PKH Ventures Ltd IPO
Published by Sharekhan Education | July 3, 2023
PKH Ventures Ltd IPO is an issue size: ₹359-379 Crores and price band in the range of ₹140-148.The issue opens on Friday, 30th June 2023 and closes on on: Tuesday, 4th July 2023
Company Overview:
PKH Ventures Ltd is a versatile company that excels in Construction & Development, Hospitality, and Management Services. With a strong commitment to growth and innovation, PKH Ventures Ltd has established itself as a reputable player in the industry. One of its subsidiaries, Garuda Construction, specializes in civil construction for third-party developer projects, including prestigious government projects like the Hydro Power Project and the Nagpur Project. PKH Ventures also owns and manages hotels, restaurants, QSRs, and spas, with notable projects in Mumbai. The company has ambitious future plans, including real estate development in Amritsar and Dadar-Matunga, an agro-processing cluster in Jalore, a cold storage facility in Indore, and a wellness center and resort in Chiplun.
Objects of Issue:
PKH Ventures Ltd IPO comprises a fresh issue of equity shares amounting to ₹270 crores. The proceeds from this issue will be utilized for funding working capital requirements, developing the Hydro Power Project, and pursuing inorganic growth through acquisitions. Interested investors can apply for a minimum of 100 shares, with subsequent multiples. Upon allotment, the shares will be listed on the stock exchanges, boosting the company’s brand recognition and market presence.
Competitive Strengths:
PKH Ventures boasts several competitive strengths that have contributed to its success. The company operates with a diversified business model, excelling in Construction & Development, Hospitality, and Management Services. Notably, PKH Ventures has a proven track record in effectively managing restaurants, hotels, banquets, and quick-service restaurants. Its construction arm, Garuda Construction, adopts an asset-light model, leveraging third-party suppliers for equipment and labor. The company consistently delivers strong financial performance and maintains a robust balance sheet. Led by experienced Promoter Pravin Kumar Agarwal, the management team possesses expertise in various sectors, playing a vital role in securing new projects and expanding the business. Despite the challenges posed by the Covid-19 pandemic, PKH Ventures continues to evaluate strategies to enhance margins and drive growth. Overall, the company’s diversified operations and skilled team position it for sustained success.
Business Strategy:
PKH Ventures has developed a well-defined business strategy to expand its projects and venture into new segments. The company aims to bid for high-margin DBFOT and HAM projects, focusing on the development and maintenance of infrastructure assets. Additionally, PKH Ventures plans to establish a multi-commodity cold storage facility in Madhya Pradesh. In the hospitality sector, the company intends to develop new hotels, expand its restaurant operations, and establish a wellness center and resort. PKH Ventures actively seeks strategic joint venture partnerships to leverage resources and expertise. Moreover, the company explores capital investment opportunities in projects with high growth potential and profitability.
Key Concerns:
It is crucial to acknowledge that PKH Ventures plans to invest ₹124 crores in their new Hydro Power Project. However, the company lacks prior experience in developing and operating hydro power projects. The Hydro Power Project is also exposed to various risks, such as weather changes and potential calamities like floods or cyclones, which may impact productivity and result in significant capital and revenue loss. Additionally, the company has experienced negative cash flows in the past, which could affect its operational capacity. The failure to secure new contracts may also have adverse effects on the company’s financial condition.
Financials:
From FY20 to FY22, PKH Ventures demonstrated consistent revenue, EBITDA, and PAT growth, with a compound annual growth rate (CAGR) of 10%, 127%, and 70% respectively. Notably, the company witnessed a significant increase in EBIDTA margin from 6.2% in FY20 to 26.6% in FY22. However, return ratios remained modest, with an average RoE and RoCE of 8.5% and 4.6% respectively during FY20-22. The average Net Asset Turnover during the same period stood at 1.7x. At the upper end of the price band (₹140-148), the issue is priced at 30x P/E, 24.5x EV/EBITDA, and 6.5x EV/Sales.
Source: IPO Red Herring Prospectus
Conclusion:
The upcoming PKH Ventures Ltd. IPO is a growth story of a versatile company excelling in Construction & Development, Hospitality, and Management Services. With a robust business model, a proven track record, and ambitious growth plans, PKH Ventures is well-positioned for success. However, it is important to consider the key concerns and evaluate the financial performance before making investment decisions. To deepen your investing skills and knowledge, we encourage you to join our comprehensive education program “The Ace Investor”, where you can gain valuable insights and experience in the world of investing.
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