Annu Projects Limited

Annu Projects Limited

Incorporated in 2003, Annu Projects is a Delhi-based EPC contractor that lays and maintains underground and overhead utilities: optical fibre, sewer lines and treatment plants, and gas distribution pipes. Sewerage was 53% of FY26 revenue and telecom 42%. It owns no manufacturing facility and wins work through competitive tender from government bodies or as a sub-contractor to larger EPC players. Promoters Sanjay Kumar Sarraf and Krishna Ranjan have run it since 2003.

Auditor : Suresh Chandra & Associates          BRLM : Mefcom Capital Markets Limited

Disclaimer - Delta Partners (public market division under Dexter Capital) is not a SEBI registered Investment Advisor and this report does not constitute a recommendation but is only prepared for educational purposes. We (our team members including our directors) may or may not apply to IPO.  Queries: shubham@deltainvest.in

Delta’s View: 

Limited Listing Gains | Skip

Annu Projects does EPC for sewerage and telecom, with 96% of revenue traceable to government or PSU payers. We hold a negative view on government-facing EPC: the work is commoditised, orders are won on lowest price rather than capability, and the payer controls the collection cycle, keeping receivables high and cash generation weak. That shows here, with unbilled revenue rising from ₹16 cr to ₹77 cr over FY24 to FY26 and receivable days from 138 to 237. Order books have not been a reliable guide either: sector revenue grew 2.8% in FY26 against double-digit guidance, with only 29% of operating profit converting into cash against a historical 65% (India Ratings). Annu's ₹1,005 cr order book is 74% one sub-contracted BharatNet Kerala order at a scale it has not executed before, and largest customer A2Z Infra, 27% of FY26 revenue, is in distress with its contract already terminated. At 20x P/E the issue is priced below peers at 31x, with the O&M mix and government outlay offering growth levers. But a cheaper multiple does not compensate for the structural issues this business carries, and we would rather stay out.

One can expect only flat to moderate listing gains as per current GMP ~4% (26 Aug 2026), provided the GMP sustains.

• Annu Projects is an EPC contractor that lays and maintains underground and overhead utility lines: sewer networks and treatment plants, optical fibre for telecom, and gas distribution pipes. Direct government and PSU customers were 57.1% of FY26 revenue. Most of the balance came from two larger EPC companies, A2Z Infra Engineering at 26.6% and G R Infraprojects at 12.4%, which win government telecom contracts and pass the execution work down to Annu. Counting these, 96.1% of FY26 revenue traces back to a government or PSU payer. Direct contracts are won on competitive tender at lowest price. The sub-contracted work is taken back-to-back from the principal contractor rather than bid by the company itself.

• As a category, we hold a negative view on government-facing EPC. The work is commoditised, with orders being won on lowest price rather than capability. The payer also controls the billing and collection cycle, so receivables build up on the contractor's balance sheet while the work is done.

• Execution has lagged order books across the sector. As per India Ratings' EPC Sector Watch (dated Aug, 2026), revenue across 22 listed EPC companies grew 4% in FY25 and 3% in FY26, against 17% to 21% a year over FY22 to FY24. For FY27, companies guide for around 14% growth while Ind-Ra estimates mid-to-high single digit. Conversion of EBITDA into operating cash flow has fallen to around 30%, against 55% to 65% historically until FY24.

• A large order book has not been reliably converted in this sector. EMS Limited, one of our comparables, held an order book of ₹1,837 cr and still saw FY26 revenue fall 24.7%. NCC Limited formally withdrew its FY26 guidance mid-year and executed just ₹1,300 cr to ₹1,500 cr of Jal Jeevan Mission work in nine months against a planned ₹4,000 cr to ₹5,000 cr, which its CFO attributed on the Q3 FY26 earnings call to delayed client payments.

• The company derived 52.7% of revenue from sewerage projects and 41.5% from telecom projects in FY26, but the order book inverts that mix. It had 23 ongoing projects at June 30, 2026 carrying basic contract value (exc GST) of ₹1,681 cr and order book (unexecuted) was ₹1,005 cr. Of the 23 orders, only 4 orders are of Telecom projects and a single subcontracting project of BharatNet Phase III (Kerala Package 16), where Annu's own scope is ₹747 cr, or 74.3% of the order book. It won this as L1 in consortium with G R Infraprojects and SRIT India under an LoI dated May 20, 2025, and executes it as a sub-contractor to G R Infraprojects, which issued the work order. Annu is the technical member of that consortium. Three-fourths of the book therefore rests on one order, one counterparty and one state.

