GR Infraprojects IPO to open tomorrow; things to know

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Road engineering, procurement and construction (EPC) company GR Infraprojects (GRIL) Rs 963.28 crore initial public offering will open for bidding tomorrow, July 7, and closes on Friday, July 9.

The infrastructure developer has fixed a price band of Rs 828-837 per share at a face value of Rs 5. An investor can bid for a minimum of 17 equity shares and in multiples, thereafter, translating to a minimum bidding amount of Rs 14,229 at the higher end of the price band. A retail investor can at max apply for 14 lots or 238 shares for 1,99,206. Half of the issue is reserved for qualified institutional buyers, 35% for retail investors and 15% for non-institutional bidders.

The issue is a complete offer for sale by promoter and promoter group, and investors. Promoters, Lokesh Builders will sell 11,42,400 equity shares through an offer for sale, Jasamrit Premises 1.27 lakh equity shares, Jasamrit Fashions 80,000 equity shares, Jasamrit Creations 56,000 equity shares, and Jasamrit Construction 44,000 equity shares.

Among others, India Business Excellence Fund I will offload 64,14,029 equity shares and India Business Excellence Fund 31,59,149 equity shares, which are investors in the company. Another selling shareholder is Pradeep Kumar Agarwal, who will sell 4,86,126 equity shares through an offer for sale.

Grey market chatter

Ahead of the IPO, GR Infraprojects shares were trading at Rs 1,253-1,262 marking a premium of Rs 425 or 51% over the IPO price on Tuesday.

“They have established track record of timely execution of projects which show-cases their operational efficiency. On the operational front, the company has witnessed the fastest growth in operating income at 47% CAGR (Compounded annual growth rate) from FY15 to FY20. The issue is quite reasonably priced compared to its peers. The P/E ratio stands at 8.5x FY21 earnings which leave enough on the table for investors,” said grey market tracker Abhay Doshi, Founder of Unlisted Arena.

Should you apply?

GR Infraprojects has completed over 100 road construction projects successfully, and currently, 4 BOT (build operate transfer) projects are under construction. So, the key question is whether you should subscribe to IPO or not. Here what the brokerages have to say

Phillip Capital | Rating: Subscribe

Phillip Capital finds risk-reward ratio for the IPO to be attractively given the company’s strong fundamentals. “GR Infra is seeking a market cap of Rs 8,100 crore. Adjusting this for Rs 2,500 crore of equity to be invested in HAM projects, it seeks a valuation of Rs 6,400 crore for its EPC business, which translates into 7x FY23 PE (assuming 15% revenue CAGR and 18% EBITDA (earnings before interest tax depreciation & amortization) margins over FY22-23) – in line with most peers, which are all trading at significant discounts to their historical average (15x) due to the ongoing pandemic,” noted the report released by the brokerage firm.

Prabhudas Liladhar | Rating: Subscribe

Prabhudas Liladhar also recommends applying for the IPO given its strong pedigree management with excellent execution capabilities, lean balance sheet (standalone Net D/E: 0.3x), robust earnings growth (45% CAGR over FY16-21), and well placed to capitalise on huge opportunities in infra space. “At the upper end of the price band, this issue is valued at a P/E (price to earnings ratio) of 8.5x and an EV/EBITDA (Enterprise Value to Earnings Before Interest Tax Depreciation & Amortisation) of 6.3x as on FY21 consolidated earnings (vs PL infra coverage at an average P/E of 19.6x/11.4x FY21/22E earnings),” said the brokerage firm.

Angel Broking | Rating: Subscribe

GRIL has a strong track record of timely execution, has a presence across regions, and has built up its size over the years which should enable it to capitalize on the opportunity arising from government spends on-road/highways. Its standalone level, its net debt to equity is 0.3x and GRIL generates strong cashflows which should help in meeting future equity commitments in HAM projects. Current standalone order book translates to book to bill of 2.7x which is in in-line with peers while it leads in terms of ROCE (Return on Capital Employed) and Revenue/EBITDA CAGR over the past five years.

Marwadi Shares & Finance | Rating: Subscribe

Marwadi Shares & Finance believes that the company is going to list at PE of 8.51x with a market cap of Rs.8,092 crore while its peers namely KNR Constructions Ltd and PNC Infratech Ltd is trading at 16.6X and 15.10X respectively.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)