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Udayshivakumar Infra Limited
A IPO Analysis
About The Company
Incorporated in 2019, Udayshivakumar Infra Limited is engaged in the business of the construction of roads.
Udayshivakumar Infra Limited is an ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 company. They construct roads including State Highways, District Roads, Smart Roads under Municipal Corporations, Smart Roads under PM's Smart City Mission projects, National Highways, Bruhat Bengaluru Mahanagara Palike (BBMP), and Local Area Roads in various Taluka Places, etc.
The company primarily operates in the State of Karnataka. They bid for Roads, Bridges, Irrigation & Canals Industrial Area construction in Karnataka, this includes National Highways (MORTH), State Highway Development Corporations Ltd., (SHDP), Government Departments such as Karnataka Public Works Ports & Inland Water Transport Department (KPWP & IWTD), Davanagere Harihara Urban Development Authority (DHUDA), and many more.
As of August 31, 2022, the Company had executed over 30 various projects in and around the State of Karnataka along with the erstwhile partnership firm, M/s. Udayshivakumar. The entity is working on twenty-five ongoing projects.
To gear up its operations and scale larger, the company is also looking to undertake projects in the joint venture with other infrastructure companies in industry.
Business Overview and Model
The company is a ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 company engaged in the business of construction of roads including National Highways, State Highways, District Roads, Smart Roads under PM’s Smart City Mission projects, Smart Roads under Municipal Corporations, Bruhat Bengaluru Mahanagara Palike (BBMP) and Local Area Roads in various Taluka Places etc., in the State of Karnataka, Constructions of Bridges across Major and Minor Rivers, Railway Over Bridges (ROB), construction of Major and Minor Irrigation and canal projects, Industrial Areas, based in the State of Karnataka. Company bid for Roads, Bridges, Irrigation & Canals Industrial Area construction in the State of Karnataka including Government Departments such as Karnataka Public Works Ports & Inland Water Transport Department (KPWP & IWTD), National Highways (MORTH), Belgaum Smart City Ltd. and Davangere Smart City Ltd., Bruhat Bengaluru Mahanagara Palike (BBMP), Various Municipal City Corporations, State Highway Development Corporations Ltd., (SHDP), Karnataka Road Development Corporation Ltd., (KRDCL), Karnataka Industrial Area Development Board (KIADB), Davanagere Harihara Urban Development Authority (DHUDA), Krishna Bhagya Jala Nigam Limited (KBJNL), Visvesvaraya Jala Nigam Limited (VJNL), Carvery Niravari Nigam Limited (CNNL), Karnataka Niravari Limited (KNNL), Youth Empowerment & Sports Department, in the State of Karnataka.
As on August 31, 2022, Company along with the erstwhile partnership firm, M/s. Udayshivakumar, have executed various projects in and around the State of Karnataka. Since Fiscal 2015, Company along with the erstwhile partnership firm, M/s. Udayshivakumar, have completed 30 projects having an aggregate contract value of ₹68,468 lakhs, which includes sixteen (16) roads, five (5) bridges, six (6) irrigation and three (3) civil construction works. As on August 31, 2022, Company is executing twenty five (25) ongoing projects which include seven (7) roads, seven (7) smart roads, one (1) bridge, seven (7) irrigation projects and three (3) civil construction works with an aggregate order book value of ₹ 72,030.00 lakhs. Further, as on August 31, 2022, company also have new work orders allotted (but work not yet started) comprising of seven (7) roads and two (2) irrigation works with an aggregate order book value of ₹ 47,659.00 lakhs. As on August 31, 2022 on an aggregate basis, they have 34 works orders in hand having aggregate order book value of ₹ 1,19,689.00 lakhs.
In addition to independently undertaking projects like the ones the have executed in the past, they intend to enter into joint ventures with other infrastructure companies in their industry to jointly bid and execute larger projects.