• Sub-contracting was a moderate 31.7% of revenue across FY24 to FY26, but it now dominates with an 83% share of the order book. The company signed 16 contracts between July 2024 and June 2026, of which Kerala BharatNet alone is ₹778 cr, or 81.3% of the value awarded. The remaining 15 range from ₹1.68 cr to ₹68.7 cr, with a median of ₹6.84 cr. Of the ₹778 cr Kerala scope, ₹747 cr was still unexecuted at June 30, 2026, split between ₹470 cr of EPC due for completion by June 2028 and ₹277 cr of O&M already running from August 2025 to July 2035. The company's experience in executing projects of this scale is new and execution will need to be tested here.

• The customer here, G R Infraprojects, is financially stable, having rated CRISIL AA/Stable. It generated standalone PAT of ₹996 cr on revenue of ₹7,620 cr in FY26 with debt to equity of 0.03x. Credit risk is not much of a concern, but timing risk can be a concern. G R Infraprojects is itself waiting on BSNL for BharatNet payments, its receivable days lengthened from 82 to 120 over the June 2026 quarter, and on its Q1 FY27 earnings call it said the BharatNet project is delayed on pending right-of-way approvals, with capex work now expected to start only in October 2026.

• On the other hand, A2Z Infra Engineering is in a materially different condition. It was Annu's largest customer in FY24 at 20.5% and FY26 at 26.6%, and second largest in FY25 at 20.4%. Its auditors declined to give an opinion on its FY26 results and reported a material uncertainty over the company's ability to continue as a going concern, alongside accumulated losses of ₹1,078 cr and several loans classified as NPA. Its Managing Director was also taken into custody in May 2026 over alleged irregularities in a Chhattisgarh state contract, and has since been granted bail. Annu executes NFS Package F as A2Z's executing agency on a back-to-back basis, the head contract having been awarded to A2Z by ITI Limited. ITI terminated that contract in January 2026 and set June 30, 2026 as the end date. The RHP still carries ₹52.7 cr against it, 5.24% of the order book, with completion shown as September 30, 2026, three months past the date the employer said the work would end. Completion of that order is now uncertain, with A2Z having challenged the termination, and the ₹64.2 cr revenue this relationship contributed in FY26 largely goes away in FY27.

• Receivables have grown faster than the business. Trade receivables went from ₹58.0 cr in FY24 to ₹80.4 cr in FY25 and ₹157 cr in FY26, with receivable days at 138, 163 and 237. Unbilled revenue rose from ₹16.4 cr to ₹60.1 cr to ₹76.8 cr over the same years. The two together are ₹234 cr, close to the full FY26 revenue of ₹241 cr, so nearly a year of billing sits uncollected. The Expected Credit Loss (ECL) allowance on gross receivables was just 0.3%, which looks understated when the largest customer is already in difficulty.

• Working capital needs have risen sharply, from ₹35.2 cr in FY24 to ₹121 cr in FY26, or from 22.9% of revenue to 50.1%. About two-thirds of the fresh proceeds, or ₹115 cr would go to funding working capital. Operating cash flow has been negative for two of the last three years, and cumulative CFO over FY24 to FY26 is negative ₹27.4 cr against ₹71.5 cr of reported profit.

• Of the ₹1,005 cr order book, 32.5% sits in nine O&M and AMC contracts running 7 to 15 years. These carry a steady-state annuity of ₹33.1 cr a year, or 13.7% of FY26 revenue, on work that needs no incremental fixed capital and bills periodically as services are performed. Infomerics, the credit rating agency, attributed the FY24 EBITDA margin step-up from 11.61% to 19.31% to execution of high-margin annual maintenance orders. As the O&M share of revenue builds, it should support operating margins.

• The two closest listed comparables are Technocraft Ventures, a Delhi-based water, sewerage and electrical EPC contractor with FY26 revenue of ₹345 cr, and EMS Ltd, a Delhi-based water and sewerage EPC with FY26 revenue of ₹733 cr, compared with Annu's ₹241 cr. On FY26 gross margin Annu sits between the two at 28% (31% for EMS and 25% for Technocraft), while its EBITDA margin of 21% is slightly higher than Technocraft's 20% and EMS's 19%. On valuation, EMS trades at 30.7x with a market cap of ₹2,089 cr and Technocraft at 31.4x with ₹1,361 cr, against Annu's ask of 19.6x and ₹648 cr. Technocraft is the closer reference, having listed on August 14, 2026 at an IPO valuation of 19.4x P/E, which is similar to Annu's. Issued at ₹212, it opened at ₹284 for a 34% listing gain and now trades 62% above issue price.

• The issue structure gives almost no institutional validation. QIB allocation is 10%, NII 40% and Retail 50%, against the conventional 50/15/35, so only ₹17.5 cr of the ₹175 cr book is reserved for institutions. Anchor allocation is capped at 60% of the QIB portion, which limits any anchor book here to ₹10.5 cr, and no anchor allotment has been reported. Technocraft Ventures, the closest comparable, reserved 50% for QIBs and placed ₹75.55 cr with four anchor investors ahead of its issue, 30% of the offer, going on to close 38.69x subscribed with the QIB book at 42.26x.

