GR Infraprojects Ltd IPO Analysis

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About The Company

GR Infraprojects Ltd IPO is an integrated road EPC company with experience in design and construction of various road/highway projects across 14 States in India. In addition to there EPC activities, they own one operational road project constructed and developed by them on a Build Operate Transfer (“BOT”) basis and seven road projects under the Hybrid Annuity Model (“HAM”) have been awarded to them of which four projects are currently under construction.

Their primary business operations are broadly divided into three categories: (i) civil construction activities, under which we provide EPC services; (ii) development of roads and highways on a BOT basis; and (iii) manufacturing activities, under which the company process bitumen, manufacture thermoplastic road-marking paint and road signage and fabricate and galvanize metal crash barriers.

About Company’s Management

Vinod Kumar Agarwal

  • Is the Chairman and Whole Time Director on our Board and one of the Promoters of Company
  • has over 25 years of experience in the road construction industry
  • He is also the president of the National Highways Builders Federation and was awarded the Excellence Award by the Hindustan Times for ‘demonstrating excellence and deploying exponential strategies in their field by creating exceptional value for society’ in 2016.

Ajendra Kumar Agarwal

  • is the Managing Director on our Board and one of the Promoters of Company
  • He has experience of over 25 years in the road construction industry

Kalpana Gupta 

  • (is a Non-Executive Independent Director)
  • She has prior experience of over 34 years in the banking sector
  • Was most recently associated with Punjab National Bank as general manager

Desh Raj Dogra

  • Is an Additional Director (Non-Executive Independent Director)
  • Has over 37 years of experience in the financial sector
  • He was associated with Dena Bank for 15 years and retired as a managing director and chief executive officer of CARE

About Industry

MRTS– Mass Rapid Transit System (Metro)      
BRTS– Bus Rapid Transit System  
EPC– Engineering Procurement & Construction
HAM– Hybrid Annuity Model                             
BOT-Build-Operate-Transfer
  • The roads sector accounted for 49% of total investments in the infrastructure industry over fiscal year 2015-19.
  • Spending on road construction, which is estimated to have risen 11% on-year in fiscal 2020, is forecast to increase 1.6 times over fiscal 2021-25 compared with fiscal 2016-20
  • Around 35% of the projects awarded by the National Highways Authority of India (NHAI) in fiscal 2019 and 2020 are through HAM ( Under HAM, 40% of the total construction cost is paid by the government during the construction period) thus companies are not leveraged unlike BOT model
  • NHAI awarding trend is in significant pace.
  • Average tenders till FY25 4000-4500 KM due to a strong pipeline of projects under Bharatmala.
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GR Infraprojects Ltd

There are various types of  Model

  • BOT (annuity)- BOT, you receive annuity from govt and  you pay charges collected to authority
  • BOT (toll based)- BOT , you receive collection from the project although pricing have govt regulation.
  • HAM- You receive 10 instalment of 4% of total cost from govt, and you receive annuity payments for your 60%.
  • Toll-Operate-Transfer- You get on lease road for 30 years and you pay upfront payment to govt. Toll revenue is your income.
  • EPC- Fixed price contracts. Built and gives

About Company Business/History

  •  GR Infraprojects Ltd was incorporated in December 1995
  • An integrated road engineering, procurement and construction (“EPC”) GR Infraprojects Ltd IPO 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
  • Broadly divided into three categories
  • Civil construction activities, under which they provide EPC services;
  • Development of roads, highways on a Build Operate Transfer (“BOT”) basis, including under annuity and Hybrid Annuity Model (“HAM”); and
  • Manufacturing activities, under which they process bitumen, manufacture thermoplastic road-marking paint, electric poles and road signage and fabricate and galvanize metal crash barriers.
  • Since 2006, executed over 100 road construction projects
  • 14 road projects which have been awarded to GR Infraprojects Ltd IPO under the HAM, out of which five projects are currently operational, four projects are under construction and construction is yet to commence on five of these projects.
  • As of March 31, 2021,  GR Infraprojects Ltd IPO had an Order Book of 19026cr. 16 road EPC projects, 10 HAM projects and 3 other projects
  • Revenue Bifurcation
ParticularsFY21% shareFY20% shareFY19% share
EPC529967.6%303647.6%221642.0%
BOT Project235330.0%318450.0%290955.1%
Others1922.4%1522.4%1573.0%
Total7844100.0%6372100.0%5282100.0%

