ARSS Infrastructure plans to raise Rs103 crore with its upcoming IPO, while its main promoter is an accused in a murder case
Orissa-based ARSS Infrastructure Ltd is planning to enter capital markets to raise Rs103 crore with an initial public offering (IPO) that would open on 8th February and would be listed on both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). However, there may be a problem. One of its promoters, Subash Agarwal, has a case pending in a Bhubaneswar court in relation with the murder of Rubu alias Subash Chandra Das, that took place in April 2005.
According to the draft red herring prospectus file by ARSS Infra, the company is also involved in a number of legal proceedings with 17 cases filed against it in various categories including civil cases and sales-tax & income-tax violations.
“On the basis of a statement given by three witnesses, to the effect that they had overheard a conversation by the deceased about there being a threat to his life from several contactors including Subash Agarwal, our promoter and director, a second charge-sheet dated 11 January 2006 was filed by the Crime Branch wherein Subash Agarwal has been accused of the crime under Sections 34, 109, 120-B and 302 of the Indian Penal Code, 1860 and under Sections 25 and 27 of the Arms Act 1959,” ARSS said in the filing. The case is still pending at the Bhubaneswar court.
There are two civil cases pending against the company as on 31 December 2009. In 2006, income-tax officials found that the company’s books of accounts were not maintained properly and prepared in a fraudulent manner. The company has also been charged with suppression of facts, unaccounted cash sales, suppression of net profits and inflation of expenses.
ARSS Infra claims that its clients are mainly governments and government companies (and a few private firms) like the ministry of railways, state government of Orissa, Rail Vikas Nigam Ltd, RITES Ltd, IRCON international Ltd, National Thermal Power Corp, Hindustan Steel, National Highway Authority, Vedanta, NALCO and Jindal Steel & Power Ltd. ARSS claims to have completed around 200km of rail lines and about 300km of roads and highways.
However, the company’s fund requirements and the deployment are based on management estimates and have not been appraised by any bank or financial institution. Credit rating agency Credit Analysis and Research Ltd (CARE) has assigned ‘IPO Grade 2’ for ARSS Infra’s IPO indicating ‘below average’ fundamentals. The book-running managers for the issue are IDBI and SBI. The issue size is of Rs103 crore of Rs10 per equity share at an issue price of Rs410-Rs450 per share.
During FY07 to FY09, ARSS Infra said its total revenues have grown at a compounded annual growth rate (CAGR) of 116.7% while net profit increased at a CAGR of 120.2% over the same period. For the nine-month period ending 31 December 2009, the company reported total revenues of Rs610 crore and a net profit of Rs50 crore. ARSS Infra claims to have an order book of Rs2,877 crore as on 10 January 2010.