The initial public offer (IPO) of GR Infraprojects was subscribed 2.3 times on the first day of bidding. It will remain open for bidding till July 9, 2021. The company has fixed price band of the public issue at Rs 828 to Rs 837. GR Infraprojects IPO is a book build issue with face value of Re 5 per equity share.
Incorporated in 1995, GR Infraprojects (GR Infra) is an integrated road engineering, procurement and construction (EPC) company. Its principal business operations are broadly divided into three categories Civil construction activities, Roads & Highways and Manufacturing activities. It’s projects are spread across 15 States in India and recently it has diversified into projects in the railway sector as well.
As of March 31, 2021, G R Infra had an Order Book of Rs 190,260 million comprising of 16 EPC projects, 10 HAM projects and 3 other projects. As of March 31, 2021, their equipment base comprised over 7,000 construction equipment and vehicles and the aggregate gross block value of company’s property, plant and equipment was Rs 20 billion.
Commenting on the IPO, Prashanth Tapse, AVP- Research Head, Mehta Equities said, “We believe G R Infra IPO gives investors a unique opportunity to invest in leading integrated EPC & BOT players with high focus on road projects design and construction of various stateways/highways projects across 15 States in India. With an experience of executing over 100+ road construction projects G R Infra has built a long-term expertise in the space of constructing and winning bids across the country. For diversification it has recently engaged into projects in the railway sector which is in a high growth phase.
We are optimistic on road EPC business but the industry is very competitive wherein competition depends on various factors like established track record and technical ability to bid and win which differentiates G R Infra to its peers to lead the race. The 2021-22 Budget also recognises the need and allocated significant budgetary outlay for the road transport and highways sector which is nearly a 20% increase over the estimates in 2020-21. Given the extent of capital commitment and outlay required to augment and maintain the road network over the next few years, G R Infra is well-placed to tap this opportunity. We believe road infra is an important pillar in India’s speedy economic recovery and one would hope that the government’s budgetary commitment to strengthening roadway infrastructure is accompanied by attractive opportunities for companies like Dilip Buildcon, Ashoka Buildcon, GR Infra and Sadbhav Infra.
On valuations parse at upper price band (Rs 837/-), the issue is asking for a market cap of Rs 80.92 billion with PE (FY21) 8.5x which seems the issue is reasonably priced well below the average industry (16x) when compared to its listed peers and believe there is something is left on the table for new investors coming in. While P/BV stands at 2.03x which seems the issue is reasonably priced and the only concern for us would be the OFS issue size of Rs 963 Cr and no fresh issue. Hence, considering all the rationales like Govt commitment and focus on road infra development, healthy order book (Rs. 19K+ Cr which is 2.4x FY21 Revenue) and reasonable valuations we advise investors to “SUBSCRIBE” this IPO as markets always reward a player who has high visibility and growth potential.”
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