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PKH Ventures IPO: 5 Things to Know

Jun 27, 2023

PKH Ventures IPO: 5 Things to Know

The mainboard IPO market is back with a bang.

A plethora of SME IPOs came out in 2023 so far, but mainboard IPO activity was quite slow. In the first five months of 2023, only seven mainboard IPO offers went live. Thus the average was not even two per month.

However, this week the scenario changed all of a sudden.

This week three mainboard companies are going live with their public offers. Two out of three IPOs, Cyient DLM IPO and IdeaForge IPO already went live on 26 June 2023.

The third IPO of real estate company PKH Ventures will go live this Friday, 30 June 2023.

Let us take a look at the key details of the IPO.

Issue period: 30 June 2023 to 04 July 2023

Type of Issue: Fresh issue worth Rs 2,702.2 million (m) and offer for sale (OFS) worth Rs 1,091.3 m

Price band: Rs 140 to Rs 148 per share

Face value: Rs 5 per equity share

Lot size: 100 shares

Application limit: Minimum one lot and maximum thirteen lots for retail investors

The company has reserved not less than 50% shares of the offer for qualified institutional buyers (QIB). It has reserved not less than 15% for non-institutional buyers (HNI). Hence not more than 35% of shares are available for retail individual investors.

Tentative IPO allotment date: 07 July 2023

Tentative listing date: 12 July 2023

#1 About the company

Incorporated in 2000, PKH Ventures is engaged in the business of construction and development, hospitality, and management services.

PKH Ventures executes civil construction works for third-party developer projects. The civil construction business is executed by its subsidiary and construction arm, Garuda Construction.

PKH Ventures Hospitality vertical is in the business of owning, managing, and operating hotels, restaurants, QSRs, spas, and the sale of food products.

The company currently provides miscellaneous mechanical, electrical, and plumbing (MEP) works services such as annual maintenance of its projects and certain third-party O&M contracts.

The company is awarded two government projects viz., the hydropower project and the Nagpur project, being executed through its subsidiaries and special purpose vehicles.

#2 A look at the financials

PKH Venture's sales fell by 7.3% YoY in the financial year 2022 to Rs 2,454.1 m. This was due to lower order inflow in the year consideration.

The company managed to bring down its expenses substantially in the year under review, which is clearly reflected in the profits earned by the company.

As a result, it reported a 29% YoY jump in net t profit at Rs 664.2 m.

PKH Ventures Financial Snapshot (2020-22)

Particulars 31-Mar-22 31-Mar-21 31-Mar-20
Revenues (Rs in m) 2,454.10 2,646.60 1,690.00
Revenue Growth (%) -7.30% 56.60%  
Net Profit 664.2 516.3 141
Net Profit Margin (%) 27.1 19.5 8.3
Net Worth 7,598.30 6,934.50 1,497.30
Return on Net Worth (%) 36.6 42.6 57.8
Basic Earnings per share (Rs) 6.3 5.1 2.4
Data Source: Company's Red Herring Prospectus (RHP)

#3 Peer comparison

The company is involved in diverse business activities.

According to the company, there are no listed companies in India that are engaged in such diversified business similar to that of PKH Ventures. Accordingly, it is not possible to provide a peer comparison of key performance indicators of the whole business.

However, it is possible to compare the company's each business vertical with major business players in the relevant industry.

Let us take a look at the peer comparison of PKH Ventures in two different business segments.

Peer Comparison of Construction Segment (FY 2022)

Company Order book (Rs in m) Order book to sales (Times) Revenue from construction (Rs in m)
PKH Ventures 5,597.5* 6.0* 930.4
Larsen & Toubro 35,75,950.00 3.6 10,06,040.90
NCC 3,93,610.00 3.5 1,11,379.60
Alhuwalia Contracts 1,30,336.00 4.9 26,677.20
Hindustan Construction Company 1,59,670.00 1.6 1,02,048.20
Data Source: Company's Red Herring Prospectus (RHP)

*Sales and Order book of construction & development segment as on 10 March, 2022

Peer Comparison of Hospitality Segment (FY 2022)

