Unlocking Value in Heady Valuations: A Pre-IPO Opportunity
Technology-driven construction firm specializing in infrastructure projects like LED street lighting, water and gas pipelines, and smart infrastructure.
In a market characterized by high valuations, we seek well-priced unlisted or pre-IPO opportunities. One such standout we came across and invested is a technology-driven construction firm specializing in infrastructure projects like LED street lighting, water and gas pipelines, and smart infrastructure.
The Appeal of Specialized Businesses
The company's core strength lies in retrofitting conventional streetlights with energy-efficient LEDs and developing a cutting-edge Centralized Control and Monitoring System (CCMS). This technology enhances streetlight reliability and functionality, providing a unique competitive edge.
Market Opportunity and Tailwinds
India’s smart street lighting market, estimated at $1.8 billion, presents significant growth potential. Government initiatives like the Street Light National Programme (SLNP) further boost this opportunity. The company's ability to secure high-value contracts, such as a recent ₹49.5 crore order, underscores its market prowess.
Financial Stability and Margin of Safety
With a turnover of ₹70 crore and a PAT of ₹8 crore, the company showcases strong financial health. Projections indicate revenues of ₹425 crore and a PAT of ₹93 crore by FY 2028-29, providing a substantial margin of safety. Its current valuation of ₹100 crore at which we got allotment crore appears conservative given its growth trajectory and specialization
Why This Company does offer some margin of safety?
1. Early Profitability:- Demonstrates operational efficiency and market demand.
2. Unique Technology:- The CCMS offers a distinct advantage in the smart infrastructure market.
3. Government & PSU Contracts:- Prestigious clientele, including Indian Oil and ONGC, validate its solutions.
4. Strong Financials:- Conservative valuation with significant growth potential.
5.Massive TAM Potential:- Clear market for 10x - 100x revenue
6.Potential Premium Valutions Listing:- Combining infrastructure and tech with a strong focus on Environmental, Social, and Governance (ESG) factors, the company is positioned to attract high valuation multiples in the market.
Business Summary
The company specializes in retrofitting streetlights, pipeline construction, and smart infrastructure. Its focus on LED projects has illuminated over 4500 panels and 3 lakh streetlights, delivering significant energy savings and improved visibility.
Project Experience
- LED street lights & CCMS
- IoT products and smart meters
- Water/gas pipelines
- Electrical/telecom OFC works
- Roads and buildings
Market Opportunity
India's LED lighting market is expected to grow from $4.70 billion in 2024 to $6.77 billion by 2030, at a CAGR of 6.29%.
Current Status and Traction
Revenue:- ₹70 crore in FY 23-24, PAT of ₹8 crore.
Key Projects:- 2 Tenders recently won just under 50 crore from goverment bodies
Key Clients
- Governments of Telangana, Madhya Pradesh, Maharashtra, Meghalaya
- Energy Efficiency Service Limited
- Larsen & Toubro, Indian Oil, ONGC
Team Qualifications and Roles
The company's leadership includes individuals with engineering and MBA degrees, extensive experience in finance, budget forecasting, and R&D oversight. They excel in managing investor and government relations, driving product innovation, cost-cutting initiatives, and enhancing business processes. The team also has significant experience in Central Government and public sector projects, specializing in execution and construction management across diverse fields such as water pipelines, bridges, roads, and buildings. Their expertise in project management, business development, and strategic principles ensures effective and innovative solutions.
Roadmap - This is just a roadmap and in reality may completely change
Pre-IPO Round:- Raising ₹6 crore for project acquisitions.
SME-IPO Listing:- DRHP filing by late 2024
Revenue Goals:- ₹250 crore in the next three years with a PAT of ₹50 crore+.
Conclusion
In a market of inflated valuations, this company offers a compelling pre-IPO opportunity with its specialization, early profitability, and significant market potential. It exemplifies a high-potential investment with a promising outlook, making it a standout choice for discerning investors. Risks include government projects facing issues such as cancellation, disputes, delayed payments which may delay / cancel the IPO and even affect the company materially.
Updates - None are buy or sell reccomendations
The Outliers - Lots of credit to the market
4x- 5 x from our buying & post price -
3x+ from our buying price -
All others are trading at 1.5x - 2x + from our post date except one turaround which is still taking more time than expected and reporting losses.
We want to emphasize that this communication should not be misconstrued as a recommendation, as we are not SEBI RIAs. Readers must conduct their due diligence and exercise caution. Therefore, we urge all readers to approach this opportunity with prudence and carefully consider the potential risks involved. While the prospects appear promising, it is essential to maintain a cautious approach and stay informed of the inherent dynamics of the industry.
Happy to chat and discuss this in detail
About Us -
Govind Shorewala - Entrepreneur (Mining, Textiles) & Investor (Private & Public Markets) → Reach out at: govind.shorewala@gmail.com
Aaroah Mittal - Early Stage VC → Reach out at: aaroah.m@people-group.com