• The CFO appointed in January 2025 resigned in April 2026 and the Company Secretary appointed in November 2024 resigned in June 2026, each within 18 months and both citing personal reasons. Their replacements joined in June and July 2026. The incoming CFO has an FIR pending against him in a matrimonial matter.

• Mefcom Capital Markets, the investment banker, has a thin track record for a mainboard issue of this size. Registered since 1985, it has led just one prior mainboard IPO, Globe Civil Projects in June 2025, and one SME issue in December 2025. The mainboard issue was of Globe Civil Projects Limited, a Delhi-based EPC contractor that raised a fully fresh issue for working capital, and which now trades below its issue price.

Business

• Annu Projects is a Delhi-based EPC contractor set up in 2003 that lays and maintains underground and overhead utility lines: optical fibre for telecom networks, sewer pipes and treatment plants, and plastic gas distribution pipes. It owns no manufacturing facility. Work is won through competitive tender, either directly from government bodies or as a sub-contractor to larger EPC players. Revenue was ₹241 cr in FY26 against ₹180 cr in FY25 and ₹154 cr in FY24.

• FY26 revenue split was sewerage infrastructure 52.7% (₹127 cr), telecom infrastructure 41.5% (₹100 cr), gas pipeline 4.03% (₹9.72 cr) and others 1.80%. The mix swings year to year: telecom was 52.8% of revenue in FY24 and sewerage 61.3% in FY25. A fourth vertical, railway signalling, was added in FY26 with a single ₹11.3 cr order and no revenue yet.

• In telecom it surveys routes, trenches or bores underground, lays and splices fibre, tests it and maintains the network, having laid 26,200 km of OFC and maintaining 62,800 km. In sewerage it lays sewer lines and builds manholes, pumping stations and treatment plants under Namami Gange, Swachh Bharat, World Bank and ADB funded schemes. In gas it has laid 537 km of MDPE pipe and made 38,300 household connections.

• Customer concentration is high. Top 10 customers were 97.96% of FY26 revenue, with A2Z Infra at 26.6%, Bihar Urban Infrastructure Development Corporation at 23.1%, Goa's sewerage corporation at 14.9% and G R Infraprojects at 12.4%. Government entities were 57.1% of revenue. All revenue is domestic, with Bihar, West Bengal, Goa, Kerala and Jharkhand accounting for 84.8% of the FY26 total.

• The order book was ₹1,005 cr across 23 projects as on June 30, 2026, of which telecom is 82.9%. A single contract, BharatNet Phase III Kerala Package 16 won as a sub-contractor under G R Infraprojects, is 74.3% of it at ₹747 cr, of which ₹277 cr is a maintenance contract spread over ten years to July 2035, so it converts to revenue at roughly ₹28 cr a year rather than in one go. Book-to-bill was 3.89x in FY26 against 2.66x in FY25 and 4.60x in FY24.

• Key inputs are optical fibre cable, HDPE duct, GI pipes, TMT steel, cement and sand, all bought in rather than made. Material consumption was ₹46.5 cr in FY26 at 23.4% of total expenses, down from ₹65.3 cr in FY25. The top 10 suppliers accounted for 67.9% of FY26 purchases, with Bala Jee Machinery alone at 37.4%. Opticon Pipes, a promoter group entity, is a recurring supplier at 2.27% of purchases.

• Execution rests on an owned fleet of 558 machines including horizontal directional drilling rigs, excavators, 204 fibre splicing machines and OTDR testers, supported by 469 permanent employees and 2,500 contract labourers as on June 30, 2026. Sub-contracting charges rose to ₹66.5 cr in FY26 at 33.5% of total expenses from ₹31.5 cr at 20.5% in FY25, making it the largest single cost line.

Promoters and Leadership

• First-generation and founder-run. Sanjay Kumar Sarraf (B.Com from Magadh University, MBA from LNM College Muzaffarpur) has been a director since incorporation in June 2003 and holds 60.8%. Krishna Ranjan (engineering degree, University of Mysore) has been a director since August 2003 and holds 26.9%. 

Shareholding Pattern

• Promoters hold 87.64% and the promoter group a further 1.47%, taking the combined pre-issue stake to 89.11%, which falls to 65.05% post-issue. 

• Chanakya Opportunities Fund I at 1.88% and Generational Capital Breakout Fund I at 1.40% came in through preferential allotments in August and October 2024, and are the only holders above 1% outside the promoter group.

Issue Details

Fresh issue size - Amount → 175 cr ; To be utilized in -

• Funding working capital requirements → 115 cr
• Capital expenditure for purchase of machinery or equipment → 15.4 cr
• General Corporate Purposes & Others

Offer For Sale size - Amount → Nil ;

• The issue is entirely a fresh issue. No promoter or existing shareholder sells any share. Promoter and promoter group holding falls from 89.11% to 65.05% through dilution alone.

Financials

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