The company have already entered into joint venture vide agreement dated April 22, 2022 by way of a partnership i.e. M/s Udayshivakumar Kotarki JV with 75% share in the partnership held by their Company and the balance 25% held by Kotarki Constructions Pvt. Ltd. The partnership has been awarded a project by NHAI i.e “Widening to two lane with paved shoulders from km. 24.400 to 27.270, 40.500 to 41.900, 84.300 to 88.200, 105.250 to 112.710, 161.550 to 166.350, 174.120 to 176.120 and 186.550 to 191.900 of NH-766C in the state of Karnataka on EPC mode”. The contract value of the said project is approx. ₹17,100 lakhs. Such joint ventures or partnerships will enable us to achieve pre-qualification with their joint venture partner at the time of the bid, both technical and financial, and if the bid is successful, the company will be able to successfully bid and execute the project with our joint venture partner.
The compaby have over the years developed an established road under BOQ and EPC business and have gradually added facilities to support and supplement their road and irrigation construction business. As part of their in-house integrated model, the company have developed in house resources with key competencies to deliver a project from conceptualization to completion that includes their design and engineering team.
Over the years, the company have acquired a fleet of modern construction machinery and equipment to support the construction of their projects. As on August 31, 2022, their equipment base comprises of over ninety (90) construction equipments, forty six (46) dumpers, forty seven (47) other construction vehicles, five (5) Ready Mix Concrete (RMC) Plants (out of which one is owned by Mr. Prabhakar, brother of the Promoter and taken on lease by them), one (1) stone quarry and one (1) crusher plant owned by M/s Udayshivakumar Stone Crusher a partnership firm of their Promoter. The company have in-house integrated model reduces dependence on third party suppliers for key raw materials such as Metal Jelly, Ready Mix Concrete, construction equipment and other products and services required in the development and construction of their projects. The company have also set up a central procurement team that procures major materials and engineering items required for their projects. The company integrated business model facilitates execution of projects within scheduled timelines. The company depend on their employees, both skilled and unskilled, to execute the projects. As on August 31, 2022, the company have twenty seven (27) engineers, twenty two (22) skilled and ninety nine (99) on-site workers such as drivers, JCB operators, helpers etc for executing various projects.
Company's Competitive Strength
Focused on Roads, Flyovers and Bridge construction
As on August 31, 2022, Company along with the erstwhile partnership firm, M/s. Udayshivakumar, have executed various projects in and around the State of Karnataka. Since Fiscal 2015, the Company along with the erstwhile partnership firm, M/s. Udayshivakumar, have completed 30 projects having an aggregate contract value of ₹68,468 lakhs, which includes sixteen (16) roads, five (5) bridges, six (6) irrigation and three (3) civil construction works. Most of their projects have been executed in and around the State of Karnataka. The company focused approach over the years on the construction of roads, bridges, irrigation projects has enabled them Company to bid for various projects involving construction of road, bridges, irrigation projects. In addition to the construction of roads, bridges and irrigation projects their Company has also established an in-house design and engineering team. The design and engineering team of their Company enables them to undertake turnkey contracts which include design, engineering, procurement and construction. Construction of flyovers and Bridges require specific skills and expertise and is considered a high-risk construction activity as these are built high over the ground and river beds. These robust constructions need to conform to various specific requirements such as strength, durability and resilience over a period of time.
Strong Order Book of roads, bridges, flyovers and irrigation projects from state government.
The company's primary focus on roads, bridges, flyovers and irrigation projects has helped them in gaining technical expertise for undertaking such projects of different sizes involving varying degree of complexities establishing modern fleet of construction machinery, equipment and skilled manpower. As on August 31, 2022, the Company is executing twenty five (25) ongoing projects which include seven (7) roads, seven (7) smart roads, one (1) bridge, seven (7) irrigation projects and three (3) civil construction works with an aggregate order book value of ₹72,030.00 lakhs. Further, as on August 31, 2022, company also have new work orders allotted (but work not yet started) comprising of seven (7) roads and two (2) irrigation works with an aggregate order book value of ₹47,659.00 lakhs. As on August 31, 2022 on an aggregate basis, company have 34 works orders in hand having aggregate order book value of ₹1,19,689 lakhs. Company believe that consistent growth in their Order Book has happened due to their continued focus on bridges, flyovers and irrigation projects and our ability to successfully bid and win new projects. The company were awarded road projects worth ₹31,521 lakhs and irrigation projects worth ₹16,138 lakhs Fiscal 2022-23 till August 31, 2022. The company believe that their experience in execution of roads, bridges, flyovers and irrigation projects, technical capabilities, timely performance, reputation for quality and timely delivery, financial strength as well as the price competitiveness has enabled them to successfully bid and win projects. The company have developed long-standing relationships with clients like PWD, NH, (Morth), BBMP, KBJNL, VJNL, KIADB, DHUDA, KPWP & IWTD, various local bodies.
