The Rajesh Power Services Limited (RPSL) is a prominent player in the engineering, procurement, and construction (EPC) services sector, catering to both renewable and non-renewable power industries. With a focus on turnkey projects, RPSL specializes in the installation of Extra High Voltage (EHV) cables, transmission lines, and substations, in addition to designing underground power distribution systems. The company also offers maintenance services for solar plants and EHV substations and provides a range of utility services, including cable fault detection and transformer retrofitting. Rajesh Power Services further enhances its offerings with consultancy for power substation and cable system design.

Rajesh Power Services IPO Overview

Rajesh Power Services is launching an Initial Public Offering (IPO) with an issue size of ₹160.47 Crore. The IPO comprises a fresh issue of 27.90 lakh shares worth ₹93.47 Crore and an Offer for Sale (OFS) of 20.00 lakh shares, amounting to ₹67.00 Crore. The subscription period for the IPO began on November 25, 2024, and will end on November 27, 2024. The allotment of shares will be finalized by November 28, 2024, and the shares are expected to be listed on the BSE SME segment by December 2, 2024.

The IPO price band is set between ₹319 and ₹335 per share, with a minimum lot size of 400 shares. Retail investors must invest at least ₹1,34,000, while High-Net-Worth Individuals (HNIs) are required to invest in a minimum of 2 lots (800 shares), totaling ₹2,68,000. The market capitalization at the upper price band of ₹335 per share is projected to be ₹603.25 Crore.

Subscription Status and Market Insights

The IPO has witnessed overwhelming investor interest, with the subscription reaching 54.90 times by the final day of the subscription period. This surge reflects strong market sentiment and demand for Rajesh Power Services’ shares.

Additionally, the Grey Market Premium (GMP) of the IPO is currently around ₹65 (approximately 20% above the issue price), indicating potential gains on listing. However, it’s important to note that Grey Market Premium should not be considered as an official indicator, and trading in the grey market carries risks. It is advisable for investors to wait for the official listing rather than relying on unofficial trading figures.

IPO Objectives and Use of Proceeds

The fresh issue proceeds will be utilized for specific purposes:

1. Capital Expenditure: ₹2,510.93 Lakhs will be spent on acquiring cable identification, testing equipment, and fault location tools (₹1,794.82 Lakhs). An additional ₹416.11 Lakhs will be invested in establishing a 1,300 KW DC Solar Power Plant, while ₹300.00 Lakhs will be used for developing technical expertise in green hydrogen production and equipment manufacturing, including electrolysers.

2. Working Capital: The company will allocate ₹3,000 Lakhs to meet its working capital requirements, which will support its ongoing projects and operations.

3. General Corporate Purposes: The remaining funds will be used for general corporate needs.

Financial Performance and Valuation Metrics

Rajesh Power Services has posted significant growth over recent years. For the quarter ending September 30, 2024, the company reported a revenue of ₹31,785.09 Lakhs and an EBITDA of ₹4,205.04 Lakhs. For the fiscal years 2024, 2023, and 2022, the revenue figures stood at ₹29,506.07 Lakhs, ₹21,117.57 Lakhs, and ₹14,936.84 Lakhs, respectively. The restated profit after tax (PAT) for FY 2024 was ₹2,802.29 Lakhs, marking an impressive rise in profitability.

The IPO’s pre-issue earnings per share (EPS) is ₹17.01, with a post-issue EPS projected at ₹15.56. The price-to-earnings (P/E) ratio stands at 19.59x pre-issue and 21.53x post-issue, indicating that the IPO is priced at a moderate valuation. Rajesh Power Services also boasts a strong Return on Capital Employed (ROCE) of 29.99% and Return on Equity (RoE) of 36.41%, showcasing its financial strength and operational efficiency.

The Upcoming IPOs in this week and coming weeks are Ganesh Infraworld, Suraksha Diagnostic, Property Share REIT, Rosmerta Digital, Avanse Financial and Nisus Finance.

The Current active IPO is Agarwal Toughened, Apex Ecotech, Abha Power and Steel and Rajputana Biodiesel.

Anchor Investors and Market Maker Role

Rajesh Power Services raised ₹44.77 Crore from anchor investors at ₹335 per share, further solidifying investor confidence in the company. The company allocated 13,36,400 equity shares to these investors, and ISK Advisors Private Limited serves as the Book-Running Lead Manager for the issue. Bigshare Services Private Limited is acting as the registrar for the IPO, while Sunflower Broking will act as the Market Maker, ensuring liquidity for the shares post-listing.

IPO Allotment Process

The Rajesh Power Services IPO allotment date is set for Thursday, November 28, 2024. Investors can check their allotment status by visiting the registrar's website and entering their application number or PAN details.

Investment Recommendation

While the Grey Market Premium suggests a potential listing gain, the company’s financials and valuation metrics indicate a moderate outlook for long-term investment. Considering the P/E ratio and the growth trajectory, we recommend a cautious approach to the Rajesh Power Services IPO. Investors seeking short-term gains might consider participating based on market trends, while those looking for long-term holdings should carefully evaluate the company’s post-IPO performance.

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