GR Infraprojects IPO is for long term investors, say analysts

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GR Infraprojects IPO is for long term investors, say analysts
  • GR Infraprojects to raise ₹962 crore with a complete offer for sale (OFS) of 11.5 million shares.
  • The IPO has opened for subscription and will close on July 9 with a price band of ₹828-837.
  • The company is an integrated road engineering, procurement and construction (EPC) company proficient in designing and constructing various road/highway projects, across 15 states in India.
GR Infraprojects, a road sector contractor, is looking to raise ₹962 crore with a complete offer for sale (OFS) of 11.5 million shares.

Currently, the promoter holds 88.04% stake in the company and after the initial share sale, this stake will come down to 86.54%. The firm’s public holding will increase from 11.96% to 13.46%.

The public issue consists of ₹121 crore by promoters, ₹801 crore by private equity arms of Motilal Oswal and ₹40 crore by other shareholders.

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GR Infraprojects is an integrated road engineering, procurement and construction (EPC) company proficient in designing and constructing various road/highway projects, across 15 states in India. It has recently diversified into railway projects

Further, the company is looking to list as a mid-cap construction company, focused on the roads segment.

Most analysts have pointed out huge opportunities in the infrastructure space with GR Infraprojects for the long term on a strong order book and project execution record.
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According to a report by Religare Broking in a report, “GR Infraprojects is well placed in the infrastructure space with a large focus on executing road projects as the majority of the revenue is earned from this segment (close to 98-99%). We have a positive view of the company from the long term perspective, given government support to the infrastructure sector, high experience in the execution of road projects, technical capabilities and stable financials.”

Strong order book and financial performance

Over the last two decades, GR Infra has transformed itself from a small regional player to a pan-India EPC company. Order book of the company grew from a meagre ₹1,700 crore in FY14 to a massive ₹19,000 crore, said a report by Prabhudas Lilladher.

Its revenue has seen strong 33% compound annual growth rate (CAGR) in the last three years (much higher than listed peers), primarily driven by strong order intake and expansion in new geographies
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The company has three manufacturing facilities -- one each in Rajasthan, Assam and Uttar Pradesh -- for the manufacturing of key raw materials and also a fabrication and galvanizing unit in Gujarat. All these enable it to be less dependent on third party equipment providers and also efficiently manage its project execution schedules. In FY19, FY20 and FY21, the company executed 80%, 50% and 50%, respectively, of the projects prior to the completion dates, said Choice Broking in a report.

Robust track record

With over 25 years of experience in the construction industry, GR Infraprojects’ promoters and management team have a track record of timely executing over 100 road construction projects since 2006. “With superior project management capabilities and integrated business model, the company received ₹280 crore as early completion bonus in its projects,” said a report by Prabhudas Lilladher.
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The company’s order book of ₹19,000 crore is well diversified across the country (Uttar Pradesh -- 23%, Madhya Pradesh -- 18%, Maharashtra -- 14%, Gujarat -- 13%), but concentrated in the roads segment at 97%.

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