Tuesday, 18 September, 2007

Consolidated Construction Consortium -IPO Analysis

MAX. ISSUE SIZE (Rs) : 189 crore
PRICE BAND (Rs) : 460 - 510
ISSUE OPENS/CLOSES : 18th to 21st September, 2007

An integrated construction services company, Consolidated Construction Consortium Limited (CCCL) undertakes turnkey building contracts for corporates and infrastructure/realty players, besides the Government.

The IPO proceeds, approximating Rs.190 crore have been primarily earmarked for acquiring construction equipment, investments in subsidiaries, setting up a skill and management development centre and repayment of loans.

The IPO proceeds will also enhance CCCL’s net worth and allow it to throw its hat into the ring for larger turnkey projects in the infrastructure space including airports, SEZ’s, power plants and highways.

Unlike the many hybrid construction-cum-real-estate development companies that have sprouted of late, this company remains a pure construction play with a client base spanning across diverse sectors such as IT, manufacturing, retailing and education.

Ironically, it is the bloated order books of its hybrid peers that boost the prospects of companies with proven superior execution capabilities like CCCL. Besides this, the spate of infrastructure order-flows from the Government is another positive.

CCCL’s USP clearly lies in its relatively de-risked business model, which affords it the opportunity to now spread its wings beyond the southern part of India where its current order-book ( over 90 per cent ) is concentrated. Another concern area, going ahead, could revolve around CCCL’s food processing SEZ plans via the subsidiary route.

Yet, the positives far outweigh the negatives and with less than 15 per cent fixed price contracts, the company’s bottomline is rendered less vulnerable to downswings.

Resultantly, its 3 year financial track-record wears a healthy look with a CAGR of 75 and 125 per cent in sales and net profits respectively, as does its order-book of Rs.2,200 crore at end-August,07.

Given this backdrop and fair management pedigree, the demand for a P/E multiple of 18 plus cannot be faulted. Investors can thus consider consolidating their portfolios with an exposure to CCCL’s IPO.

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