SEPC LTD - A turnaround story

[Soham_Kunkulol]

Spec is engaged in Engineering Procurement and Construction Company (EPC Contractor) business with the experience of executing turnkey contracts in Engineering, Procurement, and Construction (EPC) and providing end-to-end solutions offering multi-disciplinary services and project management solutions.
SEPC Limited (“SEPC") is focused on providing turnkey solutions in the following business areas:

1. Infrastructure

a. Water & Sewer

•Drinking water projects

• Sewerage Treatment projects

• Rehabilitation projects

b. Road

2. Industrial EPC

a. Process Plants

b. Steel Plants

c. EPC under deep shaft Mining

d. Power Plants

Detailed info about the business

• Infrastructure
• Drinking water projects- identifying water sources < constructing treatment plant < laying pipes ( to carry water from treatment plant to overhead tanks and houses)
• Sewerage Treatment projects- collecting sewage from houses through pipes < construction of sewerage treatment plants < laying common pipeline to carry the sewerage collected through to nearby water sources to discharge the treated sewerage water.
• Rehabilitation projects- (Rehabilitation projects are generally carried out in places where normal sewerage treatment project cannot be carried out) These projects involve using special imported resins pumped into the existing pipeline to form a layer and using mechanical pressure solidified resin is pushed in to form as a new pipe over the existing dilapidated pipe. Finally, the old pipe will be removed and sewerage will pass through the newly laid resin based pipes.

2. Industrial EPC

• Steel Plants - SEPC has domain knowledge and good customer base for having executed various projects in Integrated steel plants in areas like Construction of Special Bar mills, Sinter plants, Wire Rod mill, medium structural mills, hot strip mills, Coke oven, Coal chemical plants, Coal dust injection system, air and oxygen turbo compressor, raw material handling systems, secondary refining units etc. and have qualification to participate in this segment alongwith technology provider. SEPC has also completed the balance of plant and main equipment erection for a 1.2 MTPA steel plant in Oman.
• EPC under deep shaft Mining- SEPC has done mine development project using the advanced Shaft Sinking technology for mine development and qualified to do several types of mining and various minerals like copper, gold, coal, chrome, manganese, uranium etc. In 2022 we completed the Construction of New Circular Shaft with complete Winding Installations on turnkey basis for Hutti Gold Mines Company Limited.

• Power Plants- SEPC has executed various types of Power projects like conventional thermal power plant, Wind mill-based power plant, Bio mass based power plant etc.

Process Plants- Construction of process plants on turnkey basis is under the sub business vertical of Specialized Industrial EPC segment. SEPC has done complete projects for cement, Coal handling, Coal gasification, Cattle feed plants etc. and have qualification to participate in this segment along with technology provider on consortium basis.

Customer –

RECENT BIDS -

recent order

• The contract involves the Design, Engineering, Supply, Installation, Testing, and Commissioning (EPC)of a 133 MW Solar Power Project, including all associated civil and structural works. It will span four districts in Maharashtra—Sambhaji Nagar, Dhule, Solapur, and Nanded—and is being implemented under the PM-KUSUM Yojana, a flagship initiative of the Government of India promoting solar energy for agricultural and rural development. The execution timeline is expected to range between 12 to18 months from the start of the project.
• REVENUE BREAK - UP

Management said in the meetup that they will reduce their geographical presence in India and will restrict their business to a few states only because it becomes more and more difficult for them to manage work at so many different states

RIGHT ISSUE-
They recently issued right worth 350crs at 10rs at a ratio of 11:50
it was subscribed about - 2.12x

Future vision -
Oversea business expansion plans –SEPC has done overseas projects in Australia, Zambia, Iraq (Though Mokul Shriram EPC JV), Tanzania, Ezan (through L&T SEPC JV), Oman (through its Wholly owned Subsidiary) through its subsidiaries. Also, working on do a project in Kingdom of Saudi Arabia through its wholly owned subsidiary, formed specifically for this purpose.

Promotor and management changes –

1. Mark AB Capital LLC
   In September 2022, Mark AB Capital LLC, a Dubai-based investment company, acquired a 26.48% stake in SEPC Ltd, becoming the new promoter and largest shareholder. (SEPC was in financial trouble. Under RBI’s rules to save stressed companies, SEPC went through a revival plan. As part of that, Mark AB Capital invested money and became the largest shareholder to help turn the company around.)
2. On June 2022, shortly before the change in promoter control there was a change in the management, Mr. N K Suryanarayanan was appointed as the new Managing Director and CEO and Mr. T Shivaraman (Managing Director & CEO) and Mr. M Amjat Shariff (Joint Managing Director) retired.

