Capacit'e Infra makes strong debut; lists at 60% premium against IPO price

Capacit'e Infra has made a strong debut in weak market by listing at Rs 399, a 60% premium against its IPO price of Rs 250 per share on the NSE and BSE.

Capacit’e Infraprojects Limited has made a strong debut in weak market by listing at Rs 399, a 60% premium against its initial public offer (IPO) price of Rs 250 per share on the National Stock Exchange (NSE) and BSE (Bombay Stock Exchange).

At 10:02 am, the stock was trading 47% higher at Rs 367 against its issue price on BSE, as compared to 0.71% decline in the benchmark S&P BSE Sensex. A combined 5.38 million shares changed hands on the counter on BSE and NSE so far.

Capacit'e Infra, a Mumbai-based construction company, IPO saw a whopping 186-times subscription. The portion of company’s IPO reserved for non-institutional investors was subscribed 638 times while the portion reserved for qualified institutional buyers (QIBs) was subscribed 131 times. The retail individual investors (RIIs) by 17.57 times, the stock exchanges data shows.

The company will use the proceeds from the IPO for funding working capital requirements and for purchase of some capital assets. The company intends to expand its presence in the South Zone; thereby reducing concentration in a few markets such as Mumbai metropolitan region (MMR). In addition, it plans to increase its presence in other cities, such as Ahmedabad, which has high growth potential.

It is a fast growing construction company in India. The residential constitutes more than 90% of the company’s Rs 4,602 crore order books. It caters to established realtors such as Kalpataru, Wadhwa group, Oberoi Construction ltd, Lodha, Rustomjee and Godrej properties.

“Considering, Capacit'e Infra’s experienced management, revenue visibility, strong track record of timely delivery of projects and strong relationships, we believe that CIL would continue to gain incremental order inflow going ahead. At the upper end of the price band, the pre-issue P/E works out to be 18.6x FY2017 earnings, which is lower compared to P/E multiple of its peers i.e. Ahluwalia - 22x, PSP 32x. Moreover, post-RERA, a contractor with strong track record of timely project delivery would garner major order,” Angel Broking said in a client note.

On valuation front, Capacit'e Infra is trading at a premium to its peer. However, we feel that this is justified owing to its specialty in the construction in the high rise buildings and superior profitability and return ratios, Choice Broking said in a note.