Vision Infra Equipment Solutions
- Vision Infra Equipment Solutions is coming out with an initial public offering (IPO) of 6,516,000 equity shares in a price band Rs 155-163 per equity share.
- The issue will open on September 06, 2024 and will close on September 10, 2024.
- The shares will be listed on SME Platform of NSE.
- The face value of the share is Rs 10 and is priced 15.50 times of its face value on the lower side and 16.30 times on the higher side.
- Book running lead manager to the issue is HEM Securities.
- Compliance Officer for the issue is Dipali Rakesh Shah.
Profile of the company
Vision Infra Equipment Solutions is a solution provider in the equipment space delivering its services in airports, smart cities, irrigation, building & factories, mining, railways, etc. Its portfolio of services includes: renting of road construction equipment and trading and refurbishment of these equipment. The company’s services offer several advantages, such as improved efficiency, cost control and a streamlined supply chain. The company’s business of renting of road construction equipment is executed in two rental modes based on: (i) time-based pricing and (ii) output based pricing.
The time based pricing model allows customers to pay for the equipment based on how much they use it or the time duration they utilize it for, which is primarily a fixed fee. This model is common where its equipment is leased to contractors or developers in the infrastructure industry and in road construction activity like: paving. Rental based on the output of a service provider is often referred to as output-based pricing. In this model, the customer pays for the service based on the results or outcomes delivered by the service provider, rather than a fixed fee or hourly rate. This approach is commonly used in delivering its services as service provider for various road construction activities like: milling and crushing. The company deploys its equipment, manpower and other resources for running out these activities.
The company has large no. of fleet of major OEM’s like Wirtgen, Case, Luigong, Dynapac, Komatsu, Atlas Copco, Ashok Leyland, Bharat Benz, Eicher Motors, Volvo, Terex Power Screen, Caterpillar, Metro, BOMAG etc which is rented out to infra companies like: Larsen & Toubro, Ashoka Buildcon, Afcons Infrastructure, NCC, GMR Infraprojects, Shapoorji Pallonji, Dilip Buildcon, Tata Projects, ITD Cementation India, HG Infra Engineering, IRB Infra developers, GR Infra Projects, etc. Offering a fleet of road construction equipment for rent provides flexibility to clients who may not want to invest in purchasing the machinery outright. Further it allows its clients to access the latest technology without the long-term commitment of ownership.
Proceed is being used for:
- Funding capital expenditure towards purchase of additional equipment
- Funding to meet working capital requirements
- General corporate purpose
Industry Overview
India has the second-largest road network in the world, spanning over 6.3 million kms. Over 64.5% of all goods in the country are transported through roads, while 90% of the total passenger traffic uses road network to commute. Under the Union Budget 2023- 24, the Government of India allocated Rs 2.7 lakh crore ($33 billion) to the Ministry of Road Transport and Highways. The Roads sector is expected to account for 18% capital expenditure over FY19-FY25. In FY22 (until November 2021) private sector invested Rs. 15,164 crore ($1.98 billion) in roads. India's road network has grown 59% to become the second-largest in the world in the last nine years. India has nearly 64 lakh km of total road network and the National Highways network alone stood at 145,240 km in 2022-23 compared to 91,287 km in 2013-14. NHAI (National Highways Authority of India) is planning to raise Rs. 40,000 crore ($5.72 billion) to monetize its highway assets through Infrastructure Investment Trust (InvIT).
Road transport is the dominant mode of transport in India, both in terms of traffic share and contribution to the national economy. Apart from facilitating the movement of goods and passengers, road transport plays a key role in promoting equitable socio-economic development across regions of the country. It also plays a vital role in social and economic integration and development of the country. Easy accessibility, flexibility of operations, door-to-door service and reliability have earned road transport a greater significance in both passenger and freight traffic vis-à-vis other modes of transport. Further, the Ministry has revamped its previous ITS Scheme and issued guidelines on June 23, 2022, to continue the previous scheme. This will provide additional financial support to STUs to equip themselves with advanced ITS technologies, improved bus services, operations, performance, and customer conveniences. The Scheme provides support of hardware and software components for Fleet Management System, Electronic Ticketing & Fare Collection System (including NCMC) and Passenger Information & Feedback System.
