Ztech India IPO: Launch on May 29, Strong Market Response and Sustainable Growth Prospects.

Ztech India Limited is poised to launch its Initial Public Offering (IPO) on May 29, 2024. The IPO, structured as a book-built issue, aims to raise Rs 37.30 crores through the issuance of 33.91 lakh fresh equity shares. The subscription window will be open until May 31, 2024. Post-issue, Ztech India’s equity shares are scheduled to list on the NSE SME platform on June 4, 2024, with the allotment process expected to be finalized by June 3, 2024.

The price band for the IPO is set between ₹104 and ₹110 per share, with a lot size of 1,200 shares. Consequently, the minimum investment required by retail investors is ₹132,000. For High Net Worth Individuals (HNIs), the minimum application size is two lots, equating to 2,400 shares and an investment of ₹264,000.

Narnolia Financial Services Ltd serves as the book-running lead manager for the IPO, while Maashitla Securities Private Limited is the registrar. NVS Brokerage has been appointed as the market maker for the issue. The IPO includes a reservation wherein up to 50% of the net issue is allocated for Qualified Institutional Buyers (QIBs), at least 35% for retail investors, and 15% for Non-Institutional Investors (NIIs).

Ztech India Limited, incorporated in November 1994, specializes in designing civil engineering products and offering specialized geotechnical solutions for infrastructure and civil construction projects in India. The company is notable for its focus on sustainable practices, particularly in waste management and theme park development using recycled materials. Key clients include Bhartia Infra Projects Limited, Dilip Buildcon Limited, GMR Infra Limited, and others. As of May 10, 2024, the company employs 72 individuals.

Financially, Ztech India has demonstrated significant growth, with a revenue increase of 160.28% and a profit after tax (PAT) surge of 296.44% between FY 2023 and FY 2024. The company’s assets grew to ₹4,192.24 lakhs in FY 2024 from ₹2,339.62 lakhs in FY 2023. Meanwhile, its net worth rose to ₹2,191.00 lakhs from ₹998.95 lakhs during the same period.

The key financial metrics for Ztech India are robust, with a Return on Equity (ROE) of 34%, a Return on Capital Employed (ROCE) of 44.02%, and a debt-to-equity ratio of 0.06. The company’s PAT margin stands at 12%, and its market capitalization is estimated at Rs 140.77 crores.

The promoters of Ztech India, Ms. Sanghamitra Borgohain and M/s Terramaya Enterprises Private Limited, will see their shareholding reduced from 82.65% pre-IPO to 60.75% post-IPO. The funds raised through the IPO will be utilized to meet the company’s working capital requirements, general corporate purposes, and issue expenses.

The IPO has also garnered interest from anchor investors, raising Rs 10.63 crore through the allocation of 966,000 shares on May 28, 2024. The shares allocated to anchor investors will be locked in until July 3, 2024, for 50% of the shares, and until September 1, 2024, for the remaining shares.

In the grey market, Ztech India IPO is showing a premium of ₹65 per share, indicating that the shares are trading at ₹175 each, a 59.09% premium over the upper issue price of ₹110.

In summary, Ztech India’s IPO offers an intriguing investment opportunity given the company’s substantial growth, strategic focus on sustainable engineering solutions, and the robust financial performance. Investors should consider the detailed information provided in the Red Herring Prospectus (RHP) before making investment decisions.

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