G R Infraprojects Ltd - IPO Note

Engineering - Roads Construction

G R Infraprojects Ltd - IPO Note

Engineering - Roads Construction

Price range
Rs. 828-837
Issue Period:
Jul 07, 2021
Jul 09, 2021
July 08, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 952-967 cr.
Public Issue
1.15 cr shares cr. shares
Market cap post IPO
8006-8093 cr.
Equity Pre - IPO
9.66 cr.
Equity Post - IPO
9.66 cr.
Issue type
Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Rationale for Investment

Strong order book provides revenue visibility
With first project in road sector worth Rs 2.65 crores from PWD (Rajasthan) in FY’97, the company has come a long way. One of the recent projects won from NHAI on Vadodara-Mumbai expressways stands at a bid project cost of ~Rs 2747 crores. With proven track record in execution projects across diverse geographic location in India and rising ability to successfully bid and win new projects, the company has been successful in capitalizing on enhanced awarding momentum in road sector since last 5-6 years, visible from the growth in order inflows from ~Rs 1100 crores in FY14 to over Rs 11000 crores in FY21. Order book grew from a meagre Rs 1700 crores in FY14 to a massive Rs 19000 crores as at FY21, translating to an order-book-to-sales ratio of ~2.4x TTM revenues, giving strong revenue visibility over next 2-3 years.

Robust track record of project implementation within scheduled times
The company have an experience of over 25 years in executing EPC projects of roads sector. The company executed projects in construction and development of state and national highways, bridges, culverts, flyovers, airport runways, tunnels and rail over-bridges. Since 2006, the company executed more than 100 road construction projects and has an established track-record of timely completion of projects. The superior project efficiency is a result of involving trained and skilled manpower, efficient deployment of equipment and an in-house integrated model. The company enters into long term agreements to ensure timely supply of essential construction materials like steel, cement, bitumen and aggregates, thereby keeping inventory at an optimal level. Further, it has built in-house manufacturing facilities for processing of bitumen, thermoplastic road-marking paint and road signage and a fabrication and galvanization unit for metal crash barriers, for timely supply of these ancillary materials to their project sites across India. The above attributes have led the company to complete projects prior to scheduled date of completion. The company has received early completion bonus to the tune of ~Rs 280 crores in its projects.

Geographically diversified project portfolio coupled with expansion in new business segments
The company has executed projects in 15 states across India in the past two decades and has built a very well geographically diversified project portfolio thereby reducing reliance on particular states. It has also capitalized on different growth trends in various states of India. High growth states of Uttar Pradesh, Madhya Pradesh, Maharashtra and Gujarat make up ~67% of the order book as at Mar’21. The company predominantly has been operating in road construction space (97% of revenue). With rising opportunities in allied sectors, it intends to diversify into railways, urban transport and High Speed Rail (HSR). The company would be targeting projects that include earthwork, construction of bridges and supply of materials and track linking and laying of optical fibre cables. The said expansion into new functional areas will diversify order book (de-risking the same in times of down-cycles in roads sector) and effectively leverage its experience in executing EPC projects. The company successfully bagged few projects in railways sector which currently forms ~3% of the order book as at Mar’21. Going forward, it targets 10-15% of the order book & revenue mix from these segments.

Robust Infra-push specifically focusing on roads sector
In April’20, National Infrastructure Plan (NIP) laid a prominent plan for spending Rs 111 trillion capital outlay till FY25 across infrastructure sector, resulting in increased capital outlay over next 4-5 years. Road sector accounts for second highest allocation in NIP with projects worth Rs 20.3 trillion (~18%). Other major sector allocations include Energy (24%), Urban Infrastructure (17%) and Railways (12%). NHAI awarding has been rising since FY15. Over FY15-21, NHAI awarded projects of over 29,000 km and enhanced awarding momentum will likely continue with annual awarding of 4,000-4,500 km in coming 5 years. The sustained awarding momentum would translate into massive opportunities for strong players in road sector.

Monetization of assets shall aid in improving balance sheet strength
Asset monetization remains a key point of consideration to enable sustainable private investment in road sector over the long run. Two drivers of rising asset sales in the roads sector include: a) rationalization of financial position to improve balance sheet strength and b) utilization of monetization proceeds to participate in upcoming projects (asset churning). The erstwhile major BOT players are selling off assets (both BOT and HAM) to reduce their debt burden and free up equity, which can be infused in under-execution projects. Some players are also in process of selling under-construction projects to financial investors with projects being executed by the same player (thereby converting HAM projects into EPC) without facing the cut-throat competition currently in the EPC mode leading to retention of margins.

Strong balance sheet with comfortable leverage
Gross debt at consolidated level stands at ~Rs 4500 crores and Debt: Equity is comfortable at 1.1x as at FY21. On the standalone levels, Gross Debt: Equity stands at 0.82x while Net Debt: Equity stands low at 0.33x as at FY21. The company enjoys low cost of debt in the range of 7-8% led by credit rating of AA (stable outlook) by CRISIL. The company’s subsidiaries maintain relatively good financial health and are not a drag on its consolidated financials.