Infrastructure is the backbone of any country. Its development implies growth in all sectors of the economy, not to mention real estate, an indirect beneficiary of every headwind in infrastructure sector. The PM Awas Yojna and the extended credit-linked subsidy scheme address the affordability concern by provisioning increment in the PM Awas Yojna by 66% to 79,000 crores and extension of CLSS till 2027. FDI in construction development (townships, housing, built-up infrastructure and construction development projects) and construction (infrastructure) activity sectors stood at $26.23 billion and $28.95 billion, respectively, between April 2000-September 2022. In January 2023, the Construction arm of Larsen & Toubro secured orders for its power transmission & distribution and buildings & factories businesses to establish a 112.5MW Solar Power Plant in West Bengal and to construct a 600-bed super speciality hospital in Mumbai, respectively. In December 2022, BHEL formed a consortium with Titagarh Wagons and is among five entities which have bid for the mega Rs 58,000 crore ($7 billion) contract to manufacture 200 Vande Bharat trains and maintain them for the next 35 years.
Pros and strengths
The company owns a large and young fleet of road construction equipment: The company’s range of solutions include renting of road construction equipment and trading and refurbishment of these equipment. Its experience and core competencies in the road construction industry has helped it to successfully deliver quality and reliable solutions. The large portfolio of equipment enables it to correctly take orders with project specifications and provide quality services in a timely and cost-effective manner. It owns large fleet and young fleet of diverse range of road construction equipment like: Soil stabilisers, Tandem Rollers, PTR, Soil Compactors, Cement Spreaders, Excavators, Transit Mixer, Truck Container Body, Milling Machine, Jaw Crusher, Concrete Paver, Asphalt Paver, Wheel Loaders, Rock Breakers, Graders, Boom Placers, Tippers, Diesel Generators etc. Most of the equipment cater to some of the renowned brands in the industry like: Wirtgen, Case, Luigong, Dynapac, Komatsu, Atlas Copco, Ashok Leyland, Bharat Benz, Eicher Motors, Volvo, Terex Power Screen, Caterpillar, Metro, BOMAG etc.
Wide presence in domestic market with vast customer base: During the FY 2022, the company’s clientele for rental solutions included around 95 Number of customers which expanded to around 133 Number of customers during FY24. Its clientele includes large infrastructure companies as well as many organized and unorganized contractors in the road construction industry. It has large no. of fleets of major OEM’s which is rented out to infra companies like: Larsen & Toubro, Ashoka Buildcon, Afcons Infrastructure, NCC, GMR Infraprojects, Shapoorji Pallonji, Dilip Buildcon, Tata Projects, ITD Cementation India, HG Infra Engineering, IRB Infra developers, GR Infra Projects, etc. In the refurbished segment equipment are sold and purchased from various contractors, end-users, and resellers in the domestic and international markets.
In house execution team and established track record: The company’s in-house team of around 204 people as on as on March 31, 2024 comprises of electricians, engineers, foremen, managers, mechanics, operators, supervisors and welders who have the necessary skills and expertise in preparing and operating the equipment and supervising and managing the construction activities like: milling, paving and crushing based on the requirements of its clients. The company’s quality control managers are responsible for conducting regular inspection and tests for quality control monitoring and management. The company has an established track record of successfully running the rental operations and delivering road construction orders in an efficient manner. Its focus is to leverage its procurement and execution capabilities while maintaining the quality of delivery. Its team ensures operational efficiencies through overall supervision of the execution process.
Risks and concerns
Substantial portion of the revenue comes from few clients: During Fiscal 2024, 2023 and 2022, revenue generated from its top ten customers were Rs 20,699.7 lakh, Rs 29,169.51 lakh and Rs 24,751.28 lakh which represented 62.21%, 81.07% and 84.02% respectively of its revenues from operations. The company’s largest customer, contributed to around 19.14%, 63.25% and 68.31% of its revenue from operations respectively. It has not entered into long term agreements with these customers and the success of its business is accordingly significantly dependent on maintaining good relationship with them. The loss of a significant client or clients could have a material adverse effect on its results of operations.
