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Robust order inflows place GR Infra on strong footing

FY22 order inflows pump up order book for GR Infra; focus on diversification to other infra segments

* G R Infraprojects Ltd (GRIL) witnessed strong order inflows (~INR 94b) in FY22 and its order book currently stands at INR170b (2.2x FY22 revenues). Out of the 10 projects won, 8 were HAM projects, 1 was metro project and 1 was power transmission project. The order wins not only allayed concerns on depleting order book, but also provided comfort on future growth. At the end of FY22, GRIL has 30 projects under execution.

* GRIL is consciously focusing on leveraging its road sector experience and foray into other infrastructure sectors. As of now, it is looking at segments such as a) railways: projects involving earthwork and track linking b) Metros: civil engineering work and c) power transmission (tariff-based competitive bidding). It bagged its first Power transmission project in FY22. GRIL would bid for projects in these sectors, if the company can continue to maintain its current margin profile. Apart from segmental diversification, GRIL would also focus on geographical diversification, allowing it to capitalise on growth opportunities across India.

Focus on asset monetization; at advanced stage of floating InVIT

* The company plans to focus on asset monetization, allowing it to bid for more projects and also help maintain a lean balance sheet.

* GRIL is in the process of sponsoring an Infrastructure Investment Trust (InvIT), Bharat Highways InvIT. The Company would also act as the Project Manager of the InvIT and is looking to transfer some of its HAM assets to the trust. The InvIT is likely to be floated by the end of FY23.

Strong execution capabilities augurs well; strongly placed to capitalize on the huge industry opportunity

* GRIL has consistently displayed robust execution capabilities since its inception. This has been possible with a) strong in-house design and engineering team with proven expertise b) Central procurement team supervising the procurement plan c) On-site project management to ensure operational efficiencies, etc.

* FY22 project wins were impacted by intense competition in the Roads segment. With a cyclical competitive landscape, the Company expects strong growth ahead.

* As the company plans to bid for several projects across the Road and Railways segment, it is looking at increased order inflows in FY23.

Operations backed by integrated business model; earned early completion bonus of INR4.3b since inception

* GRIL operates with an integrated business model, which allows a) efficient designing b) reduction of pilferage, equipment downtime, and inefficiencies in the supply chain and c) cost control, better-quality management, and timely delivery. This has been possible due to its in-house teams, in-house manufacturing facilities, and own equipment base.

* Since inception, the Company has been demonstrating its efficient execution capabilities by completing several projects before time and has earned INR4.3b as early completion bonus over the period.

Focus on ESG initiatives

* The management is focused on minimizing its environmental footprint by prudent use of resources such as fuel, electricity, water, and raw materials. GRIL is consciously trying to increase dependence on renewable energy sources.

* The Company has been consistently investing in education, environment sustainability, economic empowerment, rural development, health care and sanitation.

* The Board comprises an appropriate balance of knowledge, skills, experience, diversity, and independence to objectively and effectively discharge its governance roles and responsibilities. 50% of the board consists of Independent Directors and it also includes one woman director.

Valuation and view

* Order inflows during the last quarter of FY22 have pumped up the order book (currently stands at ~INR170b excluding L1), placing the Company in a comfortable position.

* The entry into newer segments such as power T&D enhances the potential market opportunity for the Company. Execution of asset monetization strategy through the InVIT route could further boost its growth prospects.

* With the current order book and robust tender pipeline, we expect GRIL to clock 12% revenue growth over FY22-24, with the EBITDA margin ranging between 16 and 18%. We retain our BUY rating with a TP of INR1,630 based on an SoTP valuation.

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