Varindera Constructions IPO: An Overview
Varindera Constructions, a prominent construction company based in Haryana, is making headlines as it plans to raise approximately Rs 1200 crore through its upcoming Initial Public Offering (IPO). With the draft papers submitted to the market regulator SEBI on September 30, the company is set to make a substantial move into the capital markets.
Details of the IPO
The planned IPO involves the issuance of fresh equity shares worth Rs 900 crore, alongside a share sale worth Rs 300 crore by existing shareholders through an Offer for Sale (OFS). This financial maneuver is designed to bolster the company’s growth and operational capabilities.
Promoters and Stake Sale
Promoters Varinder Kumar Garg and his wife Sushma Garg, who collectively hold a remarkable 99.75 percent stake in Varindera Constructions, are set to sell shares worth Rs 201 crore and Rs 99 crore respectively through the OFS. Additionally, the company has the potential to raise Rs 180 crore through pre-IPO placements, which may adjust the size of the new issue.
Fund Utilization Plans
So, where will the funds raised from the IPO be directed? Established in 1987, Varindera Constructions has detailed a clear allocation plan for the capital raised:
- Purchasing Equipment: Rs 160.1 crore
- Working Capital: Rs 155 crore
- Debt Repayment: Rs 359.9 crore
- General Corporate Purposes: Remaining funds
By utilizing a significant portion of the proceeds to repay debt, the company aims to enhance its financial stability, having reported total outstanding loans of Rs 442.34 crore as of July 2024.
Project Portfolio
Over the past decade, Varindera Constructions has successfully executed 31 construction projects across 11 states in India as well as Mauritius, with a cumulative contract value exceeding Rs 5293.3 crore. Currently, the company is engaged in 7 ongoing projects in Mauritius and the Maldives, which together contribute significantly to its revenue streams—over 24 percent of revenue in FY24 came from international projects.
Financial Performance
Varindera Constructions’ financial trajectory showcases impressive growth. In the fiscal year ending March 2024, the company achieved a net profit of Rs 143.4 crore, reflecting a 31.5 percent increase from the previous year. This growth can be attributed to robust operational and revenue figures.
The company’s revenue surged by 32.5 percent to Rs 1389 crore in FY24 compared to FY23. Furthermore, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) exhibited a substantial rise of 50.5 percent to reach Rs 224.7 crore, coupled with an expansion of margins by 200 basis points to 16.2 percent.
Competitive Landscape
In the competitive construction sector, Varindera Constructions will be pitted against major players like Ahluwalia Contracts, Capacity Infraprojects, NCC, and PSP Projects. The company’s robust performance, coupled with a strong order book of Rs 3844.8 crore, positions it favorably in the market.
Conclusion
The upcoming Varindera Constructions IPO not only presents an opportunity for investors but also marks a significant step for the company in its journey of expansion and debt reduction. With a clear strategy for funding allocation and a track record of successful project execution, Varindera Constructions aims to bolster its position as a leader in the engineering, procurement, and construction (EPC) industry.
