Wapcos Limited has Filed DRHP for the IPO with SEBI on 26.09.2022

Wapcos Limited has filed DRHP with SEBI on 26th, September, 2022 to launch its IPO.

The IPO comprises Offer for Sale only. The size of Offer for Sale is of  Up to 32,500,000 Equity Shares. 

Business Model of Company 

Wapcos Limited is a central public sector enterprise wholly owned by the Government of India under the administrative control of the Ministry of Jal Shakti, GOI. The Company is engaged in engineering consultancy services and construction in the fields of water, power and infrastructure sectors for businesses and communities in India and overseas. Over the last 5 decades, the Company has been providing engineering consultancy services for projects in water, power and infrastructure sectors which have made significant contributions within India and overseas. The Company along with its Subsidiary are also actively involved in construction business and have undertaken various projects in key sectors in India. The experience gained through global presence enabled the Company to provide customized solutions to complex and diverse assignments to public and private clients both in India and overseas. The Company has been conferred with Schedule B Category-I Mini-Ratna status by the Department of Public Enterprises.

The Company is associated with a number of development projects funded by multilateral funding agencies like the World 

Bank, the Asian Development Bank, African Development Bank, Japan Bank for International Cooperation, United Nations Office for Project Services, French Development Agency, German Development Bank, Asian Infrastructure Investment Bank, European Investment Bank and European Bank for Reconstruction and Development. 

In 2019, the Company acquired National Projects Construction Corporation Limited, a “Mini Ratna: Category-I” central public sector enterprise under the administrative control of the MoJS pursuant to the strategic disinvestment programme of the GOI. As on date, the Company holds 98.89% of paid-up capital of its Subsidiary and the remaining shareholding is being held by various State Governments.

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)  Rajni Kant Agrawal, aged fifty-two (52) years, is the Chairman-cum-Managing Director of the Company with effect from October 4, 2021. He has been associated with the Company since June 28, 1991. He holds a bachelor’s degree in civil engineering from BITS Pilani, Rajasthan and also holds a master’s degree in water resources engineering from IIT Delhi. He also has a master’s degree in business administration from Sikkim Manipal University. He has more than thirty-two (32) years of experience in the field of planning, design and implementation of water resources, power and infrastructure development projects in India and overseas. 

(ii) Pankaj Kapoor aged fifty-two (52) years is the Director (Finance), Whole Time Director and CFO of the Company since September 29, 2015. He has been associated with the Company since March 9, 1994. He also holds the degree of Bachelor of Commerce (Honors Course) from University of Delhi. He is also a qualified cost accountant holding a degree from the Institute of Cost & Works Accountants of India. He has twenty-eight (28) years of experience handling various matters concerning corporate finance, working capital management, cost & budgetary control, institutional finance, accounts, taxation, audit, overseas projects etc. He is also on the board of directors as the Director (Finance) (Additional Charge) and a CFO of the Subsidiary.

Why is the company raising funds via IPO?

The objects of the Offer are:

(i) to carry out the disinvestment of up to 32,500,000 Equity Shares by the Selling Shareholder (the President of India, acting through the Ministry of Jal Shakti, Government of India) constituting 25% of the Company’s paid up Equity Share capital of the Company. 

(ii) to achieve the benefits of listing the Equity Shares on the Stock Exchanges. The Company will not receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder after deducting the Offer related expenses and relevant taxes thereon.

Further, the Company expects that listing of the Equity Shares will enhance its visibility and brand image and will also provide a public market for the Equity Shares in India.

Is there any OFS in the IPO?

The IPO of the Company includes Offer for Sale only. The Promoter will be selling equity shares Up to 32,500,000 Equity Shares aggregating up as President of India, acting through the Ministry of Jal Shakti, Government of India.  

Financials of the company?  

As per the financial statement of the Company, in FY22, the total revenue of the Company has increased 11% to Rs. 2866 crore as against Rs. 2580 crore in the previous financial year. The total expenses of the Company have also increased 11% to Rs. 2765 crore as compared to Rs. 2488 crore in the previous financial year. The Profit Before Tax of the Company increased 10% to Rs. 101 crore as against Rs. 92 crore in the previous financial year. 

The net profit of the Company zoomed 15% to Rs. 70 crore as against Rs. 61 crore in the previous financial year. 

In FY22, the net assets of the Company increased 9% to Rs. 5163 crore as against Rs. 4721 crore in the previous financial year. The total equity and liabilities of the Company has also increased 9% to 5163 crore as against Rs. 4721 crore in the previous financial year. 

In FY22, the net cash inflow from operating activities of the company was Rs. 472 crore as against Rs. 51 crore in the previous financial year.  The net cash outflow from investing activities was Rs. 551 crore as against Rs. 222 crore cash inflow in the previous financial year. The net cash outflow from financial activities of the Company was Rs. 5 crore as against Rs. 7 crore cash inflow in the previous financial year. The net cash at the end of the year of the Company was Rs. 557 crore as against Rs. 629 crore in the previous financial year. 

Risk in The IPO

Majorly Dependent on Government 

Since the  business of the Company and its revenues are substantially dependent on projects awarded by GOI, State Government and government controlled entities including central, state and local authorities, agencies and the public sector, any adverse changes in government policies and budgetary allocation resulting from a change in government policies or priorities, could materially and adversely affect the financing, capital expenditure, revenues, or operations relating to the existing and proposed projects. Although the Company believes that they maintain strong relationships with these entities/groups, any such relationship could be affected by reasons beyond the control.

Uncertainty in Procuring Projects 

The Company procures significant revenue from the engineering consultancy services and construction business through a bidding process and there can be no assurance that projects for which the Company bids will be awarded to the Company and recorded in its  Order Book or that the Company will actually realize revenues from such projects as a result of which the financial condition would be materially and adversely affected.

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.

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.

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.