Udayshivakumar Infra IPO sails through on Day 2 despite weak market sentiments

The public offer of Udayshivakumar Infra sailed through on the second day of the bidding process, driven by heavy bidding from non-institutional investors (NIIs). The portion reserved for NIIs was oversubscribed at 1.16 times, while the retail investors' category got 0.86 times bids. Meanwhile, the qualified institutional buyers' (QIBs) portion was subscribed 97%.

Analysts were doubtful whether the issue would sail through amid negative market sentiments, but full subscription on Day 2 defied all expectations.

The company has fixed a price band of Rs 33-35 and investors can bid for 428 shares and in multiples thereof.

According to market sources, the grey market premium (GMP) of Udayshivakumar Infra, which indicates the premium commanded by shares in the unlisted market, was unchanged at Rs 10.

Analysts are mixed on whether investors should subscribe to the IPO given muted market sentiments.

Religare Broking has a "neutral" rating on the public offer, while Dilip Davda, a Sebi-registered analyst recommended investors to subscribe to the issue for the long term.

"The company is in a business that is highly competitive and it is uncertain how long the margins would sustain. The downsizing of GST recovery is also a worry," Davda said.

Meanwhile, Prashanth Tapse of Mehta Equities said conservative investors should avoid subscribing to the issue, citing key risks such as potential inconsistency in financial performance and downsize in GST recovery.

According to analysts, the issue is fully priced in, discounting all the near-term growth potential for a company.

Udayshivakumar Infra is engaged in the business of construction of various road projects including national and state highways, district roads and smart roads under PM’s smart city mission projects etc.

The company has 46 work orders in hand having aggregate order book value of Rs 1,291 crore, as of the December quarter. Out of which, 30 are ongoing and 16 are new work orders which are yet to start.

Udayshivakumar Infra has clocked a revenue of Rs 185 crore in FY22, while profit stood at Rs 12 crore. Over FY20-22, it has seen a mixed growth trend, wherein revenue de-grew by 2.1% CAGR while EBITDA was flat and PAT grew by 7.6% CAGR.

Saffron Capital Advisors is the lead book running manager and MAS Services is the registrar to the issue.

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