SME IPO: Chavda Infra slumps to lower circuit after listing at 40% premium
Chavda Infra, a company operating in the small and medium enterprises (SME) sector, made its debut in the stock market with a notable entry. Its stock was listed at Rs 91 per share, a significant 40 percent premium over the initial issue price of Rs 65. This premium likely reflected the initial investor enthusiasm and optimism surrounding the company’s prospects.
However, the initial excitement was relatively short-lived as the stock encountered selling pressure, leading to a decline in its value. This decline resulted in the stock hitting the 5 percent lower circuit on September 25.
Such lower circuits often occur when there is a rush of selling orders, causing the stock price to hit a predetermined lower limit, after which trading is temporarily halted. The stock’s decline may have been influenced by broader market sentiment or specific factors related to Chavda Infra’s performance.
As of 10.58 am, the stock was trading at Rs 86.45 on the NSE EMERGE, suggesting ongoing fluctuations in its value as the market responded to various factors, including investor sentiment, company performance, and economic conditions. These fluctuations are common in the stock market, and investors often closely monitor such developments to make informed decisions about buying or selling shares.
Chavda Infra is primarily engaged in the field of civil construction, offering a diverse range of construction and allied services across various sectors, including residential, commercial, and institutional projects, with a particular focus on Gujarat, especially in the cities of Ahmedabad and Rajkot. The company provides end-to-end services in the construction value chain, encompassing everything from planning and design to construction and post-construction activities for its clients.
Chavda Infra has established a commendable track record in the construction industry, boasting a portfolio of over 100 executed projects with a cumulative value of Rs 670.99 crore over the years. As of May 31, the company was actively engaged in 26 ongoing projects, collectively valued at approximately Rs 601.39 crore. This portfolio is diverse, encompassing four commercial projects, four institutional projects, and 18 residential projects.
The company’s revenue streams are derived from three distinct business verticals. Firstly, it offers contracting services, likely involving the execution of construction projects for external clients. Secondly, Chavda Infra appears to be engaged in property development, encompassing activities such as land acquisition, obtaining necessary permits, and developing properties for sale or lease.
Lastly, the company operates in the commercial renting services segment, suggesting ownership or management of commercial properties, from which it generates income through the rental of office and retail spaces to tenants. This diversified approach to revenue generation reflects the company’s multifaceted presence in the construction and real estate sectors.
Chavda Infra has indeed demonstrated a commendable financial performance in recent years, as outlined in the provided data within the prospectus. Notably, the company has consistently maintained a robust EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) margin of approximately 15 percent over the fiscal years spanning from 2021 to 2023. This consistent margin signifies the company’s efficiency in generating operating profits in relation to its revenue, which serves as a strong indicator of its solid operational footing and effective cost management.
Maintaining a consistent EBITDA margin at this level is a positive signal for investors, as it implies that Chavda Infra has been able to effectively control its operating expenses and maintain healthy profitability throughout this period. Such financial stability and efficiency can contribute to the company’s resilience in varying market conditions and support its long-term growth prospects. This financial strength is likely to instill confidence among investors and stakeholders, showcasing Chavda Infra as a financially sound and well-managed entity in the construction and real estate sectors.
Furthermore, Chavda Infra’s financial strength is underscored by its high Return on Equity (RoE) of 49 percent in FY23. This metric signifies the company’s exceptional ability to generate profits from shareholders’ equity, highlighting its effective use of capital and solid financial performance.
Additionally, the Return on Capital Employed (RoCE) stood at an impressive 44 percent in FY23, indicating that the company has been able to generate substantial returns on the capital invested in its operations. These strong financial indicators suggest that Chavda Infra has positioned itself as a financially sound and efficient player in the construction and real estate sectors.
