Ceigall India IPO opens today: GMP up; should you bid? Brokerage calls here

The three-day subscription window of the Ceigall India IPO opens today. Should You Subscribe to the public issue? Here's what brokerages recommend

Ceigall India IPO opens today: The three-day subscription window for the initial public offering (IPO) of Ceigall India opens today for public subscription. The company's shares are trading at a premium of Rs 89 or 22.19 per cent in the grey market ahead of its opening. This GMP indicates strong demand for the Ceigall India IPO.

Brokerage firms, including Anand Rathi Research Team, Reliance Securities, SBI Securities, and Swastika Investmart have shared mostly positive outlooks on the public issue.

Ceigall India IPO details

Ceigall India aims to raise Rs 1,252.66 crore from the IPO, comprising a fresh issue of 17,063,640 shares worth Rs 684.25 crore and an offer for sale of 14,174,840 shares with a face value of Rs 5 each, amounting to up to Rs 568.41 crore.

The public issue of Ceigall India is available at a price band of Rs 380-401 apiece, with a lot size of 37 shares, allowing investors to bid for a minimum of 37 shares and in multiples thereof. 

The basis of allotment of shares for the Ceigall India IPO is likely to take place on Tuesday, 6 August 2024. Shares of Ceigall India are scheduled to list on the NSE and SME on Thursday, 8 August 2024. For the IPO, Ceigall India has appointed Link Intime India as the registrar, while ICICI Securities, JM Financial, and IIFL Securities are the book-running lead managers.

Ceigall India financials

Ceigall India's financials have seen an increase in revenue from Rs 1,134 crore in FY22 to Rs 3,029 crore in FY24, representing a CAGR of 63 per cent. The company's profit after tax (PAT) also rose to Rs 304.3 crore in FY23 from Rs 167.3 crore in FY22 and Rs 125.9 crore in FY22. Ceigall India's PAT margin stood at 11.1 per cent in FY24, against 8.1 per cent in FY23 and 10 per cent in FY22. The company's net worth was around Rs 906.4 crore in FY24, compared to Rs 593.1 crore in FY23 and Rs 431.3 crore in FY22.

Ceigall India IPO obejective

Ceigall India intends to use the net proceeds from the IPO for the repayment/prepayment of all or part of the borrowings availed by the company, as well as for the purchase of equipment and general corporate purposes.

Should You Subscribe to the Ceigall India IPO?

Here's what brokerages have said about the Ceigall India IPO:

Anand Rathi Research Team - Subscribe for Long Term

The Anand Rathi Research Team noted that the company has a strong order book spread across various business sectors and geographical regions, allowing them to pursue a wider range of project tenders and maximise business volume and profit margins.
 

"The company's P/E ratio is 22.9 times based on its FY24 earnings, with a market capitalisation of Rs 6,985.4 crore after the issuance of equity shares and a market cap-to-sales ratio of 2.3 times its FY24 earnings. Considering these factors, we recommend a 'Subscribe – Long Term' rating for the IPO," said the Anand Rathi Research Team.

Reliance Securities - Subscribe

Brokerage firm Reliance Securities highlighted that Ceigall India strategically bids for projects, leveraging its experience in roads and highways sectors to expand its portfolio into other sectors like HAM and BOT. The company follows an asset-light model, ensuring better fixed asset turnover ratios, and has strong relationships with lenders, enabling it to raise timely financing at competitive terms when required.

"We believe Ceigall India will continue to maximise revenues with multiple projects in hand and increase profit margins and return ratios over the next few years. Hence, we recommend a 'Subscribe' to the issue," said Reliance Securities.

SBI Securities - Subscribe for Long Term

According to SBI Securities, Ceigall India boasts one of the best return ratios among its listed peers, thanks to its efficient business model. "However, given the company's consistently negative operating cash flows, high debt levels, and geographical concentration in the states of Punjab, UP, and J&K (87 per cent of FY24 revenues), the business model appears to carry relatively higher risks compared to its listed peers. Due to this, the issue may be considered a slightly risky bet; therefore, we recommend that investors subscribe to this issue for the long term," said SBI Securities.

Swastika Investmart - Subscribe for Long Term

Ceigall India emerges as a rapidly growing EPC player with a strong track record in executing specialised infrastructure projects, said Shivani Nyati, Head of Wealth at Swastika Investmart. Nyati continued, "Its robust order book, efficient business model, and proven project execution capabilities position the company for continued growth. The company's consistent financial performance, marked by increasing top and bottom lines, further solidifies its position in the sector. However, significant contingent liabilities, dependence on government contracts, high working capital requirements, and intense competition present key challenges."

"The IPO is priced at a fully valued P/E of 20.7x. Whilst the company's growth prospects are promising, the aforementioned risks warrant a cautious approach. Considering these factors, a long-term perspective is essential for investors considering this IPO," said Nyati.