Strong execution capabilities with industry experience
As on August 31, 2022, Company along with the erstwhile partnership firm, M/s. Udayshivakumar, have executed various projects in and around the State of Karnataka. Since Fiscal 2015, Company along with the erstwhile partnership firm, M/s. Udayshivakumar, have completed 30 projects having an aggregate contract value of ₹68,468 lakhs. Company's focus is to leverage their strong project management and execution capabilities to complete projects in a timely manner while maintaining high quality of engineering and construction. The Company has the three important ingredients required by any infrastructure company i.e. an in-house design and engineering team, a fleet of modern construction machinery and equipment to ensure high quality construction and skilled manpower to execute projects in a timely manner. Company in-house engineering and design team of 27 engineers have the necessary skills and expertise in preparing detailed architectural and /or structural designs based on the conceptual requirements of clients. Company in-house engineering and design team reduces their dependence on outsourcing engineering and design work to third party consultant and are supported by the third party consultants in EPC contracts. Company quality control managers and quality surveyors are responsible for conducting regular inspection and tests at every project site and publishing reports on the status of compliance with contractual requirements and quality control monitoring such as Supervisory Control and Data Acquisition (SCADA).
Experienced management team
The company management team is well qualified and experienced in the Roads, Bridge and Irrigation projects construction and has been responsible for the growth of their business and operations. Company Promoter has more than 25 years of experience, individually in the infrastructure development sector and has been instrumental in driving their growth since inception of their business. The company believe that their motivated team of management and key managerial personnel along with their internal systems and processes complement each other to enable them deliver high levels of client satisfaction.
Company's Strategies
Order Book
How company bid the project
Types of tender
The clients issue various types of tenders depending on the kind of work that needs to be executed by the contractor. The company tendering depar tment has to consider each tender by its type before preparing their Company’s bid for a particular project. The company set out below in brief the various types of tenders floated by their clients.
B1 Tender
This type of tender is also known as percentage rate tender. As per this system of tendering, the bidding contractors are required to quote a single percentage rate either higher or lower against the estimated cost put to tender by the client, at which he would like to execute the work. In this type of tender the client provides the quantities of all items with the estimated rates.
B2 Tender
This type of tender is also known as item rate tender. As per this system of tendering, the contractor receives th e payment depending on the rate at which he has quoted for every item of the work. In this type of tender, the client provides estimated quantities of all required items for execution of the contract duly indicating the estimated cost of the project.
EPC Tender
EPC stands for Engineering, Procurement and Construction and is a prominent form of contracting agreement in the construction industry. The engineering and construction contractor carries out the detailed engineering design as per the requirements of the clients, for the projects to be undertaken. In such projects, the client typically provides scope of the project and specifications, based on which, the contractor is required to provide detailed project plans, structural/architectural designs for the conceptual requirements of the client, and will procure all the equipment and materials necessary and then construct to deliver a functioning facility or asset to their clients. Companies that deliver EPC Projects are commonly referred to as EPC Contra ctors. The price of an EPC contract cannot change, except for a change in scope. As on August 31, 2022, our Order Book consists of 9 B1 type projects, 21 B2 type projects and 4 EPC projects.
Industry Analysis
Review of India’s GDP growth
GDP logged 6.6% CAGR between fiscals 2012 and 2020 In 2015, the Ministry of Statistics and Programme Implementation (MoSPI) changed the base year for calculating India’s GDP between fiscals 2005 and 2012.
Based on this, the country’s GDP logged an eight-year CAGR of 5.4%, growing to Rs.147 trillion in fiscal 2022 from Rs.87 trillion in fiscal 2012. Fiscal 2021 was a challenging year for the Indian economy because of the covid-19 related distress, which was already experiencing a slowdown before the pandemic struck. GDP contracted 6.6% (in real terms) after growing 3.7% in fiscal 2020. India’s GDP (in absolute terms) dropped to Rs.136 trillion in fiscal 2021.
