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Salient features of the IPO:

* G R Infraprojects Ltd. an integrated EPC focused player, is planning to raise up to Rs. 963cr through an IPO, which opens on 7th Jul. and closes on 9th Jul. 2021. The price band is Rs. 828 - 837 per share.

*  The issue is OFS only. Thus company will not receive any proceeds from the issue.

 * One of the investors i.e. India Business Excellence Fund (a private equity fund from Motilal Oswal) is fully offloading its 9.9% stake through the OFS route.

Key competitive strengths:

* Focused EPC player with road projects focus

* Established track record of timely execution

* In-house integrated model

* Strong financial performance and credit rating

* Experienced promoters with strong management team

Risk and concerns:

* Unfavorable government policies 

* Volatility in key raw material prices

* Sustainability of the profit margins

* Rise in interest rates

* Competition

Peer comparison and valuation:

At higher price band of Rs. 837, GR Infra is demanding a P/E multiple of 8.5x (to its FY21 earnings of Rs. 98.6 per share), which is at discount to the peer average. Thus the issue seems to be attractively priced.

Below are a few key observations of the issue:

* Among the EPC players, GR Infra was the fastest growing company with an operating income growth of 47% CAGR over FY15-20. Moreover, in terms of profitability, it reported highest growth in EBITDA and reported PAT among the EPC players (Source: RHP).

* GR Infra is an integrated road EPC company with experience in design and construction of various road/highway projects across 15 States in India. Recently, the company diversified into railway sector projects. Its principal business operations includes civil construction activities under EPC services; development of roads, highways under BOT & HAM mode; processing of bitumen, manufacturing of thermoplastic road-marking paint, electric poles & road signage and fabrication & galvanization of metal crash barriers. It has over 25 years of experience and has executed more than 100 road construction projects since 2006.

* As of 31st Mar. 2021, the company had an order book of Rs. 19,026cr, which is around 2.7x of the construction services income. The order book comprising of 16 road EPC projects, 10 HAM projects and three other projects, spanned across the states of Uttar Pradesh, Madhya Pradesh, Maharashtra, Gujarat, Chhattisgarh, Rajasthan, Andhra Pradesh, Bihar, Manipur, Odisha, Himachal Pradesh, West Bengal, Andaman & Nicobar Islands, Jharkhand and Sikkim. Further orders from NHAI constituted around 87.2% of the order book.

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