planning tools and processes, it creates detailed project plans and execute them seamlessly. The company’s proactive approach to cost-effective alternatives and adherence to Quality, Health, Safety, and Environment (QHSE) policies ensure successful project delivery.
Comprehensive service offering: As a full-service EPC company, it provides a complete suite of project management, engineering, procurement, and construction services. From conceptualization to commissioning, it handles every aspect of the project lifecycle, offering its clients a one-stop solution.
Robust order book: The company’s strong and continuously growing order book is a testament to the trust and confidence its clients place in it. The cumulative value of secured contracts in its order book represents the future revenues it expects to recognize from these projects. This not only provides it with a stable revenue stream but also reflects the market's recognition of its capabilities and expertise in the industry. The company’s robust order book ensures a steady flow of projects, enabling it to maintain a competitive edge and achieve sustainable growth. As on August 31, 2023, it has an order book position for execution of around Rs 565 crore which are at different stages of implementation.
Risks and concerns
Dependency on a few customers for maximum revenue: The company’s top ten customers contribute 57.47%, 59.82%, 70.02%, and 85.16% of its total revenue from operations for the period / financial year ended on September 30, 2023, March 31, 2023, 2022 and 2021, respectively. The company is an integrated solution provider, offering a full-range of Engineering, Procurement, Construction/ Commissioning (EPC) services in India and abroad. Its business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on its business and results of operations. The loss of one or more of these significant or key customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. It cannot assure that it will be able to maintain historic levels of business and/or negotiate and execute long term contracts on terms that are commercially viable with its significant customers or that it will be able to significantly reduce customer concentration in the future. Any decline in its quality standards, growing competition and any change in the demand, may adversely affect its ability to retain them. The company 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.
Dependent on few suppliers for purchase of product: The company’s top ten suppliers contribute 64.11%, 46.54%, 51.54% and 45.40% of its total purchase for the period / financial year ended on September 30, 2023, March 31, 2023, 2022 and 2021, respectively based on consolidated restated financial statement. It cannot assure that it will be able to get the same quantum and quality of supplies, or any supplies at all, and the loss of supplies from one or more of them may adversely affect its purchases of stock and ultimately its revenue and results of operations. However, the composition and amount of purchase from these suppliers might change as it continues to seek new suppliers for its product for better quality and price in the normal course of business. Though the company will not face substantial challenges in maintaining its business relationship with them or finding new suppliers, there can be no assurance that it will be able to maintain long term relationships with such suppliers or find new suppliers in time.
Revenues subject to seasonal variations: The company’s business operations may be adversely affected by severe weather, which may require it to evacuate personnel or curtail services, may result in damage to a portion of its fleet of equipment or facilities resulting in the suspension of operations, and may prevent it from delivering materials to its project sites in accordance with contract schedules or generally reduce its productivity. The company’s operations may also be adversely affected by difficult working conditions and extremely high temperatures during summer months and during the monsoon season, each of which may restrict its ability to carry on engineering activities and fully utilize its resources. These factors may make it difficult for it to prepare accurate internal financial forecasts. In addition, Business of the company is seasonal in monsoon and summer season, efficiency of engineering work reduces during monsoon and summer season. As a result, the company’s revenues and profits may vary significantly during different financial periods, and certain periods are not indicative of its financial position for the year.
Outlook
Konstelec Engineers Limited is active in the fields of engineering, procurement and construction/commissioning. The company offers a wide range of services including engineering and drawings, procurement, operations and maintenance, project management and construction and commissioning. The company's areas of expertise include electrical installation, solar power plant installation, instrumentation and automation. The company has completed more than 200 projects of varying size and complexity, including 45 major projects worth over 400 crores. On the concern side, the company is dependent on few numbers of customers for sales. The loss of any of this large customer may affect its revenues and profitability. Moreover, the company is dependent on few suppliers for purchase of product. Loss of any of these large suppliers may affect its business operations.
The company is coming out with an IPO of 41,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 66-70 per equity share. The aggregate size of the offer is around Rs 27.06 crore to Rs 28.70 crore based on lower and upper price band respectively. On performance front, the company’s total income increased by 42.17% from Rs 10,902.31 lakh in Financial Year 2021-22 to Rs 15,500.05 lakh in Financial Year 2022-23, primarily due to an increase in its revenue from operations and other income. Moreover, the company recorded an increase of 120.80% in its profit for the period from Rs 352.25 lakh in the Financial Year 2021-22 to Rs 777.77 lakh in the Financial Year 2022-23.
Meanwhile, the company recognizes the importance of aligning its growth with the well-being of society and the environment. It actively embraces sustainable practices throughout its operations, ensuring that its projects have a positive impact on the communities and environments in which it works. By combining a customer centric approach with its commitment to sustainability, it not only meets its clients' needs effectively but also contributes to a better and more sustainable future. Its philosophy of responsible growth guides it to strike a balance between delivering high-quality services and solutions while safeguarding the environment and the interests of all stakeholders involved. This approach sets it apart as a responsible and forward-thinking organization, dedicated to making a positive difference in the world.
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