Following this the economy recovered in FY22 as the shocks of the covid-19 pandemic subsided leading to a growth of 8.7% y-o-y resulting in India’s real GDP reaching Rs.147 trillion.
Economy rebounded in second half of fiscal 2021, recovery continued in fiscal 2022
After contracting in the first half because of Covid-19, the economy rebounded in the second half of fiscal 2021, growing 0.5% and 1.6% on-year in the third and fourth quarters, respectively. While the economy shrank as a whole in fiscal 2021, agriculture and allied activities, and electricity, gas, water supply and other utility services were the outliers, logging positive growth. On the other hand, contact-intensive trade, hotels and transport sectors, and services related to broadcasting were hit the most, and continued to contract in all the quarters. Construction – a labour-intensive sector – was also severely hit in the first half, but rebounded in the second half.
The economy got into recovery mode, with GDP expanding 20.1% on-year in the first quarter of fiscal 2022, 8.4% in the second quarter and 5.4% in the third quarter. Slower third quarter growth was partly due to the waning away of the low-base effect of the previous year, when the economy begun expanding post the first pandemic wave. Third quarter growth also seemed to have been impacted by lower government investment spend, with the growth being 5.4% y-o-y. In absolute terms, GDP for the second quarter only just crossed the value reported in the first quarter of fiscal 2020 (pre-Covid), representing a rise of 1.1%. The economic rebound came on the back of reduced pandemic restrictions and improving vaccination coverage. Real GDP growth slowed to 4.1% on-year in Q4 from 5.4% in Q3, led by a sharp slowdown in private final consumption expenditure (PFCE). That said, both government final consumption expenditure (GFCE) and GFCF registered higher growth in Q4. To be sure, a part of the slowdown in Q4 GDP growth is also attributed to base effect.
Key budgetary proposals for Infrastructure sector
The Union Budget 2022-23 bet big on an investment push to lift economic growth, two years and three waves into the pandemic. The idea clearly is to push the growth multiplier rather than stoke consumption through direct budgetary support. For the next fiscal, the government’s revenue expenditure is budgeted to grow less than 1% after growing 2.7% in the current fiscal. The total capex of the government (budgetary capex plus revenue grants for capital creation and capex by central public sector enterprises) is budgeted to rise 14.5% as compared with only 3.1% in the current fiscal. The government thus has tightened the belt around revenue expenditure and frontloaded infrastructure spending that would lead to faster economic growth.
Key budget announcements concerning infrastructure are, At Rs.7.5 trillion, aggregate budgetary support (gross budgetary support or GBS) for capex next fiscal is up 39% over fiscal 2022RE. For infrastructure sectors, budgetary support is 30% up at Rs.4.3 trillion. These exclude Rs.620.57 billion equity infusion into AI Assets Holding Ltd (AIAHL) in fiscal 2022RE PM Gati Shakti Master Plan for expressways is to be formulated. The national highways network will be expanded by 25,000 km next fiscal In the railways sector, 2,000 km of tracks will be brought under train collision avoidance system, Kavach; 400 new generation Vande Bharat trains will be introduced in the next three years Four multi-modal logistics parks will be awarded through the PPP mode next fiscal.
Overview of infrastructure sector in India
Developing and modernising the infrastructure sector has been a priority area for the Government of India and has witnessed increasing public investments and budgetary support. Further, the government has also undertaken several reforms and initiatives in the infrastructure sector which has resulted in robust secular growth in most of the segments within the sector.
Share of various infrastructure segments in total construction spends
Within infra segments, roads continue to have the highest share. Within the infrastructure space, road projects will be a critical investment driver from fiscals 2023-27. CRISIL Research also expects metro rail, water supply and sanitation, and railway projects to garner larger shares.
Key growth drivers for the infrastructure industry
Construction sector to be driven by infrastructure sector in the medium term; industrial sector to show modest rise Construction sector is anticipated to grow at 9-12% in FY23 driven by growth in infrastructure segment which is in turn attributed to development of roads and urban infra and a boost provided by central and state capex. The construction sector is projected to record a 35-40% recovery in fiscal 2022 from a low base in fiscal 2021, led by Growth in Construction sector to be propelled by the infrastructure segment over the medium to long term as the building construction and industrial sector record sedate growth rates.