RISK FACTOR

1. In the past, SEPC has delayed or missed payments to lenders, its plan included a change in ownership — the old promoter (SVL Limited) was replaced by the new promoter (Mark A B Capital Investment LLC). The new promoter invested funds and helped restructure old loans into long-term debt. However, if the company fails to repay loans or interest again in the future, it could seriously affect our business operations and financial health.
2. Pledged percentage- 34.0 %

HEADWINDS-

1. Increase govt spending on infra
2. Clean ganga mission
3. Steel plants expansion all over india
4. Har Ghar Jal program
5. Gati Sakti project
   
   

Promotor buying - (Mark AB Welfare Trust)

Financials -

1. Debt reducing ( around 500crs repaid in FY23)
2. Growth in sales and profits
3. Negative operating cash flow due to increase in contract assets
4. the company has zero inventory on its books and the receivables are decreasing

Note: Please feel free to share your opinions or insights on the company. I welcome diverse perspectives and constructive discussion.

Special Thanks: A heartfelt thank you to Abhishek Pokharna from Udaipur

Disclaimer- Invested in the company

[Jadewade]

Has anyone got the actual shares credited in your account after successfully applying to the SEPC rights issue which concluded recently? I applied and got allotted the shares, for which I paid Rs5/share upfront and the listing date was supposed to be July 8th but I don’t see them credited yet. Checked with my brokerage , they told me to check with the RTA. I emailed them as well but haven’t received a response yet. Any help would be much appreciated,

[new_01]

Hi Jadewade,

Even I applied for Right issue but still the shares are not credited to my demat account.

[Jadewade]

Thanks, I received this response:

The information is set out for the equity shareholders and stakeholders of SEPC Limited that pursuant to technical issues, the partly paid-up equity shares have not yet started trading from today i.e., July 10, 2025. The delay is primarily due to certain impasse in receiving listing approval (s) and thereafter filing for trading approval with the Stock Exchanges towards partly paid-up equity shares.

We are expecting to receive trading approval on the partly paid-up equity shares by today i.e., July 10, 2025 and as per the norms of the partly paid-up equity shares, the same will start trading on T+1, hence the trading in the partly paid-up equity shares of the Company will now start from Monday July 14, 2025.

We request you to take the same in your record. Should you require any further information, please contact any of the following officials of Sumedha Fiscal Services Limited - the Lead Manager to the Issue:

[naveen062000]

Promoters keep on reducing stake. I am not sure whether this is because of rights issue. Please check on this.

[Soham_Kunkulol]

Great observation my friend but here the explanation,

In such cases (when the promoter holdings are deceasing) there are 2 perspective to think.

First of all an investor need to check weather the shares are reducing or the percentage is decreasing.

AND… there are two reasons for percentage decrease

1. if they sell the shares ( promoters exiting) ( RED FLAG)
2. Change in the denominator

for example if you have 30 shares out of 100 then whats your percent?
30% right…

and now the shares are as it is and the total increases to 150% then whats the percent?
20% easy maths…

so here the actual number of shares are not decreasing!!!
you still have 30 shares with you

thats the same thing with SEPC
you can also check the equity part in balance sheet

Most of the investors think that “ohh promoters is selling we should also sell and book profits”
but this is not the right way to think .

i hope it solves your doubt

[Leading_Nowhere]

@Soham_Kunkulol

Most of the investors think that “ohh promoters is selling we should also sell and book profits”
but this is not the right way to think .

This may not be the right way to think but it is only half of the thought process. Even if the absolute promoter holding is not reducing, it does mean that the promoter is crowd funding the entity and not contributing its own resources - the inability or unwillingness to participate in the rights issue to maintain shareholding is also a ‘flag’ - whether red or green, that is up to your perspective. With multiple rights issues, the skin in the game of the public increases while the promoter has a reducing skin in the game in percentage terms. This is not a great signal. With such a large and rapidly expanding equity base and increase in public shareholding, these aspects have to also be considered.

[DEVANSHSONI]

Does it make sense to sell the fully paid up share and purchase the partly paid up one right now?

The fully paid up share is at a cmp of 12 and partly paid up is around 5.3. Whenever the company calls for the remaining 5, the pp shares would become fully paid up and i can perhaps book a very clear arbitrage. This is assuming both the shares rise from here on. This doesnt work if the partly paid plus the final call value exceeds the price of the fully paid up share. Just a thought. Would like to hear the forums opinion on it. Thanks.

[Soham_Kunkulol]

yes, you should go for it,

[Jadewade]

I followed up again yesterday about when we will get the final call for the remaining payment of our partly paid up shares. This is the response I received:

Thank you for your query regarding the first and final call on the partly paid-up equity shares allotted pursuant to the Rights Issue.

We wish to clarify that there is no mandatory timeline prescribed under SEBI (ICDR) Regulations, 2018 or the Companies Act, 2013 for completing the call. However, as informed earlier, the timing of the call is determined by the Company’s Board of Directors, based on various strategic and operational factors in order to align the call with the progress and funding requirements of the stated objects of utilisation, as disclosed in the Letter of Offer.

Basically, they will do it whenever they feel like !