Udayshivakumar Infra Limited has Filed DRHP for the IPO with SEBI on 28.09.2022

Udayshivakumar Infra Limited has filed DRHP with SEBI on 28th, September, 2022 to launch its IPO.

The IPO comprises Fresh Issue only.  The size of Fresh Issue is Equity Shares aggregating up to Rs. 60 crore. 

Business Model of Company 

The Company is engaged in the business of construction of roads including National Highways, State Highways, District Roads, Smart Roads under PM’s Smart City Mission projects, Smart Roads under Municipal Corporations, Bruhat Bengaluru Mahanagara Palike (BBMP) and Local Area Roads in various Taluka Places etc., in the State of Karnataka, Constructions of Bridges across Major and Minor Rivers, Railway Over Bridges (ROB), construction of Major and Minor Irrigation and canal projects, Industrial Areas, based in the State of Karnataka. The Company bids for Roads, Bridges, Irrigation & Canals Industrial Area construction in the State of Karnataka including Government Departments such as Karnataka Public Works Ports & Inland Water Transport Department (KPWP & IWTD), National Highways (MORTH), Belgaum Smart City Ltd. and Davangere Smart City Ltd., Bruhat Bengaluru Mahanagara Palike (BBMP), Various Municipal City Corporations, State Highway Development Corporations Ltd., (SHDP), Karnataka Road Development Corporation Ltd. etc. 

In addition to procurement and construction, in the past two (2) years the Company has focused its efforts on building a team of engineers for the designing and engineering aspects of Roads, Bridge, Irrigation Projects, Industrial Areas construction. The Company has a team of 27 engineers who are dedicated to contracts wherein the Company is involved on a BOQ and EPC basis and is supported by third-party consultants and industry experts to ensure compliance of standards laid down by the industry and government agencies & departments. Similarly, the Company also has its own team and facility for fabrication works which reduces  dependence on third parties. Further, the Promoter has rich experience of more than 25 years in the infrastructure sector and has been instrumental in driving the growth and business strategies of the Company. 

Who is the Management of the Company?

As on the date of this Draft Red Herring Prospectus, the following is the management of the company:

(i) Udayshivakumar is the Promoter, Chairman and Managing Director on the Board of the Company. He holds a doctorate in social works empowerment and contractor development from International Global Peace University. He founded the erstwhile sole proprietorship ‘M/s Udayshivakumar’ in 2002 and has over 20 years of experience in the civil construction sector. 

(ii) Manjushree Shivakumar is an Executive Director on the Board of the Company. She holds a bachelor’s degree in engineering from Visvesvaraya Technological University. She has been associated with the Company since 2020 in the capacity of a manager in the bidding and tender procurement department and the accounts and finance department and was appointed as an Executive Director with effect from August 30, 2022.

Why is the company raising funds via IPO?

The Company proposes to utilize the Net Proceeds from the Issue towards funding the following objects:

  1. Funding incremental working capital requirements of the Company
  2. General corporate purposes.

In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges and enhancement of the Company’s visibility and brand image and creation of a public market for the Equity Shares in India. 

Is there any OFS in the IPO?

The IPO of Udayshivakumar Infra Limited includes Fresh Issue only. There is no OFS ( Offer for Sale) in the IPO. The size of Fresh Issue is Equity Shares aggregating up to Rs. 60 crore. 

Financials of the company?  

As per the financial statements, in FY22, the total revenue of the Company has decreased 12% to 186 crore as against Rs. 211 crore in the previous financial year. The total expenses of the company decreased 14%  to Rs. 170 crore as against Rs. 197 crore in the previous financial year. The Profit Before Tax of the Company was increased 33% to 16 crore as against Rs. 12 crore in the previous financial year. The net profit of the Company increased 33% to Rs. 12 crore as against Rs. 9 crore in the previous financial year. 

In FY22, the total assets of the Company increased 11% to Rs. 162 as against Rs. 146 crore in the previous financial year. In FY22, the total equity and liabilities of the Company increased 11% to Rs. 162 as against Rs. 146 crore in the previous financial year.

In FY22, the net cash inflow from operating activities of the Company was Rs. 32 crore as against Rs. 17 crore in the previous financial year. The net cash outflow from investing activities was Rs. 17 crore as against Rs. 1 crore cash inflow in the previous financial year. The net cash outflow from financial activities was Rs. 5 crore as against Rs. 14 crore in the previous financial year. The net cash and cash equivalents at the end of the year of the company was Rs. 15 crore as against Rs. 5 crore in the previous financial year. 

Risk in The IPO

Reduction in Budgetary Allocation to This Sector

The Company bids for projects funded by the Governments authorities/bodies and derives its revenues from the contracts awarded to it. Any reduction in budgetary allocation to this sector may affect the number of projects that the government authorities/bodies may plan to develop in a particular period. The Company’s business is directly and significantly dependent on projects awarded by them. 

Competitive Bidding Process 

The projects are awarded through the competitive bidding process by government authorities/bodies. The Company may not be able to qualify for, compete and win future projects, which could adversely affect its business and results of operations. In addition, the government conducted tender processes may be subject to change in qualification criteria, unexpected delays and uncertainties. There can be no assurance that the projects for which the Company bids will be tendered within a reasonable time or will ever be tendered. 

Insufficient Cash Flows 

The business of the Company is working capital intensive. If the company experiences insufficient cash flows to meet required payments on its working capital requirements, there may be an adverse effect on the results of its operations.  

Actual Cost in Execution May Differ from Bid Estimated/Bid Cost 

The actual cost in executing may vary substantially from the assumptions underlying bid or estimates. The Company is vulnerable to the risk of rising and fluctuating raw materials prices, steel and cement, which are determined by demand and supply conditions in the global and Indian markets. Any unexpected price fluctuations after placement of orders, shortage, delay in delivery, quality defects, or any factors beyond control may result in an interruption in the supply of such materials and adversely affect the business, financial performance and cash flows of the Company.

Limited Ability to Negotiate the Terms of Contracts

The contracts with government authorities/bodies usually contain terms that favor them, who may terminate  contracts prematurely under various circumstances beyond the company’s control and as such, the Company has limited ability to negotiate terms of these contracts and may have to accept restrictive or onerous provisions. The inability to negotiate terms that are favorable to the Company may have a material adverse impact on the financial condition and results of operations of the Company.

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