We have entered into second half of 2021 which is expected to remain full of surprises and opportunities. IPOs in the Indian equity market are making fortunes as we have sufficient success stories of recently listed IPOs such as Barbeque nation, Likhita infrastructure, Equistas Small Finance Bank, Happiest Minds and Route Mobile to prove our statement. In the month of June we had four listing of IPOs while GR infraprojects will be the 1st to open for subscription in July but 2nd to list as India Pesticides Ltd. will list on July 5.
G R Infraprojects IPO Details:
- Issuer Company: G R Infraprojects Ltd.
- Industry: Infrastructure
- IPO Size: 963.28 cr.
- Price Band: 828-837
- Issue Open Date: 7 July, 21
- Issue Close Date: 9 July, 21
- Listing Date: 19 July, 21
- Minimum Lot Size: 17 shares
- Face Value: 5 Rs. Per share
- Employee Discount: Rs. 42/ share
- Retail Allocation: 35%
- Listing Exchange: NSE, BSE
Composition of Issue Size
The issue size of 963.28 crores is a complete Offer for Sale comprises sale of up to 11.5 million shares by India Business Excellence Fund and Pradeep Kumar Aggarwal.
About the Company
Incorporated in December 1995 and have gradually increased our execution capabilities in terms of the size of projects that we have bid for and executed. GR Infraprojects Limited is an integrated road engineering, procurement and construction (“EPC”) company with experience in design and construction of various road/highway projects across 15 States in India and has recently diversified into projects in the railway sector. The principal business operations of the company are broadly divided into three categories: (i) civil construction activities, under which we provide EPC services; (ii) development of roads, highways on a Build Operate Transfer (“BOT”) basis, including under annuity and Hybrid Annuity Model (“HAM”); and (iii) manufacturing activities, under which we process bitumen, manufacture thermoplastic road-marking paint, electric poles and road signage and fabricate and galvanize metal crash barriers.
Industry Growth Drivers
- The scope of infrastructure encompasses roads, power, railways, urban infrastructure, and irrigation among others.
- Administration launches various policy reforms to boost the inflows of FDI that can enhance the infrastructure. The Department of Industrial Policy & Promotion data has revealed that $16.3 billion have been received in last 20 years for construction activities in infrastructure.
- Earlier PPP (Public-Private Partnership) model of infrastructure was not lucrative for private players due to high restrictions but major amendments have made to regain their interest.
- Revised eligibility criteria for small players to enter in Engineering, procurement and Construction (EPC) and Hybrid Annuity Model (HAM) projects. Various concessions have been provided in HAM projects to ease cash flow.
- Gross budget of developing roads was 12.3% higher in FY2021 than the previous fiscal budget.
- National Highway Authority of India is planning to raise Rs 400 billion ($5.72 billion) to monetize its highway assets through Invitation of Investment Trust (InvIT).
- More concession period offerings for construction activities from the Indian government to complete their projects.
- NHAI borrowings have been increased 11 times in last five years which signals that government is very aggressive towards building roads and highways.
- Application processes for licensing and environment clearances have been eased to support flow of operations.
In the listed space, the company faces tough competition from Ashoka Buildcon, Dilip Buildcon, Hindustan Construction Company, KNR Constructions, PNC Infra and Sadbhav Engineering.
On the financial front, GR Infraprojects have been able to increase their revenues by 22%. Company has been able to generate 22% EBITDA margins due to higher efficiency. Net Debtor days period of the company is 50 days much lower than the listed peers which seems that the company has higher working capital to incur operations effectively. Return on Equity is 27.8% while Return on Capital Employed is 32.2%, which is highest recording among the listed peers. The company has a strong order book of 222,540 million out of which 98.2% belongs to road construction that shows its competence in road construction expertise. Company has a debt of 3,543 crores on its balance sheet while its Interest Coverage Ratio of 9.1 puts the company in a strong case. Considering the upper price band and FY20 Earning Per Share (EPS), the company is demanding a P/E multiple of 10.15x, much in-line with the listed peers.