Company Revenue (Rs in m) Net profit (Rs in m) Net profit margin (%) EPS (Rs)
PKH Ventures 2,454.00 990.2 577.2 6.3
Sayaji Hotels 1,720.00 330.5 19 18.3
Graviss Hospitality 503.7 -65 -13 -0.9
Gujarat Hotels 35.7 27.2 76 7.2
Kamat Hotels 1,456.30 -226.7 -16 -9.6
Advani Hotels & Resorts 522.2 65.1 12 1.4
Indian Hotels 21,524.20 -344.5 -2 -0.3
Chalet Hotels 5,014.70 -701.5 -14 -3.1
Lemon Tree Hotels 1,321.70 -160.6 -12 -0.2
EIH Hotels 9,107.60 -1,182.10 -13 -1.9
Byke Hospitality 941.5 -128.2 -14 -3.2
Source: Equitymaster

#4 Arguments in favour of the business

  • It has an established track record of 15 years in the construction and hospitality segment.
  • The company has a strong and steadily growing order book. It continues to receive orders from third parties, government projects, government hotel development projects and forthcoming development projects.
  • It has a diverse business model. A diversified business model effectively de-risks the company against any recessionary environment in a particular industry where it does business.
  • It has an asset-light business model for civil construction. It relies mostly on third-party suppliers for equipment and labour.

#5 Risk Factors

  • The company has experienced negative cash flows in the past and may continue to do so in the future. The same may adversely affect its cash flow requirements, which in turn may adversely affect its ability to operate its business and implement its growth plans, thereby affecting its ability to continue as a going concern.
  • The company is developing a hydropower plant for the very first time. In the event of failure of execution, the said plant or lack of adequate generation of power, the same may adversely affect its results of operations and financial condition.
  • If the company fails to obtain approvals required for the execution of the hydropower project in respect of which it has relevant applications that are currently pending, the schedule of implementation of the hydropower project may be affected.
  • A significant portion of revenues from its construction and development activity comes from the government of India, through Delhi Police. Any dispute with the Delhi Police leading to a delay or cessation of annuity payments may result in a material adverse effect on the company’s financial condition.

To conclude

Rising income and employment opportunities have led to migration to urban areas thereby creating a greater need for real estate in major Indian cities. Thus, the Indian real estate sector is set to boom on the back of rising demand.

The real estate segment also received a massive boost from government initiatives such as Affordable Housing Scheme, Goods and Services Tax (GST) and the Real Estate Regulation and Development Act, 2016 (RERA).

While the initial months following the implementation of these initiatives created some disruption, the policies increased the transparency and competence of the sector.

As a result, the confidence of domestic and foreign investors in the real estate industry witnessed a boost leading to higher FDI in the sector.

Thus, strong demand coupled with government initiatives could create major tailwinds for the company.

However, like every other investment opportunity, PKH Ventures has both pros and cons. How the company's shares perform in the market remain to be seen.

Stay tuned to get further updates on this IPO and all upcoming IPOs in the market.

Happy Investing!

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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Which are the best performing IPO stocks in India right now?

As per Equitymaster's Stock Screener, these are the best performing IPO stocks right now -

These companies have been ranked as per the gains they have delivered to investors since listing.

Remember, it's not easy to identify future multibagger stocks, but if you do it carefully and with due diligence, you can find high growth companies which can turn out to become future multibaggers.

How should you go about investing in the best performing IPO stocks in India right now?

The best performing IPOs have already delivered outsized returns. So there is a good chance these stocks might be overpriced.

Before you invest your hard-earned money, make sure you check out the valuations first. Studying the business is equally important. One should only invest in fundamentally strong stocks with bright prospects.

What is GMP?

GMP stands for grey market premium. It is the amount, over and above the issue price, that traders are willing to pay or ask for to trade IPO shares. The GMP can tell you how an IPO will perform on its listing day.

If you are applying for an IPO, take a look to see what could happen on listing day. But remember GMP shouldn't be the only factor influencing your decision on whether or not to hold or exit the stock.

If you are an investor, then we would say take the GMP with a pinch of salt. A factor as volatile as GMP can't be a deciding factor.

Therefore, you should never apply for an IPO just because it commands a good GMP. You should apply for an IPO because you believe in the company's earning potential. Hence more weightage should be given to the fundamentals of the company.

What is an IPO Price Band?

IPO Price Band is the price range within which investors can bid for the shares. The minimum price is called the floor price and the maximum price is called the cap price.

In case the company revises the price band, the offer period gets extended for at least three additional working days.

Any revision in the price band and the revised offer period, if applicable, is shared by notification to the stock exchanges by issuing a press release and on the websites of the book running lead managers.

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