Pratham EPC Projects coming with IPO to raise upto Rs 36 crore

Pratham EPC Projects

• Pratham EPC Projects is coming out with initial public offering (IPO) of 48,00,000 shares of Rs 10 each in a price band Rs 71-75 per equity share. 
• The issue will open for subscription on March 11, 2024 and will close on March 13, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 7.10 times of its face value on the lower side and 7.50 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisor.
• Compliance Officer for the issue is Bhavasthi Rahul Mehta.

Profile of the company

Pratham EPC Projects is an integrated engineering, procurement, construction and commissioning company being in business of end-to end service providers to Oil & Gas distribution companies in India. It is an Oil & Gas pipeline infrastructure service provider in India, focused on laying pipeline networks along with construction of associated facilities; and providing Operations & Maintenance services to the City Gas Distribution (CGD) Companies in India. It is an integrated EPC company offering a diversified range of pipeline and allied services for oil & gas industry. 

It provide its services for cross country pipeline projects for different applications viz. Oil, gas & water etc. and also undertake Pipeline laying work on Turnkey basis including engineering, procurement, pipeline construction for city gas distribution, horizontal direction drilling, stations including civil, electromechanical and instrumentation for its clients. The company is ISO 10002:2018 certified for customer satisfaction and complaint management system by International Standards Registrations, ISO 14001:2015 certified for environment management system by International Standards Registrations, ISO 18001:2007 certified for Occupational Health and Safety management system by International Standards Registrations and ISO 9001:2015 certified for quality management system by ROHS Certification.

Founded by visionary Promoters Pratikkumar Maganlal Vekariya and Nayankumar Manubhai Pansuriya having combined experience of many years in engineering industry. Both its promoters are Mechanical Engineers. Pratikkumar Maganlal Vekariya, in past, has worked in reputed construction companies namely Jai-Hind Projects, Punj Lloyd and NCC. Nayankumar Manubhai Pansuriya, in past, has worked with NCC. The company has been executing various gas pipeline project handling all pipeline activities like, mainline welding, tie-in, coating, hydro testing, pipeline commissioning etc. Pratham specialize in oil & gas pipelines for cross country distribution and city gas distribution. It also undertakes offshore projects for water distribution specifically project bidding & project management.

Proceed is being used for:

• Purchase of machinery.
• Meeting working capital requirements.
• General corporate purpose.

Industry overview

India’s oil refining capacity stood at 251.21 million metric tonnes per annum (MMTPA) in April 2022, making it the second-largest refiner in Asia and the fourth-largest in the world. Private companies owned about 35% of the total refining capacity. India is planning to double its refining capacity to 450-500 million tonnes by 2030. According to IEA (India Energy Outlook 2021), primary energy demand is expected to nearly double to 1,123 million tonnes of oil equivalent, as the country's gross domestic product (GDP) is expected to increase to $8.6 trillion by 2040. India’s oil consumption stood at almost 4.9 million barrels per day (BPD) in 2021, up from 4.65 million BPD in 2020. India retains its spot as the third-largest consumer of oil in the world, as of 2022. In FY23, India consumed 222.3 MMT of petroleum products, up 10.2% from the previous year. This is the highest ever in the history of the world’s third largest oil consumer.

High-Speed Diesel was the most consumed oil product in India and accounted for 38.6% of petroleum product consumption in FY23. It is used primarily for commercial transportation and further, in the industrial and agricultural sectors. India’s consumption of petroleum products stood at 4.44 MBPD in FY23, up from 4.05 MBPD in FY22.  India’s oil consumption is forecast to rise from 4.8 MBPD in 2019 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. According to the International Energy Agency (IEA), India’s medium-term outlook for natural gas consumption remains solid due to rising infrastructure and supportive environment policies. Industrial consumers are expected to account for 40% of India’s net demand growth. The demand is also expected to be driven by sectors such as residential, transport and energy.

In Union Budget 2022-23, the government has given a massive push to the infrastructure sector by allocating Rs 10 lakh crore 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 (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.

Pros and strengths

Optimal utilization of resources: The Company constantly endeavours to improve its execution process, capabilities, skill up gradation of employees, modernization of plant and machineries to optimize the utilization of resources. It regularly analyses its material procurement policy and project execution process to de-bottle neck the grey areas and take corrective measures for smooth and efficient working thereby putting resources to optimal use.  

Visible growth through robust order book: An order book is considered one of the key indicators of future performance as it represents a portion of anticipated future revenue. Its strategy is not focused solely on order book addition but, rather, on adding quality projects with potentially higher margins and/or prestigious projects that help enhance its growing reputation. By diversifying its skill set and order book across different sectors, it is able to pursue a broader range of project tenders and consequently, optimize its business volume and profit margins.

End-to-end execution capabilities: Its execution capabilities, comprising strong in-house operations consisting of design, engineering, procurement, construction and quality assurance teams, is a critical factor that has contributed to growth story of the company. Its track record in construction of pipeline projects has been instrumental in its consistent sales and performance. Its management team ensures efficient and rapid construction and completion of its pipeline projects, its quality assurance team ensures the quality construction of its pipeline projects, and its procurement team works with vendors who have the scale to deliver and meet it requirements to procure pipeline construction materials and equipment.

Risks and concerns

Dependent on few numbers of customers for sales: The Company is an integrated solution provider, offering a full range of Engineering, Procurement, Construction/ Commissioning (EPC) services in India. 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.

Dependent on few suppliers: Its top ten suppliers contribute 75.15%, 64.34%, 50.76% and 63.20% of its total purchase for the financial year / period 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 seeking new suppliers for its product for better quality and price in the normal course of business.

Huge labour workforce required: Its project operations require deployment and its ability to retain labour. In case such labour workforce is unavailable, or it is unable to identify and retain such labour its business could be adversely affected. It cannot guarantee that it may be able to continue with the same on favourable terms or at all. Any such failure may impact the operations, business process and profitability. Additionally, there have been amendments in the labour and Employment related laws, which may have a direct impact on its employee costs and consequently, on its margins. 

Outlook

Pratham EPC Projects is an integrated engineering, procurement, construction and commissioning company being in business of end-to end service providers to Oil & Gas distribution companies in India. The company is engaged in the business of Pipeline Construction of Oil & Gas and Water Engineering Procurement Construction. On the concern side, the Company is an integrated solution provider, offering a full range of EPC services in India. 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 company is coming out with an IPO of 48,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 71-75 per equity share. The aggregate size of the offer is around Rs 34.08 crore to Rs 36.00 crore based on lower and upper price band respectively. On performance front, the total revenue from operations for the year ended on FY 2022- 23 was Rs 50.20 crore as compared to Rs 50.47 crore during the FY 2021-22. Revenue from Operations mainly includes revenue from Gas pipeline contract services through direct contract and through sub-contracting. Revenue from operations decreased by 0.52% from previous year i.e. FY 2021-22. Profit after Tax (PAT) increased to Rs 7.64 crore in FY 2022-23 from Rs 4.41 crore in the FY 2021- 22. PAT was 14.79% and 8.72% of total income of the company for the year ended on March 31, 2023 and March 31, 2022 respectively. Going forward, it intends to continue its focus in enhancing project execution capabilities so as to derive twin benefits of client satisfaction and improvements in operating margins. It will constantly endeavour to leverage its operating skills through its equipment and project management tools to increase productivity and maximize asset utilization in its ongoing projects.