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TecPro Systems IPO Analysis – Construction Play on India’s Power Sector Growth at Reasonable Price

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Tecpro Systems is another Indian EPC Company that is coming out with an IPO in the last week or so.The company plans to raise around Rs 260 crore ( $50mm) with around $11mm  to be sold by existing shareholders.Ramky Infrastructure and Ashoka Buildcon are the other 2 companies in this space.However Tecpro Systems differs from the other 2 IPOs in the sense that it is primarily focused on the Power  Sector Space.It is a leader in the ash handling and material handling systems and is currently diversifying into becoming a turnkey provider in this segment.Like other infrastructure players it has seen amazing growth in the last 3 years at around 70%+.Its margins have come down and stabilized at around 7%.Cash Flow have been negative due the breakneck growth and the high WC requirements of the Construction Sector.The valuation does not seem expensive with the promoters diluting around 15% of the company.Here are some of the highlights of this issue.

1) Growth – The growth has been fantastic both on the topline and the bottomline.The 2300 crore Order book provides some comfort over the next year’s revenues or so.

2) Sector – The Power Sector in India particularly the Thermal Power Plants are expected to see an explosive growth period.Steel and Cement sectors are also growing strongly.With Tecpro Systems focusing on these 3 segments,it should be able to maintain a good growth trajectory in the future years as well

3) Margins – Margins for the company have come  down as usage of 3rd party products has increased.That said its revenues are diversifying.7% Net Margin is usual for the EPC space.The RONW is much higher than its peers at 30%+.

4) Management – While the Company faces potential legal cases with liabilities of Rs 1000 crores+,the Management Quality looks better than some of the other EPC companies.The Management has professional experience working for 25 years in different organizations.


1) Supreme Court Case against one of its Big Contracts – The company’s 993 crore contract for building a Coal plant in the state of Chhattisgarh has been challenged by one of the bidding companies in the Supreme Court.While the plant is already being built,there is potential of a major loss if the SC rules against the Chhattisgarh government for  awarding the case.

2) High WC,Negative Cash Flows – The Company has a Huge Recievables Books and negative cash flows due to increase in the WC requirements.The Debt is not high at around 1x Debt/Equity Ratio.


This EPC company seems a  good investment to me though not as good as VA Tech Wabag.The valuation at around 17x P/E is not very expensive though the sector concentration increase the risk for the company.However given the management quality,this company seems a better investment that other construction companies.The growth prospects of the Power Sector in India is huge and Tecpro seems well positioned in this space with partnerships with other major companies like Va Tech Wabag.Though there is some concentration risk,I think Tecpro seems a subscribe.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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  1. Nilesh M.Bobade

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