IPO Update- Consolidated Construction Consortium Ltd.

Making hay while the sun shines

Company : Consolidated Construction Consortium Ltd. (CCCL)
Sector : Construction / Engineering

Shares Offered : 37 Lac
Price Band : Rs. 460 – 510

CCCL is a good mix of play on construction and engineering space. Investment Guru is of the view that the company has good growth potential given the visibility into its earnings based on 2000 crore order book, good management pool and its move towards high margin businesses. However, the IPO has been priced quite aggressively and the quantum of listing gains depends on the state of markets at the time of listing. Investment Guru expects moderate listing gains on listing.

About CCCL

CCCL is a provider of integrated turn-key construction services in the industrial, commercial, infrastructure and residential sectors of the construction industry.

The Company was incorporated in 1997 in Chennai by promoters (ex L&T engineers), four of whom have over 20 years experience each in the construction sector.

The company started with a project to build a Temple in Tamil Nadu ! Since then,it has executed 334 projects,comprising of 104 industrial projects, 172 commercial projects, 14 infrastructure projects, and 44 residential projects across 14 states and union territories in India comprising built up area of 19.0 million sq.ft.

The company baosts of a strong order book providing visibility into future earnings. As of July 31, 2007, the order book stood at Rs.20,495.68 million comprising of projects related to industrial structures, IT parks, commercial building, airport terminal buildings, hotel, hospitals and educational institutions.

Out of the 500 orders received by the company so far ,185 have been placed by clients for whom it has executed projects in the past. This shows that the company has a good amount of repeat orders coming in and hence the company enjoys good customer satisfaction.

CCCL has a diverse and impressive clientele list including Infosys, Manipal University, Airport Authority of India and Hi-Tech Carbon (a unit of Aditya Birla Nuvo Limited).

Strengths

Ability to provide integrated turn-key construction services to clients operating in diversified sectors
Scheme of concentric integration: CCCL has the key competencies and in-house resource to deliver a project from its conceptualization to completion. The company believes that this has been one of the important contributing factors to successful completion of a number of projects in a timely manner, without compromising on quality.
Ability to execute innovative and complex structures
Qualified experienced and proven management team

Alert Areas

The company’s operations are concentrated in Southern part of India. 92.50% of the Order Book as of July 31, 2007 and 92.2% of revenues for Fiscal 2007 are from projects located in the south of India. Further to this even in South they are concentrated in the states of Tamil Nadu and Karnataka. Hence the company lacks geographical diversification.
The company does not owns the CCCL brand, it has licensed by one of the promoter’s group company. The company pays 4% of profit to this company (maximum Rs. 2 Crore) for using the logo.
The company has generated negative cash flows from operating activities for last three years.

Financials

Company’s Topline has zoomed from 126 crore in year 2003 to 868 Crores in year 2007. Bottom line has also soared from 3 crore in FY03 to 47 crore in FY07. In last 4 years, the company’s sales have grown at a CAGR of 76% while the profits has grown at a CAGR of 126 %.

Valuations

For FY07, the EPS post the bonus issue stood at 14.88. Return on Networth is 23.27%.The Net asset vale per share comes to Rs. 55.84. At the higher price band the issue comes at a PE of 34. Peer B.L. Kashyap is quoting at a PE of 24.

ICRA Grading
This Issue being has been graded by ICRA Limited as IPO Grade 3 indicating average fundamentals.

Issue Opens : 18-Sep-2007
Issue Closes : 21-Sep-2007
Registrar : Karvy

To check IPO Allotment status of CCCL click Here