Bharat Highways InvIT IPO subscribed 37% on Day 2 so far; should you subscribe to the Rs 2,500-cr issue?

Bharat Highways Infrastructure Investment Trust’s (InvIT) IPO has been subscribed 37 percent so far on February 29, the second day of bidding. The Rs 2,500-crore IPO, the biggest so far in 2024, has received a ‘Subscribe’ rating from several brokerages owing to reasonable valuation. BP Wealth believes that the InvIT’s objective to repay or prepay loans to the Project SPVs will enhance its leverage position.

Offer details

The price band of the issue, which opened for subscription on February 28 and will close on March 1, 2024, has been fixed at Rs 98-100 per share. The offer is entirely a fresh issue of 25 crore shares. The infrastructure investment trust will utilise the net issue proceeds for providing loans to the project SPVs (special purpose vehicles) for repaying their outstanding loans, and general purposes.

ICICI Securities, Axis Capital, HDFC Bank and IIFL Securities are the book-running lead managers while Kfin Technologies is the registrar for the IPO. Aadharshila Infratech is the sponsor, GR Highways is the investment manager and IDBI Trusteeship Services is the trustee.

The business

Bharat Highways InvIT is an infrastructure investment trust established to acquire, manage, and invest in a portfolio of infrastructure assets in India and to carry on the activities of an infrastructure investment trust, as permissible under the Sebi InvIT regulations.

Its portfolio consists of seven roads, all of which are operated on a hybrid annuity model (HAM) basis in Punjab, Gujarat, Andhra Pradesh, Maharashtra, and Uttar Pradesh. These roads are operated and maintained based on concession rights granted by the NHAI and are owned and operated by the Project SPVs, which are currently wholly owned by GR Infra.

The InvIT has entered into a ROFO agreement with GR Infraprojects under which it has granted a right of first offer to the InvIT to acquire certain of its road assets.

Anchor investors

The company garnered Rs 825.97 crore from several anchor investors on February 27. Asset management companies like ICICI Prudential Mutual Fund, HDFC Mutual Fund, Kotak Mutual Fund, Quant Mutual Fund, Nippon Life India, Axis Mutual Fund, Aditya Birla Sun Life Trustee, UTI Mutual Fund, Baroda BNP Paribas MF and DSP Mutual Fund were some of the anchor investors in the IPO.

Among others, Societe Generale, Copthall Mauritius Investment, HDFC Life Insurance Company, Max Life Insurance Company, Reliance General Insurance Company, Alpha Alternatives MSAR, and CIM Investment Fund ICAV also invested in the infrastructure investment trust that has a portfolio of seven road assets, which all are operating on HAM basis, in Punjab, Gujarat, Andhra Pradesh, Maharashtra and Uttar Pradesh.

Financials 

The revenue from operations of the SPV Group for the financial year ended March 2023 was at Rs 1,537 crore, down marginally from Rs 1,600 crore a year earlier. Profit for FY23 jumped multi-fold to Rs 527 crore, compared with just Rs 62.8 crore in FY22. For the period ended on September, the InvIT reported a profit after tax at Rs 101.35 crore, with a revenue of Rs 388.54 crore.

Should you subscribe to Bharat Highways InvIT IPO?

BP Wealth: Subscribe

The lender will utilise net proceeds of the fresh equity issue to repay/prepay loans to the Project SPVs which will enhance the InvIT's leverage position.

“At the current P/BV multiple of 0.8x based on book value as of September 2023, we believe the company is reasonably valued and advise investors to “Subscribe” to the issue from a medium to long-term perspective.”

Mastertrust Broking: Subscribe

Bharat Highways InvIT owns an initial portfolio consisting of seven InvIT Assets having an aggregate length of approximately 497.292 km located on national networks across five states in India.

“Investors can invest in this IPO with a medium to long-term perspective.”

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