Capacite Infraprojects - Information Analysis

Note: This article has no recommendation to either buy or avoid this IPO. Instead, we have presented all the relevant information based on which you can make your own decision. Capacite Infraprojects is essentially a building contractor. It builds homes on behalf of major builders such as Godrej, Rustomjee, Lodha and Oberoi, mostly in Mumbai. It employs about 10,000 contract workers and about 1700 permanent employees. The company has a hefty order book which is nearly four times current revenues, meaning that business isn’t hard to come by. Revenues themselves have grown at a blistering CAGR of 182% over the past four years and profits have grown at 419% (albeit from a modest 3 crore loss in 2013). EBITDA and Net Margins at 13% and 6% respectively look good. It’s portfolio of blue-chip customers of repute is an advantage. The hardest part of real estate - obtaining approvals from various government bodies rest more with the developer rather than Capacite. The company also owns much of the equipment it uses, keeping a lid on costs. On the other hand, the company is new and thus relatively unproven. The pledging of 19% of the pre-issue equity by the promoters is a worrying sign. Real estate is a murky business and a building collapse or other accident could expose the company to some harsh penalties. The company is also heavily exposed to the Mumbai real estate market. Valuations at 23 times earnings* and 2.3 times book* are not especially cheap.  *On a post IPO fully diluted basis  Where is it all going Money being raised - Rs 400 Crores Funding working capital requirements -  Rs 250 crores Funding purchase of capital assets - Rs 52 crores General Corporate Purpose - Rs 98 crores  So what is the verdict to be? Use our questions to make up your mind. Company / Business 1. Are the company's earnings before tax more than Rs 50 cr in the last twelve months? Yes, Capacite’s consolidated earnings before tax for FY 2017 were Rs 107 crores, an increase of 44% over FY 2016.  2. Will the company be able to scale up its business? Yes, the company is expanding its operations at