ARSS Infrastructure Projects - Reviews

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ARSS Infrastructure Projects Ltd (ARSS) is engaged in construction activities in India and has successfully
executed over 86 projects involving construction of ~ 300 km of roads and highways, 200 km of rail tracks, 10 minor and major bridges and other general civil engineering works over the span of nine years.

ARSS has maintained long-term relationship with reputed clients like Railways, Govt. of Orissa, NHAI, Rail Vikas Nigam RITES, IRCON, NTPC, Vedanta etc. While 73.11% of its order book comprise of repeat order, 87.5% of current work orders are from government authorities.

Revenues have grown at CAGR of ~117% from FY07 – FY09 .The total income for FY 09 was Rs 624 cr with an EBITDA margin of 16%and PAT of Rs 51 cr. The PAT has grown at CAGR of 120% from FY07 - FY09. For the 9 months ended 31st Dec-09 the total income stood at Rs 605 cr with a PAT of Rs 50.1 cr

Price band: Rs 410 – Rs 450
Issue opens: Feb 08 ,2010
Issue closes: Feb 11,2010
Bid Lot : 15 shares

Stay tuned for Analysts Views.

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This is what Anand Rathi Securities Analyst has to say about the offer,

Comparing to its past financial performance and huge order book there is potential for improved earnings in the coming years. Government’s support to the infrastructure enhancement will further push the growth of the company. On peer level comon also we see it competitively placed in terms of pricing and its size therefore subscribe for long term. Long Term Subscribe

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SMC Securities Analyst Mayak Garg has the following View on the IPO,

Considering the P/E valuation, the company is trading at a P/E of 7.74x times on the lower side of the price band and 8.49x times on the higher side of the price band of its annualised FY10 EPS of Rs.53. Looking at post issue valuation, the company is trading at a P/E of 9.15x times on the lower side and 10.04x times on the higher side of its post issue annualised FY10 EPS of Rs44.82.

Some of the factors that give positive outlook to the company are - experience of promoters, healthy and diversified order book position & improving financial position & profitability of the company year on year. Moreover, government's drive on infrastructure development & SBI's taking active interest in the company by virtue of acquiring an equity stake of 7.9% further strengthens the company's outlook. However, smaller size of the company, few pending litigations against the company and/or the promoters, limited geographical diversification, & high fragmentation in the domestic construction sector are some of the concerns to look for.

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Unicon Wealth Research has the following View on the IPO -

On the positive side of the issue is – a) Promoters experience, b) healthy and diversified order book position, c) improving financial position & profitability of the company. Besides, government's thrust to drive on infrastructure development also augurs well for the company.

Post issue, ARSS is valued at a price to earning ratio of ~7.7x at the lower price band and 8.5x on the upper price band to its annualised FY10 EPS of Rs.53. Subscribe at lower price band.

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HDFC Securities is of the following View,

AIPL has been a relatively small sized construction company and only, in last two years, it demonstrated significant growth in its top line. As of January 10, 2010 total value of AIPL’s order book stand for Rs.2,877.53 crores. It has successfully executed over 60 projects involving 300 km of road & highways, 200 km of rail tracks and 10 minor & major bridges and other general civil engineering works over a span of seven years.

At the price band of Rs 410-450, the offer is at a valuation of ~9 times the estimated FY10 per share earnings on a post-offer equity. A reasonable asking price and a focus on government projects make the offer from ARSS Infrastructure Projects a fair bet, but only for investors with a high-risk appetite. It could provide listing gains provided market conditions do not deteriorate further dramatically.