Dependency on limited number of suppliers: The company is an equipment outsourcing company, engaged in providing road construction equipment for sale and on a rental basis. It does not manufacture any of the road construction equipment that it sells or provide on rental basis. The company relies on the limited number of OEMs and suppliers for purchasing this equipment. Its purchases from its top ten suppliers during Fiscal 2024, 2023 and 2022 are Rs 9,471.95 lakh, Rs 10,216.77 lakh and Rs 12,147.87 lakh respectively. The company’s reliance on a limited number of suppliers for its business exposes it to risks, that may include, but are not limited to, reductions, delay or failure on the part of its suppliers to deliver such equipment in a timely manner, deterioration in the financial condition or business prospects of these suppliers, failure to negotiate favourable terms with its key suppliers, all of which could have a material adverse effect on the business, financial condition, results of operations and future prospects of the company.
Derive significant portion of revenue from trading and refurbishment activities: The company derives a significant portion of its revenue from trading and refurbishment activities. For the financial years 2024, 2023 and 2022, Rs 16,417.25 lakh, Rs 24,228.04 lakh, and Rs 21,611.18 lakh, or 49.34%, 67.34% and 73.36% of its revenue from operations were derived from trading and refurbishment activities. During the aforementioned financial years/period, the company has traded and refurbished multiple type of construction equipment. Its reliance on the external vendors for procurement of such equipment, exposes it to risks, that may include, but are not limited to, reductions, delay or failure on the part of its suppliers to deliver the equipment in a timely manner, quality issues and clear title of the equipment as it does not have control over the equipment, failure to negotiate favorable terms with the vendors, vendors changing their sales strategy or shifting focus to some other channel which could have a material adverse effect on the business, financial condition, results of operations and future prospects of the company.
Outlook
Vision Infra Equipment Solutions was founded in 2015 and provides services in the fields of airports, smart cities, irrigation, buildings and factories, mining, railroads, etc. The company's service portfolio includes the rental of road construction machines as well as the trade and reconditioning of these machines. Road construction machinery is rented out in two ways: (i) time-based pricing and (ii) output-based pricing. As of March 31, 2024, the Company employed around 227 permanent employees and 763 contract employees, including administrative staff, operators, drivers, electricians, engineers, helpers, logistics mechanics, painters, supervisors, and welders, all of whom are required for operations. On the concern side, the company generates a significant percentage of its revenue from few clients. The loss of any one or more of its major clients would have a material adverse effect on its business operations and profitability. Moreover, the company’s business is capital intensive in nature. If it is unable to raise additional funds whenever required, or on terms acceptable to it, the company may be required to scale down or abandon its expansion & growth plans and/or reduce capital expenditures and the size of its operations, any of which could materially and adversely affect its business, financial position and results of operations.
The company is coming out with a maiden IPO of 6,516,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 155-163 per equity share. The aggregate size of the offer is around Rs 101.00 crore to Rs 106.21 crore based on lower and upper price band respectively. On performance front, the total income from FY23 to FY24 decreased slightly by 5.22% from Rs 36,889.54 lakh in FY23 to Rs 34,965.58 lakh in FY 24. The main reason for decrease in total income is due to decrease in Revenue from Trading & Refurbishment Products by 32.24% from Rs 24,228.04 lakh in FY23 to Rs 16,417.25 lakh in FY 24. Further the Revenue from Rental Services increased by 43.43% from Rs 11,752.77 lakh in FY 23 to Rs 16,857.33 lakh in FY 24. Moreover, net profit after tax for the financial year 2023-24 increased to Rs 2,668.89 lakh as compared to profit of Rs 918.85 lakh in the financial year 2022-23. The increase of 190.46% was majorly due to factors increase in PAT margin. The company’s client includes large infrastructure companies as well as organized and unorganized contractors. Over the years, its relationship with its customers have expanded and the strength of its customer relationships is attributable to its ability to offer customer specifications and requirements, as well as its track record of consistent delivery of quality and cost-effective services over the years. It has a history of high client retention and derive a significant proportion of its revenues from repeat business built on its successful execution of prior engagements. In order to improve client retention, it carries out regular client interactions, which is important for it to ensure a high level of client satisfaction through continuous feedback. This also helps the company to understand customer requirements and future plans better, enabling it to forecast, plan and offer its services accordingly, thereby resulting in business optimization, improved productivity, efficiency and margins. By focusing on providing value, understanding the needs of both suppliers and customers, and adapting to changes in the market, it can foster strong relationships and successfully expand customer base.
