ICRA has assigned an IPO Grade 2, indicating below average fundamentals, to the proposed IPO of J.Kumar Infraprojects Limited (JKIL). ICRA assigns IPO gradings on a scale of IPO Grade 5 to IPO Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

J.Kumar Infraprojects Limited is proposing a public issue of 6.5 million shares of face value Rs.10 each, through 100% book building route. The IPO proceeds are proposed to be used primarily for purchase of capital equipments and funding of working capital requirements.

The IPO grading assigned by ICRA reflects JKIL`s small size of operations, the risks arising out of the concentration of JKIL`s order book on Mumbai and near by areas, dependence on a few clients for most of its order book and ability to
scale up its activities to execute higher value and more complex projects. The grading favourably factors in the promoters experience in the civil engineering industry, its track record of having successfully executed projects within the budgeted time and stipulated quality parameters and its healthy order book position, which along with buoyant outlook on the infrastructure industry, is expected to lead to growth in revenues and profitability.

ICRA expects that the key challenge for the company would be to scale up operations, professionalise their set-up and recruit and retain key management personnel, given the current boom in construction industry. Moreover JKIL`s activities are primarily focussed on infrastructure segment involving transportation engineering business (Roads, Flyovers, Bridges, Airport runway etc), in which operating margins and profitability could be more vulnerable to competitive pressures.

Company Profile

Mr. Jagdishkumar M Gupta, the current chairman of the company,set up a proprietorship concern in 1980 namely, J. Kumar & Co., which started operations with maintenance of PWD buildings. It subsequently got registered with Public Works Department, Government of Maharashtra as a Class IA Civil Contractor. Thereafter, J. Kumar & Co. has been executing civil contracts for Government, Semi government and other various private organizations relating to infrastructure and Civil Engineering Construction contracts. In 1999, the promoters in a view to professionalize and expand incorporated a new company named J Kumar & Company (India) Private Limited. In FY2005, operations of J.
Kumar & Co were transferred to J Kumar & Company (India) Private Limited. Subsequently, on January 8, 2007, J Kumar & Company (India) Private Limited was renamed as J Kumar Infraprojects Private Limited and then to J. Kumar Infraprojects Limited (JKIL) on January 31, 2007.

JKIL carries out development of roads, flyovers, railway over bridges, commercial and residential buildings,railway buildings etc. JKIL also undertakes piling work for other contractors. The company has been carrying out work primarily in Mumbai, Pune, Aurangabad and Vidharbha region of Maharashtra.

 For the financial year 2007, JKIL reported an operating income of 1133.6 million and Profit after tax of 80.1 million.