SRM Contractors IPO Review: 10 Key Points You Need to Know


As investors keenly eye the infrastructure sector for promising opportunities, SRM Contractors emerges as a noteworthy contender, poised to leverage its expertise in engineering construction and development. As we delve deep into SRM Contractors IPO Review, here are 10 points investors should know.

#1 SRM Contractors IPO Review: Company Overview

SRM Contractors is an engineering construction and development company primarily involved in constructing roads (including bridges), tunnels, slope stabilization works, and other miscellaneous civil construction activities in the Union Territories of Jammu & Kashmir and Ladakh. The company undertakes construction works both as an EPC contractor and on an item-rate basis for infrastructure projects. With a focus on difficult terrains, the company has established niche expertise, showcasing successful execution in challenging environments.

SRM Contractors IPO Review

In the calendar year 2023, the organization was involved in the construction project named “Vijayak” (BRO) in the Union Territory of Ladakh. This project entailed the realignment of road Zozila-Kargil-Leh (NH-1) between Pandrass-Pashkyum, with a net length of 27.10 km, to 2-lane specifications, with a total project cost of INR 205.68 crore.

#2 SRM Contractors IPO Analysis: Impressive Project Portfolio

The company has 38 completed infrastructure construction projects valued at INR 1,411.66 crore since its inception. These projects comprise 31 road projects, 3 tunnel projects, 1 slope stabilization works project, and 2 other miscellaneous civil construction activities.

Their ongoing projects, totaling 21, further reinforce their growth trajectory. While rooted in Jammu & Kashmir and Ladakh, SRM Contractors has expanded its operations into Uttarakhand, Arunachal Pradesh, and Himachal Pradesh. This geographical diversification opens doors to additional growth opportunities. As of 31 January 2024, SRM Contractors’ order book stands at INR 1,199.31 crore, reflecting a substantial pipeline of projects. Considering FY 2023 revenues of INR 300 crore, this order book translates to revenue visibility of nearly 4 years.

#3 SRM Contractors IPO Review: Offer Details

The SRM Contractors IPO is scheduled for 26 to 28 March 2024, with a price range of INR 200 to 210 per share. The IPO is purely a fresh issue of 6,200,000 shares, valuing the offering between INR 124 – 130.20 crores. The minimum bid size is 70 shares, priced at INR 14,700, and retail investors are allotted 35% of the shares. The IPO will be listed on both BSE and NSE.

#4 SRM Contractors IPO Analysis: Market Opportunity & Important Clients

The Indian government’s emphasis on infrastructure development, evident through initiatives like the National Infrastructure Pipeline (NIP) and PM Gati Shakti, underscores a fertile investment landscape. The Union Budget FY 2024 allocated approximately INR 270,000 crore in substantial funds to the Ministry of Road Transport and Highways, indicative of a robust infrastructure push.

Over the years, the company’s delivery model and efficient operations have gained favor among its clients. SRM Contractors’ major clients include the National Highways & Infrastructure Development Corporation Limited (NHIDCL) under the Ministry of Road Transport & Highways, Government of India, Konkan Railway Corporation Limited (KRCL), the Economic Reconstruction Agency (ERA, Jammu) under the Government of Jammu and Kashmir, the Border Roads Organisation (BRO), the Rural Roads Development Agency (JKRRDA) in Jammu & Kashmir, and more. Their strong market presence underscores trust and reliability within the industry.

#5 SRM Contractors IPO Objectives

The company proposes to utilize the Net Proceeds from the issue towards funding the following objects:

  • Funding capital expenditure requirements for the purchase of equipment/machinery  – INR 31.50 crore
  • Full or part repayment and/or prepayment of certain outstanding secured borrowings – INR 10 crore
  • Funding the working capital requirements – INR 46 crore
  • Investment in Project Specific Joint Venture Projects – INR 12 crore
  • General Corporate Purpose

#6 SRM Contractors IPO Review: Integrated Model Backed by Equipment Ownership

SRM Contractors prioritizes equipment ownership as part of its in-house integrated approach which helps in timely project delivery and efficient execution. Its extensive fleet of modern construction equipment minimizes reliance on external providers, giving it a competitive edge. The company strategically invests in equipment, often acquiring similar models to streamline operator training and reduce downtime and maintenance costs.

As of 31 January 2024, the company owns 228 pieces of equipment (with a value of INR 73.05 crore on 31 December 2023), including hot mix plants, stone crushers, excavators, and various essential machinery for road construction. The company further augmented its fleet through equipment purchases of INR 18.48 crore in FY 2023.

#7 SRM Contractors IPO Analysis: Financial Performance

SRM Contractors has demonstrated impressive financial growth, with a steady rise in revenue over the past three financial years. The company had achieved revenue growth of 13.91% and 64.70% in FY 2023 and FY 2022, respectively. This growth highlights the company’s effective bidding strategy while integrated operations and a tight grip on costs helps in boosting earnings and progfitability.

FY 2021FY 2022FY 20239M FY 2024
Net income8.2717.5718.7521.07
Margin (%)5.176.676.248.98
Figures in INR Crores unless specified otherwise

#8 SRM Contractors IPO Review: Valuations & Margins

FY 2021FY 2022FY 2023 (Pre-Issue)FY 2024 (Post-Issue)*
PE ratio17.86 – 18.7516.33 – 17.15
* Calculated based on annualized Profits After Tax for FY 2024
FY 2021FY 2022FY 2023
RONW (%)30.8139.5529.68
ROCE (%)31.1742.1635.04
EBITDA (%)11.4512.1412.87
*Compiled by IPO Central from Prospectus

#9 SRM Contractors IPO Review: Risk Factors

  1. The company relies heavily on Jammu & Kashmir and Ladakh for its business. Economic, regulatory, or other changes in these regions could significantly impact the company’s performance.
  2. The company derives a large portion of its revenue from a few government clients. Losing any of these major clients could have a severe negative impact.
  3. The company’s business is subject to seasonal variations, which could lead to uneven cash flow and operational challenges.
  4. The company depends heavily on government projects. Changes in government priorities or funding could affect the company’s future projects and revenue.

#10 SRM Contractors IPO: Skilled Workforce

With 275 employees, including skilled engineers and on-site workers, SRM Contractors possesses a capable workforce dedicated to project execution. This human capital forms the backbone of the company’s operations.

SRM Contractors


India has been an infrastructure-deficient country for years and while this is changing rapidly, lot more needs to be done. Thankfully, the governments are prioritizing infrastructure development and this bodes well for well-prepared and integrated players like SRM Contractors.

In terms of valuations, the company seems to be leaving something on the table, effectively making the upcoming IPO an attractive option for investors. At the upper price band of INR 210, it is priced at post-IPO PE ratio of 17.15. This is among the lowest when compared with its peers such as Man Infraconstruction, ITD Cementation and Likhitha Infrastructure. Meanwhile, its superior return profile indicate that investors have an interesting opportunity at their hands.

With a solid foundation, diverse project portfolio, and regional expertise, the company offers investors a compelling avenue for growth. At the same time, positive grey market movement is another shot in the arm for the IPO.

In conclusion, SRM Contractors IPO Review is indicative of a compelling investment opportunity, backed by its specialized expertise, strategic positioning, and favorable market dynamics. As the company gears up for its IPO, investors stand to gain from its strong fundamentals, promising outlook, and potential for sustainable growth in India’s burgeoning infrastructure sector.


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