GR Infra’s Rs 963 cr IPO opens next week; should you subscribe?

NEW DELHI: When the initial public offer (IPO) of GR Infraprojects opens for subscription on Wednesday, the promoters and shareholders of the company will look to raise Rs 963 crore from primary markets.

The GR Infraprojects issue has a price band of Rs 828-837 per share at PE a multiple 8.5 on FY21 EPS basis. As of March 31, the company had a healthy order book of Rs 19,025.80 crore. It included 16 EPC projects, 10 HAM projects and three other projects which gives strong revenue visibility going forward.

The book building issue is expected to sail through successfully as most analysts have ‘subscribe’ rating on it as they believe shares are being offered at a comparatively cheaper valuations.

In the unofficial markets for unlisted shares, GR Infra is trading with a premium of Rs 343 to 348 per share, said Dinesh Gupta, Founder of UnlistedZone, a dealer of unlisted shares. This translates into a 42 per cent premium over the price band. The grey market premium is indicative of possible listing gains.

“GR Infraprojects is bringing the issue at a price band of Rs 828-837 per share at PE multiple 8.5 on FY21 EPS basis. We like the financial performance posted by the company with healthy balance sheet status,” analysts at Hem Securities said. .

“As the company strives to maintain a robust financial position and low debt levels along with emphasis on a strong balance sheet enable the company to pursue future opportunities for growth. Hence we recommend ‘subscribe’ on issue both for listing gain and long term purpose,” they added.

GR Infraprojects is an integrated road engineering, procurement and construction company with experience in design and construction of various road/highway projects across 15 States in India and having recently diversified into projects in the railway sector.

As of March 31, the company had a healthy order book of Rs 19,025.80 crore and comprised 16 EPC projects, 10 HAM projects and three other projects which gives strong revenue visibility going forward.

Of the total shares on offer, 50 per cent shall be available for allocation on a proportionate basis to qualified institutional buyers (QIBs). Further, not less than 15 per cent of the offer shall be available for non-institutional bidders and the rest for retail investors.Up to 225,000 shares are reserved for employees. Bidding can be placed in a lot of 17 shares.

Its peers, and , are trading at 16.6 times and 15.10 times their earnings, respectively, which is quite expensive compared to GR Infra, which makes the issue lucrative

“We recommend to ‘subscribe’ this IPO as the company is an EPC player with road project focus having established track record of timely execution and is available at a favourable valuation as compared to its peers,” said Saurabh Joshi and Ridhima Goyal of Marwadi Financial Services.

The significant growth of business in the last three fiscal years has contributed significantly to the company’s financial strength. The company’s revenue from operations increased from Rs 5,282.58 crore in fiscal 2019 to Rs 7,844.12 crore in fiscal 2021 at a CAGR of 21.86 per cent while profit for the year increased from Rs 716.63 crore in fiscal 2019 to Rs 953.22 crore in fiscal 2021 at a CAGR of 15.33 per cent.

Rajnath Yadav of Choice Broking, while assigning ‘subscribe for long term,’ said GR Infra with its efficient operations is well placed to benefit from the growth in the sector, however, there are some concerns on the sustainability of the EPC profitability in the near term.

Philip Capital also advised ‘subscribe’ to the issue but counted a few risks including unsustainability of 18-20 per cent margins, large HAM portfolio that may be difficult to monetise and interest rate risks.