LCC Projects comes to its IPO with growing revenues and an unmodified examination report from its statutory auditors. Three operational realities need attention: operating cash flows are deeply negative because ₹498.45 crore is tied up in unbilled revenue, group borrowings have expanded to ₹1,379.91 crore, and related-party contracts and executive pay have surged ahead of the public issue.
Key findings
- Operating cash flow is negative as unbilled revenue and debt mount
Major- The company recorded negative operating cash flow of ₹177.27 crore for the six months ended September 30, 2024, even while reporting restated profits of ₹117.95 crore. Cash was absorbed as unbilled revenue (work completed on projects for which bills have not yet been submitted to clients) jumped to ₹498.45 crore as of September 30, 2024 from ₹52.87 crore in March 2022. To bridge the gap, total borrowings reached ₹661.66 crore on September 30, 2024 and ₹1,379.91 crore across the group by December 31, 2024, leaving cash balances at ₹9.92 crore. - Related-party transactions expand across family contracts, loans, and captive donations
Major- Related-party transactions (deals conducted with promoters, their family members, or their private companies) rose to 27.58% of operational revenue in the six months ended September 30, 2024, up from 9.76% in Fiscal 2023. The company paid subcontracting and mining fees to promoter relatives Hamir Suja Rabari and Kailash Harilal Jatiya, while continually moving tens of crores in short-term unsecured loans back and forth with executive directors. All corporate social responsibility spending was directed to promoter-founded trusts, alongside ₹6.60 crore in annual commercial rent paid to promoter-owned DOM Reality Private Limited. - Executive salaries jumped fivefold while a teenage student joined the board
Major- Annual pay for Chairman Arjan Suja Rabari and MD Laljibhai Arjanbhai Ahir grew from ₹2.40 crore each in Fiscal 2022 to ₹11.05 crore each in Fiscal 2024, taking up 24.93% of the company's total employee expenses in the six months ended September 30, 2024. In December 2024, resolutions approved salary caps of up to ₹12.00 crore per year for each executive. On November 12, 2024, the Chairman's 19-year-old daughter Maya Arjan Rabari, an undergraduate engineering student, was appointed as a Non-Executive Director, while the company's internal auditor of eight years was named Chief Financial Officer on December 18, 2024. - Exceptional political donations reached ₹35.52 crore while building titles remain unshifted
Major- The company recorded a one-off political donation expense of ₹35.52 crore in Fiscal 2024, compared to zero donations across all other reported years. In addition, legal title deeds for five buildings with a net value of ₹2.88 crore are not registered under the company, remaining in the names of former partnership firm partners since 2017 and 2018. An investment property with a net carrying value of ₹10.38 crore as of September 30, 2024 is mortgaged to State Bank of India under personal guarantees from promoter directors. - Revenue relies heavily on one state agency facing multi-crore arbitrations
Minor- The top 10 customers provided 90.82% of revenue in the six months ended September 30, 2024, with a single client, Madhya Pradesh Jal Nigam Maryadit (MPJNM), generating 54.84% of revenue in Fiscal 2024. The company initiated two arbitration proceedings on August 29, 2024 against MPJNM claiming ₹26.16 crore and ₹15.81 crore over contract price adjustment methods. Separately, a liquidator for Balaji Fiber Reinforce issued a demand notice on June 27, 2024 claiming ₹9.51 crore in disputed unpaid dues. - Off-balance-sheet bank guarantees climbed to ₹536.62 crore alongside tax demands
Minor- Contingent liabilities (potential obligations the company must pay if contract guarantees are invoked or disputes are lost) for bank guarantees grew to ₹536.62 crore as of September 30, 2024, up from ₹110.41 crore in March 2022. The top 10 projects represent 67.99% of these guarantees, while committed capital expenditure reached ₹399.79 crore as of September 30, 2024. Disputed direct and indirect tax claims totaled ₹13.37 crore across 14 proceedings, including a ₹4.61 crore indirect tax demand pending on appeal. - Promoters acquired low-cost shares before launching a 22.9 million share exit
Minor- The promoter family held 100.00% of the pre-offer equity at an average acquisition cost of ₹0.67 and ₹0.70 per share for the two main promoters, assisted by a 3:1 bonus issue in February 2025. In this offer for sale (existing shareholders selling their own shares and pocketing the proceeds), the two lead promoters are selling 22,940,000 shares in total. Of the ₹320 crore raised through newly issued shares, ₹220 crore will be utilized to prepay borrowings. - Capital sits in loss-making subsidiaries and non-earning joint ventures
Minor- Subsidiary DOM'S Delicious Private Limited reported a negative net worth (where accumulated losses cause liabilities to exceed assets) of ₹2.42 lakh in Fiscal 2024 with ₹13.27 crore in borrowings and annual revenues under ₹0.17 crore. An investment of ₹5.00 crore in associate entity Gramang Hydel Projects LLP produced no revenue and no profit in Fiscal 2023 or Fiscal 2024. - Financial statements received unmodified examination reports across all restated periods
Clean- Statutory auditor Surana Maloo & Co., appointed on September 30, 2023, issued an unmodified examination report on February 18, 2025 on the restated financial statements (previously reported numbers corrected and presented in a uniform format) without any audit qualifications. Formal declarations confirm no benami property proceedings, no wilful defaulter classifications, and no diversion of bank loans.
What to watch
- Machinery purchase deadline. The ₹14.91 crore quotation from SANY Heavy Industry India for excavators and dump trucks had an expiry date of May 8, 2025.
- Major water project completions. Large multi-village water supply contracts representing over ₹3,700 crore in total value, including Sidhi Bansagar and Gandhi Sagar 1, were scheduled for completion by calendar year 2025.
- Arbitration against primary client. Adjudication of the two claims totaling ₹41.97 crore against Madhya Pradesh Jal Nigam Maryadit filed on August 29, 2024 remained pending before the state arbitration tribunal.
- Tax demand challenge. The appeal against the ₹4.61 crore tax order passed on November 24, 2023 by CGST Bhopal remained pending as of March 20, 2024.
- Liquidator demand claim. The ₹9.51 crore insolvency demand notice issued on June 27, 2024 by the liquidator of Balaji Fiber Reinforce remained disputed by the company.
Bottom line: LCC Projects shows substantial reported revenues backed by clean audit reports. The central financial risk is cash conversion: reported profits are not generating liquid cash because ₹498.45 crore sits unbilled, forcing the company to take on ₹1,379.91 crore in group borrowings. Investors must weigh this alongside heavy revenue reliance on a single state client currently in arbitration, as well as significant related-party contract flows and salary increases.