FIN506 CA2 - Lecture notes 123 PDF

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Course Code: FIN509

Course Title: Investment Banking

Course Instructor: Komalpreet Kaur

Section: Q5E06

Academic Task No.: CA 02

Academic Task Title: Assignment (sadbhav infrastructure project Ltd)

Date of Allotment: 10th March 2020

Date of submission: 20 April 2020

Student’s Roll no:B03,B08,B62,B63

Student’s Reg. no: 11907162,11907891,11919047,11919055

Evaluation Parameters: (Parameters on which student is to be evaluated - To be mentioned by students as specified at the time of assigning the task by the instructor)

Learning Outcomes: (Student to write briefly about learnings obtained from the academic tasks) • Learnt about the services provided by investment bankers and knowledge about IPO and role of investment banker in the IPO. Declaration: We declare that this Assignment is our individual work. We have not copied it from any other student’s work or any other source except where due acknowledgment is made explicitly in the text, nor has any part been written for us by any other person. Student’s Signature: • Bonam Manikanta Reddy • Akashdeep Patnayak • Thumati Srikanth • Prashansa Vishnoi Evaluator’scomments (For Instructor’s use only) General Observations

Suggestions for Improvement

Best Part of Assignment

Evaluator’s Signature and Date: Marks Obtained:

Max. Marks: _________________ 1

TABLE OF CONTENTS

S.No

Contents

Page No.

1

Peer Rating

3

2

Introduction

4-5

3

IPO issued by company

6

4

IPO lead manager

7-9

5

Role of lead manager

9

6

How much sadbhav infra IPO subscribed

10

7

Date of issue open for the IPO of sadbhav infrastructure project limited Reasons to invest or not invest sadbhav infrastructure project IPO

11

References

13

8

9

12

2

PEER RATING

S.No Name

ID Number

Peer Rating

1

Bonam Manikanta Reddy

11907162

10

2

Akashdeep Patnayak

11907891

10

3

Thumati Srikanth

11919047

07

4

Prashansa Vishnoi

11919055

10

3

INTRODUCTION (Sadbhav Infrastructure project limited) Sadbhav Infrastructure Projects Limited is a holding company. The Company is principally engaged in development, construction, as well as operation and maintenance of infrastructure projects, and related consulting and advisory services. The Company's segments include BOT (Toll Operation, User Fees and other operating income), Contractual Income, and Project Operations, Management and Advisory Services. The Company's projects include Ahmedabad Ring Road Infrastructure Limited, Nagpur Seoni Expressway Limited, Hyderabad Yadgiri Toll way Private Limited, Bijapur-Hungund Toll way Private Limited and Rohtak-Panipat Toll way Private Limited. The Company is involved in the development, operation and maintenance of national and state highways and roads in various states in India, including Maharashtra, Gujarat, Rajasthan, Karnataka, Haryana and Telangana and border check posts in the state of Maharashtra. The Company is a subsidiary of Sadbhav Engineering Limited (SEL). Sadbhav Engineering Limited (SEL) is a civil engineering construction company based in Ahmedabad, Gujarat, India. It was founded in 1988 by Vishnubhai M. Patel. Sadbhav has implemented projects in Construction of Roads & Highways, Bridges, Mining and Irrigation supporting infrastructure. Sadbhav Engineering Ltd is listed on BSE and NSE. The company worked for clients including NHAI, Sardar Sarovar Narmada Nigam, Coal India, GIPCL, GHCL, L&T, HCC, Punj Lloyd among various others. SEL was listed on the Bombay Stock Exchange and the National Stock Exchange of India in 2001. As on 31 March 2019, market capitalisation of the Company stood at Rs. 42.74 billion.

