It is still not clear & contradicting whether they are only providing service job or Site- management/Architectural work for the Civil Work. (Why are we concerned about this, as this segment will form the core of the company going forward).
As mentioned in Pg. 29 of AR, Company itself is stating they are using state of the art technologies like pre-cast products in the affordable housing segment.
If they are only doing service job, why is it mentioned that “They source building materials from the local un-organised players, making this business asset light”
if they are doing service job, why would there be a working capital requirement unless for raw-material procurement and funding the debtor cycle. Below is the excerpt from the AR
“We maintained our working capital requirements at around 16-20% of the project value”,
which is around 70 - 85 cr (assuming order book is 636 cr with average project period of 18 months). Additionally they have spent 10 cr towards capex
What I feel and I can be completely wrong
Company is too excited to show off that they have the capability to take up the civil works & they have taken multiple projects in civil construction, with negligible experience in this segment.
Key questions remain.
a) Can the company deliver or it has bitten too much to chew
Q1FY19 result shows company has achieved construction revenue of ~70 cr and expects to complete the projects in hand in next 12 - 15 months (~ 90% of the project value). Considering the forth coming elections of Govt of Telangana, the above timelines look too optimistic.
b) What is different with Uniply as compared to any other construction company in affordable housing segment??. The margins from this segment is not extra-ordinary, if not every construction player would have bid for the project. Further, the receivables from the Govt. are always delayed and doubtful
with the above unanswered questions. we see the below, what should we infer from this, why would the promoters and other shareholders convert their warrants @ 82/share (premium of 60% as on 9th Oct)
The above excerpts of the segment wise breakups have been taken from the below research report, for your reference.
Disc: Invested, but confused with no clear direction.
May be have to go wtih Mohnish pabrai’s suggestion. Investment should be a no-brainer otherwise give it a pass