Should you invest in Likhitha Infra Ltd IPO?

Sathish - Wealth Consultant, Author - Untold Wealth Secret, Investment consultant, Mutual Funds

Should you invest in Likhitha Infra Ltd IPO?

About the Company

Incorporated in 1998, Likhitha Infrastructure Ltd is an oil and gas pipeline infrastructure service provider in India headed by the ­rst generation entrepreneur Mr. Srinivasa Rao Gaddipati having around 3 decades of technical experience. The co-promoter Ms Likhitha Gaddipati post-graduated from Illinois Institute of Technology, Chicago has worked with PWC (USA). The company is engaged in providing ‘services of laying’ oil & gas pipelines, city gas distribution projects, cross-country pipeline projects, and operations and maintenance services as well. The company has presence in more than 16 states and two Union Territories in India. It has successfully laid around 600 Kms of oil and gas pipelines including steel and medium-density polyethylene (“MDPE”) network. Additionally, the company has laid approximately 800 kms of oil and gas pipelines for on-going projects.

Strengths about the company

1) Order Book as of July 31, 2020 stood at approximately Rs.662.59 crore

2) Likhitha Infrastructure is among very few companies with almost zero debt. Average ROC in the last three years stood above 45% and average RONW above 24% and positive operating cash pro­t. It’s average NP margin above 12%. Working capital days last 3 years stand at 31.30, 34.09 and 4.72.

3) Signi­ficant experience and strong presence in India, It is one of the well-established oil & gas pipeline laying companies in India with diversi­fied operations spread across various geographical regions such as Karnataka, Delhi-NCR, West Bengal, Gujarat, Goa, Andhra Pradesh, Kerala, Tamil Nadu, Telangana, Madhya Pradesh, Jharkhand, Bihar, Chandigarh, Haryana, and Uttar Pradesh. Its client includes leading City-Gas-Distribution (CGD) Companies.

4) The Company has on more than 31 on-going projects across India. It has good experience and strong presence across the country with strong project execution capabilities and experienced management team. Its clients include leading City Gas Distribution (CGD) Companies.

5) The Company has secured 5 new Pipeline Infrastructure contracts over the last few months & has long term relationship with clients and gets repeat business on regular basis. f) India’s pipeline network is expected to expand to around 35,000 kms in the next 5-6 years, based on which the Company is also planning to expand its pipeline laying execution capacity to a range of 250-300 kms per year.

6) Government focus on gas distribution leads to clear growth visibility.

7) Strong project execution capabilities and experienced management team.

8) In listed space there are very few companies with ‘high ROC, high pro­fit margin and zero net debt companies available above 20 PE. High earning growth and PE growth can generate good returns for investors in coming days.

Conclusion – This IPO is valued at 12 times of EPS, which is very reasonable valuation. Given that the gas segment and distribution are in govt focus and development of Emerging India. I recommend applying for this IPO with medium and long term view

Disclaimer – Pls consult your wealth manager / Advisor before purchasing the IPO. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith.

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Sathish Kumar

Equity Fund Manager | Wealth Consultant | Author

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