G R Infraprojects will be one of the first companies to kick off the IPO frenzy in July. They have launched a three-day initial public offering (IPO) today— July 7. It is a company in a sector that is showing huge promise for future growth. So let us take a closer look into G R Infra and learn more about its IPO.
Company Profile – G R Infraprojects Limited
G R Infraprojects Limited (GRIL) is an integrated road engineering, procurement, and construction (EPC) company. It was established in 1996 and is headquartered in Gurugram. The company is engaged in the design and construction of roads/highways across 15 states in India. They primarily undertake civil construction projects under the EPC and Build Operate Transfer (BOT) basis.
Since 2006, G R Infra has completed more than 100 road construction projects. This includes state and national highways, flyovers, airport runways, and tunnels. Currently, there are 4 BOT projects under construction. The company’s order book stood at ~Rs 19,025.81 crore at the end of March 31, 2021 (FY21). A major portion of their orders come from the National Highways Authority of India (NHAI) and various state governments.
GRIL has strategically diversified into the manufacturing of thermoplastic road marking paints, electric poles, road signages, bitumen, and metal crash barriers. It owns and operates three manufacturing facilities in Udaipur (Rajasthan), Guwahati (Assam), and Sandila (Uttar Pradesh). They also operate a fabrication and galvanizing unit in Ahmedabad. These facilities provide integral support to the company’s road construction business.
G R Infra has more than 25 years of experience in executing large-scale road projects. It has established a good track record for the timely completion of projects. GRIL recently diversified into projects in the railway sector as well.
About the IPO
In June 2021, G R Infraprojects received approval from the Securities and Exchange Board of India (SEBI) to float its initial public offering (IPO). The public issue opens on July 7 and closes on July 9. The offer for sale (OFS) of up to 1.15 crore equity shares from existing shareholders aggregates to Rs 963.28 crore. The price band for the IPO has been fixed at Rs 828-837 per equity share.
Individual investors can bid for a minimum of 17 equity shares (1 lot) and in multiples of 17 shares thereafter. You will need a minimum of Rs 14,229 to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 238 equity shares (14 lots). However, if you are planning to apply for more than 1 lot, keep in mind that your capital may get blocked for no reason if the IPO is oversubscribed.
The primary objective of the IPO is to provide an exit strategy (or liquidity) to G R Infra’s promoters and early investors. Thus, the company is not raising any funds through the public issue. It aims to achieve the benefits of listing on the NSE and BSE. After the successful completion of the IPO, the total promoter holding in the company will reduce from 88.04% to 86.54%.
Financial Overview
G R Infraprojects has posted a consistent rise in revenues and profits over the last three financial years. The Covid-19 pandemic has not caused a severe impact on its operations. In fact, many such firms were able to ramp up construction activities during the strict lockdowns imposed across India. During FY19-FY21, GRIL’s total income grew at a CAGR of 21.85%. Net profit grew at a CAGR of 15.33% during the same period. However, the company has revealed that a rise in finance costs and higher provisioning for depreciation and tax has caused a dent in its margins.
The company has a healthy balance sheet. Its total borrowings at the end of FY21 stood at Rs 4,494.97 crore, while net worth stood at Rs 3,980.03. GRIL has also maintained healthy cash flows, which is very essential for firms engaged in construction activities. They require a strong cash flow for making payments on debt obligations and working capital requirements. The average Earnings Per Share (EPS) over the last three financial years stood at Rs 89.
Risk Factors
- G R Infra has stated that the continuing impact of the Covid-19 pandemic on its operations is highly uncertain and unpredictable. Over the past year, their manufacturing units were forced to shut down temporarily amidst strict lockdowns. If the situation persists, they may not be able to complete pending orders or commence new projects as per schedule. This could adversely impact its overall financial performance.
- The company’s projects are capital intensive, and they are required to hold significant amounts of long-term loans to settle expenses. The inability to meet debt obligations or conditions imposed by financial agreements could severely affect its business performance.
- A major portion of GRIL’s revenue is derived from civil construction projects. The failure to secure large projects from government entities (such as NHAI) could harm its operations and financial performance. G R Infra is also prone to sudden termination of a particular project.
- The company may face an unprecedented rise in costs of construction materials, fuel, labor, or other inputs.
- There are outstanding legal proceedings against G R Infraprojects, its Directors, promoters, and subsidiaries.
IPO Details in a Nutshell
HDFC Bank, ICICI Securities, Kotak Mahindra Capital, Motilal Oswal Investment Advisor, SBI Capital Markets, and Enquiries Capital have been appointed as the book-running lead managers to this public issue. G R Infraprojects Ltd had filed draft papers for its IPO in April 2021. You can read it here.
Ahead of the IPO, GRIL raised Rs 283 crore from 22 anchor investors. This includes prominent names such as Blackrock, Allianz Global, Fidelity, Aditya Birla Sunlife, etc.
Conclusion
India has always focused on the development of a strong transportation network. It is one of the most vital aspects that contributes to the growth of our economy. Thus, companies involved in the construction and maintenance of roads/highways will continue to receive large orders from the government. In the recent Union Budget announcement, the Finance Ministry proposed a significant boost for highway infrastructure projects. G R Infra has established itself as a leading player in this sector. The company is likely to secure more projects from the NHAI due to its strong project execution capabilities. This indicates that one could invest in the firm based on its future growth prospects.
Once it gets listed, G R Infraprojects Ltd will be directly competing with major players such as KNR Construction, Ashoka Buildcon, IRB Infrastructure Developers, Dilip Buildcon, PNC Infratech, and many more. You can check out our recent analysis on some of the prominent highway-infra construction firms here. As always, consider the risks associated with this company and come to your own conclusion.
Before applying, we will wait to see if the portion reserved for institutional investors gets oversubscribed. What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.