Peer comparison

FY21 (Rs in crores) Revenues EBITDA PAT Net D/E ROE (%) EV/EBITDA
GR Infra 7844.00 1850.00 953.00 0.90 27.20 6.30
Ashoka Buildcon 4992.00 1536.00 274.00 8.90 52.90 5.10
HG Infra 2602.00 476.00 237.00 0.50 25.10 7.10
PNC Infratech 4925.00 673.00 362.00 -0.20 13.30 6.90


Change in government policies on roads would largely impact future prospects
The company’s business is primarily dependent on road projects in India - undertaken or awarded by governmental authorities and other entities funded by the Central or State governments. A significant reduction in awarding momentum could adversely affect the business with subdued topline. Suboptimal margins or losses on one or more large contracts could further deteriorate the financial performance.

Rising competition in roads sector could impact order inflows and margins going ahead:
Some of the competitors may have greater industry experience, and substantial financial, technical and other resources which enables them to undertake larger projects or obtain better financing arrangements. Increased competition may cause the company to accept lower margins to sustain required order inflows.

High working capital requirements
Construction of roads, like other infrastructure segments, requires a significant amount of working capital which is based on certain assumptions, and any change in such assumptions could result in sizeable changes to the working capital requirements. A significant amount of working capital is required to finance the purchase or manufacturing of materials, mobilization of resources and other work on projects before payments are received from clients.

Company Description

Incorporated in Dec 1995, G R Infraprojects Limited (GRIL) is an integrated Road Engineering, Procurement and Construction (EPC) company proficient in designing and constructing various road and highway projects across 15 states in India. It has recently diversified into railway projects. Since 2006, GRIL has executed over 100 road construction projects. As of April 2021 the company has project portfolio comprising of 1 operational BOT road project and 14 HAM road projects of which five projects are currently operational, four are under construction and the remaining five constructions is yet to commence. The company also has experience in constructing state and national highways, bridges, culverts, flyovers, airport runways, tunnels and rail over-bridges.


We believe the company shall capitalize on growth opportunities supported by i) robust order pipeline with overall infra-push in the economy ii) superior execution skills with majority projects getting completed before/within stipulated time iii) healthy order book iv) geographical diversification across India and v) controlled debt levels, respectively. At upper end of the price band, this issue is valued at a EV/EBITDA of 6.3x FY21 consolidated earnings and we recommend SUBSCRIBE to this issue.

Key Information

Use of Proceeds:
The issue constitutes Offer for sale of 11.5 million shares (11.9% of equity share capital). The proceeds of the offer for sale will be received by the selling shareholder only; GR Infra will not receive any proceeds. The main objective is to provide liquidity to the company's existing shareholders and to enhance the visibility and brand of the company.

Book running lead managers:
HDFC Bank, ICICI Securities, Kotak Mahindra Capital, Motilal Oswal Invt Advisors, SBI Capital Markets, Equirus Capital

Vinod Kumar Agrawal: Being one of the promoters, he has over 25 years of experience in the road construction industry. He looks after the strategy and policy formulation for the Company and liaises with various departments of the Government and also overlooks processes in the Company which includes, bidding, tendering and planning. He is also the president of the National Highways Builders Federation. Ajendra Kumar Agrawal: Being one of the promoters, he holds a bachelor’s degree in civil engineering and has experience of over 25 years in the road construction industry. He is responsible for overseeing the overall functioning of the Company, especially the operational and technical aspects. He heads the in-house design team and is actively involved in continuous value engineering using the latest specifications and methodologies. Vikas Agrawal: He holds a bachelor’s degree in commerce. He has been associated with the Company since April-06 and has over 15 years of experience in the road construction industry. He is responsible for overseeing the functioning of running projects of the Company, as allocated by management from time to time.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Yr End March (Rs Cr) FY18 FY19 FY20 FY21
Net Sales 3292.00 5283.00 6373.00 7844.00
Materials cost consumed 2451.00 3575.00 4258.00 5425.00
Employee expenses 182.00 350.00 449.00 458.00
Other Expenses 35.00 74.00 80.00 112.00
EBITDA 624.00 1283.00 1586.00 1850.00
EBITDA Margin 19.00% 24.00% 25.00% 24.00%
Depreciation & Amortization 86.00 149.00 189.00 226.00
EBIT 538.00 1134.00 1398.00 1624.00
Other Income 40.00 43.00 51.00 63.00
Interest & Finance Charges 68.00 170.00 295.00 362.00
Profit Before Tax 511.00 1008.00 1154.00 1325.00
Tax Expense 98.00 291.00 353.00 371.00
Effective Tax rate 19.00% 29.00% 31.00% 28.00%
Net Profit 413.00 717.00 801.00 954.00
Net Profit Margin 13.00% 14.00% 13.00% 12.00%