Company’s Logo: Revenue:

368.02 crores INR (FY 2019)

Shares Owned:

69.63%

Total Shares Held:

245,241,061

Sales:

3548 crores INR (FY 2019)

4

BUSINESS PROFILE: The Company was incorporated as Sadbhav Infrastructure Project Limited on January 18, 2007 at Ahmedabad as a public limited company under the Companies Act, 1956. the Company obtained a certificate of commencement of business on February 7, 2007. As of the date of this Red Herring Prospectus, the Company has 51 members. For information on the Company’s profile, activities, services, market, growth, technology, managerial competence, standing with reference to prominent competitors, major vendors and suppliers Major events and milestones of the Company: 1. 2007 The Company was incorporated as ‘Sadbhav Infrastructure Project Limited’. 2. 2011 The Company issued certain Equity Shares and CCCPS aggregating to Rs.4,000 million collectively to Xander and Norwest.The Company acquired equity shares of BHTPL aggregating to 76.99% of the equity share capital of BHTPL resulting in the Company holding 76.99% of the share capital of BHTPL and also acquired equity shares of ARRIL aggregating to 79.99% of the equity share capital of ARRIL from SEL resulting in the Company holding 79.99% of the share capital of ARRIL. 3. 2012 The Company acquired equity shares of NSEL aggregating to 39% of the equity share capital of NSEL from SREI Venture Capital Trust A/c Infrastructure Project Development Fund resulting in the Company and SEL collectively holding 90% of the share capital of NSEL. 4. 2013 The Company acquired equity shares of AJTL aggregating to 49% of the equity share capital of AJTL from PBA resulting in AJTL becoming the wholly owned subsidiary. The Company issued SEL CCDs aggregating to Rs.750 million to SEL, the corporate Promoter. 5. 2014 The Company acquired equity shares of NSEL aggregating to 9.99% of the equity share capital oNSEL from SREI Infrastructure Finance Limited resulting in the Company and SEL collectively holding 99.99% of the share capital of NSEL. 6. 2015 The Company issued certain non convertible debentures aggregating to Rs.1,405.40 million to ITCL. The Company acquired equity shares of NSEL aggregating to 21% of the equity share capital of NSEL from SEL resulting in the Company holding 69.99% of the share capital of NSEL. The Company acquired equity shares of BRTPL aggregating to 26% of the equity share capital of BRTPL from SEL resulting in the Company holding 100% of the share capital of BRTPL. The Company acquired equity shares of MBCPNL aggregating to 50.80% of the equity share capital of MBCPNL from SEL resulting in the Company holding 77.82% of the share capital of MBCPNL. The Company acquired equity shares of RHTPL aggregating to 26% of the equity share capital of RHTPL from SEL resulting in the Company holding 100% of the share capital of RHTPL. The Company acquired equity shares of SUTPL aggregating to 26% of the equity share capital of SUTPL from SEL resulting in the Company holding 100% of the share capital of SUTPL. The Company acquired equity shares of HYTPL aggregating to 39.99% of the equity 5

share capital of HYTPL from GKC resulting in the Company holding 99.99% of the share capital of HYTPL. The Company issued certain listed, unsecured, rated, redeemable and taxable non convertible debentures aggregating to Rs.1,600 million to various subscribers. The Company issued certain non convertible debentures aggregating to Rs.2,000 million to various subscribers. NSEL received rating of ‘AAA(SO)’ from CARE. The Company received qualifications from NHAI as bidder for various BOT projects, with the highest estimated project cost being Rs.23,561.6 million. 7. 2016 Sadbhav Infra receives certificate for road project Sadbhav Infra Signing of EPC agreements between the Company and its subsidiaries

IPO ISSUED BY COMPANY: Sadbhav Infra IPO is a main-board IPO of [.] equity shares of the face value of ₹10 aggregating up to ₹491.66 Crores. The issue price of the IPO is ₹100 to ₹103 Per Equity Share. The minimum order quantity is 145 Shares per application and the offer type is Book Built Issue. The IPO opens on Aug 31, 2015 and closes on Sep 2, 2015. Link Intime India Private Ltd is the registrar for the IPO. The shares are proposed to be listed on BSE, NSE. Sadbhav Infra IPO lot size is 145 Shares and the minimum order quantity is 145 Shares.

