Fitch Ratings assigns grade 3(ind) for Technofab Engineering IPO
Red Herring Prospectus filed with RoC
Technofab Engineering Limited (TEL) is engaged in the business of providing Engineering Procurement and Construction (EPC) services, and executing a wide range of Balance-of-Plant (BoP) and electro-mechanical projects on a complete turnkey basis. Fitch Ratings India Private Limited (Fitch Ratings) has assigned a grade of ‘3 (ind)’ out of a maximum of ‘5 (ind)’ to the proposed initial public offer of Technofab Engineering Limited (TEL). The grade indicates the average fundamentals of the issue relative to other listed equity securities in India.
Technofab Engineering has filed the Red Hearing Prospectus with Registrar of Companies, NCT of Delhi and Haryana (RoC) to enter the capital markets with an Initial Public offering (IPO) of 29,90,000 equity shares of face value of Rs.10 each (the Issue) for cash at a price to be decided through a 100% book-building process. The issue comprises of a reservation of 50,000 Equity shares of Rs.10 each for eligible employees.
The issue will constitute 28.50% of the post issue paid-up equity capital of the company. The net issue will constitute 28.03% of the post issue paid-up equity capital of the company.
Technofab Engineering provides EPC services to domestic and overseas markets across a number of industrial and infrastructure sectors which includes conventional power, nuclear power, oil & gas, water & waste water treatment, electrical distribution & rural electrification and other industrial & infrastructure sectors. Apart from India, the company has presence in international markets like Ethiopia, Kenya and Fiji.
As per the IPO Grading Report by Fitch Ratings, “The grading factors in TEL’s strong revenue growth, improving margins and order book of INR5.3bn, which is 3.5 times of its 12 months ending March 2009 (FY09) revenue. TEL reported strong revenue growth of 84% in FY09 (FY08: 33%), with the EBITDA margin improving to 14.5% (FY08: 12%) and earnings per share (EPS) to INR15.6 (FY08: INR7.0). Despite increase in revenue in FY09, TEL kept its working capital requirements at a lower level than in FY08, as indicated by its improving cash conversion cycle. Gammon India Limited (GIL) acquired a 15.7% stake in TEL in FY07, and the association has benefited TEL by enabling it to bid for and secure projects for which it was not previously eligible due to net worth and/or revenue criteria.”
The company is proposing an initial public offering to meet long term working capital requirements of Rs 300mn, finance procurement of construction equipment for Rs 162.38 mn, finance setting up of maintenance and storage facility for construction equipment for Rs 49.95 mn, setting up training centre for employees for Rs 54.07 mn and balance for general corporate purposes.
“We are in the EPC business for the last thirty eight (38) years and have developed expertise in the line of operations with the track record in designing, manufacturing, procuring, construction, commissioning, troubleshooting and servicing various systems and equipments. Our clientele include Public Sector Units and private / multinational companies (MNCs) in India and overseas in diverse sectors such as power, steel, cement, refineries, fertilizers, petrochemicals, ports / jetties, water services, etc.”, says Mr. Avinash Gupta, Chairman & Managing Director, Technofab Engineering Ltd.
The Company is ISO 9001:2000 accredited for Engineering Procurement and Construction of Engineered Systems on Complete Turnkey basis in Core, Energy and Infrastructure Sector Projects.
“The continued growth in the Indian economy, with the government of India’s focus on infrastructure and TEL’s association with GIL should keep the company’s order book robust and will contribute to sustained high revenue growth. However, the sustainability of the high revenue growth in FY08 and FY09 will largely depend on the company’s ability to manage large projects and execute them on time and within cost estimates” mentioned as outlook in IPO Grading Report on Technofab Engineering by Fitch Ratings.
The shares of Technofab Engineering Limited will be listed on the BSE and NSE.
Collins Stewart Inga Pvt. Ltd. is the sole Book Bunning Lead Manager to the Issue and Link Intime India Pvt. Ltd. is the Registrar to the Issue.
Disclaimer: “The Issuer, is proposing, subject to market conditions and other considerations, a public issue of its equity shares and has filed a Red Herring Prospectus with the Registrar of Companies, National Capital Territory of Delhi and Haryana ("RoC") and the Securities and Exchange Board of India (“SEBI”). The Red Herring Prospectus will be available on the website of SEBI at www.sebi.gov.in as well as on the website of the Book Running Lead Manager at www.csinga.com. Any potential investor should note that investment in equity shares involves a high degree of risk. For details, potential investors should refer to the Red Herring Prospectus including the section titled “Risk Factors” on page 10 of the Red Herring Prospectus.
This announcement has been prepared for publication in India and may not be released in the United States. This announcement does not constitute an offer of securities for sale in any jurisdiction, including the United States, and any securities described in this announcement may not be offered or sold in the United States absent registration under the US Securities Act of 1933 or an exemption from registration.”