Active Infrastructures coming with IPO to raise Rs 77.83 crore

Active Infrastructures

• Active Infrastructures is coming out with an initial public offering (IPO) of 43,00,200 equity shares in a price band Rs 178-181 per equity share.
• The issue will open on March 21, 2025 and will close on March 25, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 5 and is priced 35.6 times of its face value on the lower side and 36.2 times on the higher side.
• Book running lead manager to the issue is Kreo Capital.
• Compliance Officer for the issue is Aanchal Tembhre. 

Profile of the company

The company operates primarily in two key segments: Infrastructure and Construction of Commercial Projects. Within the Infrastructure segment, its focus encompasses the construction of roads (including bridges), flyovers, water supply systems, irrigation projects, and other related infrastructure activities and in its Construction of commercial projects segment, it builds various spaces such as, office complexes, retail centers, exhibition halls, retail outlets, private educational institutions, and other facilities.

It operates on a pan-India scale, with its completed, ongoing and upcoming projects being in the state of Maharashtra, Madhya Pradesh, Uttar Pradesh and Tripura. It strives for achieving customer satisfaction in all its projects, without compromising on quality and safety. Its manpower, resources, machinery and equipment, together with its engineering capabilities, strategically positions the company to meet the market demands. It is committed to achieving industry standards in quality, environmental sustainability, and occupational health & safety requirements across all its projects. This helps in ensuring that the company upholds innovation, quality, and client-centered values.

Proceed is being used for:

• Funding working capital requirements. 
• Repayment/ Prepayment of Certain Borrowings availed by the Company and Margin Money for obtaining Bank Guarantee.
• Capital expenditure towards purchase of construction equipments.
• General corporate purposes
• Meeting the issue expenses

Industry overview 

India’s high growth imperative in 2023 and beyond will significantly be driven by major strides in key sectors with infrastructure development being a critical force aiding the progress. Infrastructure is a key enabler in helping India become a $26 trillion economy. The infrastructure sector is a key driver of the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from the Government for initiating policies that would ensure the time-bound creation of world-class infrastructure in the country. The infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. In other words, the infrastructure sector acts as a catalyst for India’s economic growth as it drives the growth of the allied sectors like townships, housing, built-up infrastructure, and construction development projects.

The Central government has increased its capital expenditure (capex) allocation to $133.9 billion (Rs 11.11 trillion) for the fiscal year beginning April 1, 2024, with a focus on advancing India's infrastructure, as part of a strategic move to stimulate economic growth. An increase of 11.1% from the previous year, the FY25 budget allots $133.9 billion (Rs 11.11 trillion) for capital expenditures, or 3.4% of GDP. 

With a 37% increase in the current fiscal year, capital expenditures (capex) are on the rise, which bolsters ongoing infrastructure development and fits with 2027 goals for India's economic growth to become a $5 trillion economy. In order to anticipate private sector investment and to address employment and consumption in rural India, the budget places a strong emphasis on the development of roads, shipping, and railways. Global investment and partnerships in infrastructure, such as the India-Japan forum for development in the Northeast 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

Quality assurance and standards: Its commitment lies in delivering exceptional service to its customers through the construction of high-quality Infrastructure projects and Construction of commercial projects. Thorough quality standards have been its compass from the outset, guiding it throughout the construction process. It meticulously selects the right materials with safe designs of structures, ensuring excellence. These dedicated efforts have not only given it a competitive edge but also earned it goodwill from its satisfied client.

Optimal utilization of resources: The company constantly endeavors to improve its execution process, capabilities, skill upgrading of employees, and modernization of plant and machineries to optimize the utilization of resources. It regularly scrutinizes utilization of its resources and identifies and eliminates bottlenecks and takes corrective measures for smooth and efficient working thereby putting resources to optimal use.

Visible growth through increasing order book: In the construction industry, an order book is considered as one of the key indicators of future performance as it represents a portion of anticipated future revenue and provides a brief list of projects undertaken and to be undertaken by the company. It aims to undertake projects with reasonable margins and/or select projects that help it to enhance its reputation, market penetration and perception. The quality of its construction and the stable alliances with its clients, has enabled it to build its order book.

Risks and concerns

Dependent on third parties for supply of materials: It relies on various materials such as bricks, stones, steel, and cement for its projects, and the cost of these materials depends on commodity prices, which can fluctuate. While it maintains strong relationships with its suppliers, it does not have formal agreements for material procurement. Instead, it chooses suppliers based on price and availability at the time of need. Without contracts in place, its suppliers are not obligated to continue supplying materials to it at specific rates, and they may prioritize its competitors, leading to delays or increased costs.

Geographical concentration: Its entire revenue stream is derived from activities from the states of Maharashtra, Uttar Pradesh and Madhya Pradesh. Any adverse development affecting its operations in these regions could have an adverse impact on its business, financial condition and results of operations. Such geographical concentration of its business in these states heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in these regions which may adversely affect its business prospects, financial conditions and results of operations. it may not be able to leverage its experience in these regions to expand its operations in other parts of India. 

Labour-intensive industry: It operates in a labor-intensive industry, where its contractors rely on casual labour for its projects. In the event of a labour dispute, if its contractors are unable to negotiate successfully with workers or subcontractors, it could lead to work stoppages or increased operational costs. Additionally, finding the necessary skilled labour for current or upcoming projects may be challenging. It may also face liability, penalties, or losses resulting from accidents or damages caused by its workers or contractors. Although it has not experienced any significant disruptions in its business operations due to labour disputes or workforce issues in the past, there is no guarantee that such disruptions won’t occur in the future. Such incidents could negatively impact its business, operational results, and may also divert management’s focus, leading to increased costs.

Outlook

Active Infrastructures operates primarily in two key segments: Infrastructure and Construction of Commercial Projects.  The company is primarily engaged in the business of construction & sale of residential/commercial units and execution of infrastructure projects. On the concern side, the market for its industry is highly competitive due to the presence of both organized and unorganized players. Competitors often strive on factors such as timely delivery, pricing, design quality, construction standards, and project locations. Some rivals may have more industry experience and greater financial, technical, and other resources, allowing them to adapt quickly to market changes and maintain competitiveness.

The company is coming out with a maiden IPO of 43,00,200 equity shares of Rs 5 each. The issue has been offered in a price band of Rs 178-181 per equity share. The aggregate size of the offer is around Rs 76.54 crore to Rs 77.83 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations has increased by 8.71% to Rs 9,718.33 lakh in the fiscal year ended March 31, 2024 as compared to Rs. 8,939.83 lakh in the fiscal year ended March 31, 2023. Moreover, net Profit after tax has increased by 5.83% to Rs 1,044.55 lakh in the fiscal year ended March 31, 2024 as compared to Rs 986.99 lakh in the fiscal year ended March 31, 2023.

Meanwhile, it intends to focus on performance and timely project execution in order to optimise profit margins. It also intends to integrate best practices from different sectors and geographic regions. It attempts to utilize designs, engineering and project management tools to increase productivity and optimise asset utilization in construction activities. It intends to continue to offer high quality engineering solutions to its clients to improve its ability to execute its projects with efficiency and within the time limit specified by its client.