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Focused road EPC player

G R Infraprojects Ltd (GRIL) is an integrated road engineering, procurement and construction (EPC) company with experience in design and construction of various road/highway projects across 15 States in India and having recently diversified into projects in the railway sector. Incorporated in 1995, GRIL’s principal business operations are broadly divided into (i) civil construction activities, providing EPC services; (ii) development of roads, highways on a Build Operate Transfer (BOT) basis, including under annuity and Hybrid Annuity Model (HAM); and (iii) manufacturing activities.

* Spending on road construction is forecast to increase 1.6x over FY21-25, due to the government's focus on roads, and state and national highways.

* In FY21, GRIL Order Book remains robust at Rs.19,026cr (87% with NHAI) which is 2.4x FY21 revenue, provides revenue visibility for the next 2 to 3 years.

* The order book comprised of 16 EPC projects,10 HAM projects and 3 other projects.

* As of date, it has 1 operational road project on a BOT (annuity) basis and 14 road projects under the HAM, out of which 5 projects are currently operational, 4 projects are under construction and construction is yet to commence on 5.

* GRIL invested Rs.1,300cr in the HAM projects and will invest Rs.1,200cr in the next two to three years through internal accruals or will raise equity in the secondary market.

* GRIL’s total income and profit grew at a CAGR of 21.8% and 15.3%, respectively, between FY 19 to FY21, mainly on account of a healthy order book.

* GRIL saw highest increase in EBITDA over a period of 5-years from FY15 to FY20 at a CAGR of 63% among key EPC players.

* GRIL has EBITDA margin of 23.6%, led by superior execution capabilities & backward integration and PAT Margin of 12.2% in FY21.

* In FY21, the company's standalone debt is at Rs.13.5bn with a debt to equity of 0.3x, while consolidated D/E is 1.2x.

* At the upper price band of Rs.837, GRIL is available at PE of 8.5x (FY21) which appears reasonably priced compared to peers. We assign a Subscribe rating, with a long term perspective as growth in order book, pick up in execution, diversification to other sectors like railways provides visibility for future growth.

Purpose of IPO

The offer comprises of offer for sale by the selling shareholders. The proceeds of the offer for sale shall be received by the selling shareholders. The object of the offer is to achieve the benefits of listing the Equity Shares on the Stock Exchanges.

Key Risks

* Primarily dependent on road projects and derive majority of revenues from contracts with a limited number of government entities.

* Project portfolio concentrated in the northern States of India.

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