Sadbhav Infrastructure Project Limited IPO Details

IPO Date

Aug 31, 2015 - Sep 2, 2015

Issue Type

Book Built Issue IPO

Issue Size

[.] Eq Shares of ₹10 (aggregating up to ₹491.66 Cr)

Fresh Issue

[.] Eq Shares of ₹10 (aggregating up to ₹425.00 Cr)

Offer for Sale

6,471,524 Eq Shares of ₹10 (aggregating up to ₹[.] Cr)

6

Face Value

₹10 Per Equity Share

IPO Price

₹100 to ₹103 Per Equity Share

Market Lot

145 Shares

Min Order Quantity 145 Shares Listing At

BSE, NSE

REASONS TO ISSUE IPO: • The main issue was the matter of a Fresh Issue

•

The second reason was an Offer for Sale by the Selling Shareholders

IPO LEAD MANAGER: IPO lead managers are also known as Book Running Lead Manager or BRLM. Are SEBI registered independent financial institution appointed by the companies to help them with raising funds through IPO and getting listed at stock exchanges. Lead manager manages the IPO process end to end , their responsibilities include initiating the IPO processing , creating DRHP & RHP, getting offer documents approved from SEBI and exchanges and helping the company shares to get listed in the stock exchanges.

Sadbhav Infrastructure Project Limited IPO LEAD MANAGER: 1. Edelweiss Capital Limited 2. ICICI Securities Limited 3. Kotak Mahindra Capital Company Limited

7

Edelweiss Capital Limited IPO Lead Manager Review

Edelweiss Capital Limited is adiversified financial services provider in India. It provides loans, advisory, and insurance services to individuals and fulfils investment needs, provides advisory services on FX and Currency, Institutional Equity, Alternative Asset Management, Investment Banking, Multi-Strategy Fund, and Financial Product Distribution.

Some IPO's by Edelweiss Capital Limited as Lead Manager

ICICI Prudential Life Insurance Company Ltd IPO BSE, NSE SEP 19, 2016

Sadbhav Infrastructure Project Limited IPO

BSE, NSE AUG 31, 2015

Wonderla Holidays Ltd IPO

BSE, NSE APRIL 21, 2014

Kotak Mahindra Capital Company Limited IPO Lead Manager Review

Kotak Mahindra Capital Company Limited is an equity capital market services provider to help foreign and Indian companies to raise money through the capital market in the country and abroad. The company focuses on some other areas as well to provide a complete investment solution. It helps the corporates in mergers & acquisitions, equity capital markets, private equity advisory, and infrastructure advisory. Some IPO's by Kotak Mahindra Capital Company Limited as Lead Manager SH Kalkar and company LTD IPO

BSE, NSE Oct 28, 2015

Sadbhav Infrastructure Project Limited IPO BSE, NSE AUG 31, 2015 Coffee Day Enterprises Ltd IPO

BSE, NSE Oct 14, 2015

8

ICICI Securities Limited IPO Lead Manager Review

ICICI Securities Limited is a financial services provider in India. By providing private wealth management, institutional broking, investment banking, financial product distribution, and private wealth management services, the company helps financial institutions, corporates, HNI and retail investors. It has a headquarter in Mumbai and maintains quality services through presence across 75 cities in India. Some IPO's by ICICI Securities Limited as Lead Manager RBL BANK LTD IPO

BSE, NSE AUG 19, 2016

Sadbhav Infrastructure Project Limited IPO BSE, NSE AUG 31, 2015 Wonderla Holidays Ltd IPO

BSE, NSE APR 21, 2014

ROLE OF LEAD MANAGER Lead managers are independent financial institution appointed by the company going public. Companies appoint more than one lead manager to manage big IPO’s. They are known as Book Running Lead Manager and Co book running Lead Managers Main responsibilities are to initiate the IPO processing, help company in roadshows, Creating draft offer document and get it approve by SEBI and stock exchanges and helping company to list shares at stock market. The success or failure of an IPO depends on a lead manager. The lead manager decides the pricing, dates, size of IPO. They also help the company selling its IPO shares to public and institutional buyers. Most investors and IPO analysts check the profile of a lead manager before applying in an IPO. The lead manager or merchant banker is a SEBI registered financial institutions. They play the most critical role in the IPO process. The book running lead manager work closely with the company from day one until the IPO shares get listed at the stock exchanges. They help companies preparing for IPO, write the DRHP / RHP documents and get them approved from the exchanges and SEBI. They decide the offer price, public issue dates and listing dates of the IPO in consultation with the company. They also take care of regulatory requirement and educate the company in for pre and post IPO compliances. 9

How much Sadbhav Infra IPO subscribed? The Sadbhav Infra IPO is subscribed 2.24x by Sep 2, 2015 21:30. Sadbhav Infra IPO Subscription Investor Category

Subscription (times)