Basic Details About GR Infraprojects Ltd IPO

BASIC DETAILS ABOUT IPO (7-9 July)
Price Band828-837
Bid Lot17 shares
OFS (Amount)963.28cr
Total issue amount- AT Upper Band963.28
Post issue Implied Market Cap8093cr
Post issue (Shares) Cr9.67cr
Book Runner and Lead Managers: HDFC Bank, ICICI Sec, Kotak, Motilal, SBI Cap & Equirus

Financials – Balance Sheet

Balance sheet
Particulars31-Mar-2131-Mar-2031-Mar-19
PPE1313.4996.4898.4
% of Total Assets13.0%12.8%15.4%
Capital WIP55.427.943.3
% of Total Assets0.5%0.4%0.7%
Total PPE+Capital WIP1368.81024.3941.7
% of Total Assets13.5%13.2%16.2%
Other Financial Asset3113.41610.9416.6
% of Total Assets30.8%20.7%7.1%
Inventories1058.4768.7613.7
% of Total Assets10.5%9.9%10.5%
Trade Receivable508301543
% of Total Assets5.0%3.9%9.3%
Cash and Bank balance831948716
% of Total Assets8.2%12.2%12.3%
Other Current Assets122318161483
% of Total Assets12.1%23.3%25.4%
Equity398030272230
% of Total Liabilities39.3%38.9%38.3%
Borrowings + Lease Liability452532092141
% of Total Liabilities44.7%41.2%36.7%
Trade Payable735555517
% of Total Liabilities7.3%7.1%8.9%
Total Assets/Liabilities1011677845829

Financials – P&L

P&L
Particulars31-Mar-2131-Mar-2031-Mar-19
Revenue from Operation784463735283
% Growth    23.1%20.6%
COMC+change in inventory107104113
% of Revenue1.4%1.6%2.1%
Civil Construction Cost531341513462
% of Revenue67.7%65.1%65.5%
Employee benefit expenses458449350
% of Revenue5.8%7.0%6.6%
Depreciationa and Amortisation226189149
% of Revenue2.9%3.0%2.8%
Finance Cost362295170
 4.6%4.6%3.2%
Total Expenses658252704318
 83.9%82.7%81.7%
EBITDA185015871284
Margin23.6%24.9%24.3%
PBT132511541008
PBT Margin16.9%18.1%19.1%
PAT953801717
PAT Margin12.1%12.6%13.6%
EPS98.382.673.9

PRO’s & CON’s of GR Infraprojects Ltd IPO

SHAREHOLDING
ParticularPre-IssuePost-Issue
Promoter88.04%86.54%
Public11.96%13.46%
Total100%100%

PRO’s

  • GR Infraprojects Ltd IPO is the segment on which government has been aggressively focusing, NHAI average tender till FY25 is expected to be 4000-4500KM p.a. due to a strong pipeline of projects under Bharatmala.
  • GR Infraprojects Ltd’s management have good experience of the business they are into…actually it’s a second generation into the business and have grown from strength to strength with getting new work based on timely execution quality. 
  • In last 3 FY projects completed before scheduled completion date FY21 50% Projects, FY20 50% Projects & FY19 80% projects.
  • There have been no material instances in the last three years, where GR Infraprojects Ltd IPO have failed to maintain the roads to the standards set forth.
  • Bonus received for completion of projects before time.
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  • Based on Peer comparison company have left room for investors.
Peer ComparisionPEPBOrder BookEV/EBITDAD/E ratioROEBook/Bill
KNR Construction16.93.50114409.90.423.2%3.9
PNC Infratech15.82.601662071.217.7%2.9
HG Infra11.42.5059706.40.6525.1%2.3
Dilip Buildcon33.72.502741082.87.7%2.7
Ashoka Buildcon11.75.20101205.21053.4%2.0
IRB Infrastructure47.40.80145098.42.61.7%2.7
Sadbhav EngineeringTTM Loss0.9896287.84.3-11%4.3
Industry Average22.82.613671.07.53.121%3.0
GR Infraprojects8.52.0190256.41.127%2.4
Peer ComparisionMcapFY21 PATPAT marginFY21 RevenueRevenue growth FY19 to FY21
KNR Construction688340714.0%290426.7%
PNC Infratech78424978.6%578853.4%
HG Infra26922379.1%260229.2%
Dilip Buildcon85402672.6%101688.1%
Ashoka Buildcon32352765.5%49921.3%
IRB Infrastructure55531172.2%5299-21.0%
Sadbhav Engineering1412-155-6.9%2243-57.2%
Industry Average5165.3300.27.0%5292.224%
GR Infraprojects8093.0953.012.1%784448.5%
  • Consistency in performance which can be seen in Financials growth in Revenue, Maintaining margins and good profitability.
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P&L
Particulars31-Mar-2131-Mar-2031-Mar-19
Revenue from Operation784463735283
% Growth   23.1%20.6%
EBITDA185015871284
Margin23.6%24.9%24.3%
PBT132511541008
PBT Margin16.9%18.1%19.1%
PAT953801717
PAT Margin12.1%12.6%13.6%
EPS98.382.673.9
  • GR Infraprojects Ltd IPO has healthy order book of 19026cr also order’s are well diversified state wise also. Also 50% Project is from HAM and 50% if from EPC.
  • Borrowing  have been matched and significant portion of borrowing is long term which is matched with receivable from Government.
Borrowing has been matched with Revenue Stream
ParticularsAmount
Total Borrowings4524
Of Which Long Term Borrowing3604
Of which Term Loan3000
Note: Term loan payble time line 18-27 half yearly Instalments
That means amount is to be paid ranging from 9 years to 14 years
As on 31 March 2021 
Right to Receive annuity from Govt.3018
i.e. govt 60% share in HAM to be received in next 15 years
 
