Salasar Techno IPO Analysis

Salasar Techno IPO Analysis

Established in 2001, the company offers customised steel fabrication and infrastructure solutions for Telecommunication Towers, Transmission Towers & Substation Structures and Solar Module Mounting Structures. As one can imagine, this requires supply of customized, high-quality material and the company’s service suit includes engineering, designing, fabrication, galvanization and deployment of these products.

The company commenced its manufacturing/fabrication activities in the FY2006/07 and its second unit became operational in FY2008/09. Salasar Techno Engineering recently increased its installed annual manufacturing/fabrication capacity from 50,000 MT to 100,000 MT with the installation of new galvanizing plant at Salasar Stainless Limited, a wholly-owned subsidiary.

Salasar Techno Engineering IPO opens tomorrow and it will be interesting to see this public offer which is among the smallest IPOs in recent times. Priced at INR108 per share, Salasar Techno Engineering IPO aims to raise INR35.86 crore. The IPO will open on 12 July and investors can place their orders till 17 July. The IPO will be managed by Sarthi Capital Advisors while Bigshare Services will be the registrar. Through Salasar Techno Engineering IPO review, we try to find out if throwback to the bygone era deserves a serious consideration.

Subscription Dates	12 – 17 July 2017
Price Band	INR108 per share
Fresh issue	3,321,000 shares (INR35.86 crore)
Offer For Sale	Nil
Total IPO size	3,321,000 shares (INR35.86 crore)
Minimum bid (lot size)	125 shares
Face Value	INR10 per share
Retail Allocation	50%
Listing On	NSE, BSE

As mentioned above, the upcoming IPO will raise just INR35.86 crore and this entire money will go to the company. Out of the total, INR31.87 crore will go towards working capital requirement while INR2.5 crore have been earmarked for general corporate purposes.

Average growth in terms of Revenue over past four years is 32.77% and in terms of Profits is 33.16%.

The company has negligible long-term debt and this has helped in shoring up profits in these years. Earnings grew from INR4.9 crore in FY2013 to INR20.7 crore in FY2017. Once again, commendable job! As a result of growing profits and a strong control on costs, margins have been improving after hitting a low of 1.9% in FY2015. In the latest year ended 31 March 2017, net margin stood at solid 5.4%.

In terms of valuations, the issue price of INR108 per share and its consolidated EPS of INR20.83 mean that the P/E ratio is an attractive 5.2. This is much lower than comparable figures of 18.1 and 19.5 for Kalpataru Power Transmission and KEC International, respectively. Salasar Techno Engineering also boasts of a strong return on net worth (RONW) of 21.6% which is higher than most of its listed peers.

All in all, go for the IPO.