Ceigall India IPO: Here are 10 key risks from the RHP you should know before subscribing

Ceigall India Limited IPO: The initial public offer opened for subscription today. Investors can make applications for allotment in the IPO till Monday, 5 August 2024. Here are 10 key risks from the Red Herring Prospectus (RHP) you should know before subscribing to the IPO that

10 Key Risks from the RHP:

1.Ceigall India business is primarily dependent on contracts awarded by governmental authorities. Any adverse changes in the central, state or local government policies may lead to Ceigall India contracts being foreclosed, terminated, restructured or renegotiated, which may have a material affect on its business and results of operations.

2.Ceigall India revenue from execution of projects in the roads and highways sector including specialized structures constituted approximately 92.75%, 96.57%, 97.46% and 97.12% of its total revenue for the nine months ended December 31, 2023 and for the Financial Years ended March 31, 2023, 2022 and 2021, respectively. Ceigall India business and its financial condition would be materially and adversely affected if Ceigall India fail to obtain new contracts or our current contracts are terminated.

3.Ceigall India order Book may not be representative of its future results and its actual income may be significantly less than the estimates reflected in its Order Book, which could adversely affect its business, financial condition, results of operations and prospects.

4.All projects Ceigall India operates have been awarded primarily through competitive bidding process. Ceigall India bids may not always be accepted. Ceigall India may not be able to qualify for, compete and win projects or identify and acquire new projects, which could adversely affect its business and results of operations.

5.Ceigall India diversification beyond projects in the roads and highways sector may not be successful, which could adversely affect its business, financial condition, results of operations and prospect

6. Ceigall India entered into the hybrid annuity model (“HAM”) segment in 2021 for implementing highway projects which are different from the engineering procurement contract (“EPC”) projects. Ceigall India cannot assure if it will be successful in executing these HAM projects.

7.Delays in the acquisition of private land or rights of way, eviction of encroachments, environmental clearances for the projects or resolution of associated land issues, which are though attributable to Ceigall India customers, may adversely affect timely performance of its contracts and lead to disputes and losses.

8.Ceigall India have high working capital requirements. If it experiences insufficient cash flows and is unable to make required payments on its debt or fund working capital requirements, there may be an adverse effect on its results of operations

9.Ceigall India has sustained negative cash flows from operating activities in the past and may experience earnings declines or operating losses or negative cash flows from operating activities in the future

10. Ceigall India operates in a very competitive industry and its failure to successfully compete could result in the loss of one or more of its significant customers and may adversely affect its business.

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