Road projects to dominate longterm construction activity
Roads: The pandemic was a minor speed bump in terms of the fast Construction spend of Rs.2122 lakh crore over fiscal 2023-- growing investments in the roads sector . 2027 will be driven by the steady execution of national highway and highvalue expressway projects. The share of HAM in awarding is expected to be similar to fiscal 2020 levels or rise marginally going forward, as the initial outlay required by the NHAI is 40% of the project cost. Also, the NHAI gets an additional 6 months to acquire the required land as players typically take the same time to achieve financial closure. However, delays in appointe d dates of already execution of these projects.
Irrigation:-- awarded projects is delaying the After a logjam in the past few years and post a blip in fiscal 2021 due to the pandemic, investment is expected to improve over the long term due to the low penetration of Irrigation in the country. Investment spends of ~Rs. 4.3 4.5 lakh crore over the ne xt 5 years are anticipated, as compared with the Rs. 3.2 lakh crore investment over the past 5 fiscals. Apart from the top6 states that accounted for the majority of irrigation investment, Odisha has emerged as a top state with considerable increase in ir rigation investments over the past few years.
Railways: Construction spend in railways rose in fiscal 2022 despite the pandemic. Spends are seen rising 8 in fiscal 2023 and then moderate going ahead. Investments in railways would be led by a dedicate12% d freight corridor, network decongestion and the bullet train projects. Central budgetary allocations to railways grew by 14% in fiscal 2023 over fiscal 2022 RE. About 50% of the planned outlay is expected to be financed through budgetary support, and the remaining through internal sources and market borrowings/institutional finance.
Within infra segments, roads continue to have the highest share
Within the infrastructure space, road projects will be a critical investment driver from fiscals 2023 Research also expects metro rail, water supply and sanitation, and railway.
Share of major segments in overall construction spending
National Infrastruture Plan (NIP) drive Infrastructure investments as nearly Rs.55 lakh crore of projects currently under construction
The NIP outlines a spend of 111 lakh crore over fiscals 2020 funds to do the heavy lifting.2025 which is a lofty target with focus on public With public funds being constrained due to the impact of the pandemic across fiscals 2021 and 2022, with vaccination, social and healthcare spends to be met. The investments outlined in the NIP are almost double over the previous 5 year plan and the achie vement ratio of the 5 year plans have been dropping with rising outlay of capex. CRISIL Research projects a 6575% achievement of the NIP. The balance investments are unlikely to be met till fiscal 2025 and will likely spill over into further years.
Roads
Review of past and future investments in key infrastructure segments.
Construction growth in Roads and Highway sector to be driven by execution of high value expressways
CRISIL Research expects investments in roads to rise 1216% in fiscal 2023 led by a strong pipeline of awarded and under execution national highway projects, execution of higher value expressways and recovery in state road investments. Investments in National highways led by expressway execution are projected to rise 25 sta te road investments are projected growing 810% in FY23. Investments in roads in fiscal 2022 are expected to have recorded a 8 challenges due to irregular monsoon in certain states in Q3FY2022.
Road projects augur wel30% while 10% rise despite the second wave and l for construction players, as nearly all funds (save those used for land acquisition) are channelised into construction. Investments in road and highways, is forecasted to almost double over fiscals 202327 compared to fiscals 2018 by public funds.22, due to the governme nt's focus on roads, and state and national highways driven Around 50% of the projects awarded by the National Highways Authority of India fiscal 2021 are through the hybrid annuity model (HAM), in which 40% of the total construc (NHAI) in tion cost is paid by the government during the construction period. Thus, more than 7580% of the total investment expected in national highways will be expensed by public funds (state and centre).
Expected spend on road construction
Budgetary allocation for capital expenditure in national highways
Management Of The Company
Udayshivkumar - Managing Director
Manhushree Shivkumar - Executive Director
Kodachawad Sheetalkumar - CFO
Growth Drivers Of The Company
Financials Of The Company (Amount in Lakhs)
Balance Sheet
Profit and Loss
Cash Flow
Risk
Objective of the IPO issue
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.
Source - Company's DRHP Filing and Company's website. Disc - IPO is not an recommendation, pls do your own research before applying
I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.
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