Total Borrowings4524
Of Which Current Borrowing920
Montly cash cost for operations550
Total Current Needs1470
Cash/Bank Balance as on 31 March 2021 (freely Availiable)467
Under Other Current Assets 
Contract Assets Receivable387
Trade receivable508
Total Availiability1362
Which also highlights for every new Bid no surplus is left hence borrowings increase

CON’s

  • Entire issue size is OFS and GR Infraprojects Ltd IPO’s management clearly told that this IPO is to give exit to the investor India Business Excellence Fund (Motilal Oswal) which invested in 2011 at 177 per share…so the point is no Fresh issue which would be used for reducing borrowing which stands at 4525cr as currently D/E ratio is 1.1 although seems comfortable but leverage could have reduced.
  • Another aspect is GR Infraprojects Ltd IPO plans to Create Invit in future to deleverage but with that assets will also go into that so how that would be down fairly for the investors who are investing now could also be seen. Apart from the fact that after OFS promoters holding still remains at 86.54% which has to brought down to 75% so that overhang will also be there.
  • Of the total bids submitted by company during Fiscals ended March 31, 2021, March 31, 2020, and March 31, 2019, GR Infraprojects Ltd IPO were awarded the projects in respect of 5.21%, 6.12% and 15.48% of such bids respectively …conversation ratio has been declining.
  • GR Infraprojects Ltd IPO derives almost all of its Revenue from Road’s construction , Revenue of 78bn also margins as high as 23.6% …so single segment dependence may be an issue although company recently forayed into Railway sector.
  • There has Been Various litigations most of them are tax related however there are 7 criminal litigation against company and 3 against promoters of the company, among 7 one being that company has colluded with one company for unlawful activities .
  • GR Infraprojects Ltd has been financing its capex and HAM projects 60% infusion through borrowing .Borrowings are expected to increase by around 1300cr more in FY22. Capex done in 3 years is 1281cr and in HAM project infusion done is 1200cr(As told by Management) that combines makes around 2481cr while borrowings rose by around 2384cr. So it is clear HAM project financial is done through borrowing. So why not Fresh Issue and reduce the stress of borrowing.
Particulars (FY19 to FY21)Amount
Capex done1281
Borrowings Rose2384
Infusion for HAM Project (A)1200
Management told total infusuion Requirement2500
Yet to be infused ( BY borrowings)1300

Although of the Total Order Book 19000cr, 9500cr is HAM which means 60% to be infused by company i.e. 5700cr but management told required to infuse total 2500cr so that is still not clear the calculations.

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Arman Nahar

Arman Nahar

C.A. who is a USA CFA L3 candidate | Cleared L1 & L2 | Doing independent equity research since 2016 | Screens stocks for investment | Makes in-depth valuation models | Crafts portfolios.
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