Qualified Institutional

3.04x

Non Institutional

1.66x

Retail Individual

1.69x

Employee Reservations 0.29x Others Total Subscription

2.24x

Sadbhav Infrastructure Project Limited IPO – should you invest Sadbhav Infrastructure Project Limited one of the leading road BOT companies in India that specialises in the development, operation and maintenance of highways, roads and related projects. (Source: CRISIL Report, dated October, 2014 as amended on August 4, 2015) The Company, a subsidiary of Sadbhav Engineering Limited, was incorporated in 2007 as a developer and operator for highways, road and related projects on a BOT basis. All of their projects are implemented and held through special purpose vehicles, including joint venture entities. They are pre-qualified on an annual basis to bid either directly or through joint ventures for DBFOT projects, subject to certain eligibility criteria, of project values up to Rs. 26,500.00 million by the NHAI up to December 31, 2015. They are involved in the development, operation and maintenance of national and state highways and roads in several states in India including Maharashtra, Gujarat, Rajasthan, Karnataka, Haryana, Madhya Pradesh and Telangana and border check posts in the state of Maharashtra. They have a project portfolio consisting of ten BOT projects of which six road projects are fully operational, one is the partially operational border check posts and the remaining three projects are in various stages of development. Nine of the ten BOT projects are toll projects (including user fee for the border check posts in Maharashtra), while the remaining one is an annuity project. Their operational projects cover approximately 1,531.16 lane kms and the projects under development cover approximately 1,061.48 lane kms. In addition, as of May 31, 10

2015, our Subsidiary MBCPNL completed 13 check posts and is developing 9 more check posts for their MBCPNL Project.

Date of Issue Open for the IPO of Sadbhav Infrastructure Project Limited Sadbhav Infrastructure Project Limited IPO Details Issue Open

Aug 31, 2015

Issue Close

Sep 2, 2015

IPO Price

₹103

Face Value

₹10

IPO Size

₹491.66 Cr

Listing At

BSE, NSE

IPO Lot Size 145

From the above details we can state that Sadbhav Infrastructure Project Limited. Issued their last IPO starting from Aug 31, 2015 with face value Rs.10 but IPO price was set at Rs.103 which was 10 times more than the face value of share and these shares were already segregated to be sold to different prospective buyers like (a) Retail Customers (b) Non Institutional Investors (c) Qualified Institutional Bidders (d) Anchor Investors- etc in the following pattern. QIB

NII

RII

TOTAL

Shares Offered

14,465,730

6,970,728

4,647,152

28,583,610

SEP 02,2015

3.04x

1.66x

1.69x

2.24x

Above table shows the data about how much shares were being offered for sale to various sectors. The share prices were ranged between Rs.100-Rs.103.

11

Company financials Company generated revenue of Rs 896.65 Millions for the year ended Mar-11 and Rs 5,280.49 Millions for the year ended Mar-15 indicating a CAGR of 56%. Company posted a Profit of Rs 98.84 Millions for the year ended Mar-11 and a Loss of Rs 3,015.61 Millions for the year ended Mar-15. Its diluted EPS for FY 2015 is minus Rs (9.74). Reasons to invest Sadbhav Infrastructure project IPO Good revenue growth in last 4 years where its revenue increased by more than 5 times. Company may get benefits of Governments massive spending on infra developments in coming years. However, one has to wait the progress of such developments. Reasons to not invest in Sadbhav Infrastructure project IPO Company has been incurring losses in last 3 years from FY 2013 to FY 2015. Other risk factors (Internal and external) can be read in prospectus Page. SEBI website for this IPO prospectus has some problem to download, hence unable to provide complete negative factors. Would update as soon as it is up.

Recommendations Thought it is asking for Rs 100 to Rs 103 issue price, since it has negative EPS, we cannot ascertain the P/E Ratio. Sadbhav Infrastructure Project revenues have been growing aggressively in last 4 years. However, company has been incurring huge losses in last 3 years. For such loss making company, an issue price of Rs 100 to Rs 103 is very very high. Investors should stay away from such IPO’s.

12

References-

• • •

https://www.chittorgarh.com/ipo/sadbhav_infra_ipo/494/

•

https://en.wikipedia.org/wiki/Sadbhav_Engineering_Limited

www.worldbank.org https://economictimes.indiatimes.com/sadbhav-infrastructure-project-ltd/ipos/companyid30247.cms

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