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Robust order book gives strong revenue visibility

G R Infraprojects (GR Infra) has grown exponentially over the last 2 decades and is currently an established EPC player, particularly in the road construction space. As at the end of March 2021, it is sitting on a robust order book of ~Rs.190 bn with book to bill ratio of 2.6x to its FY21 revenue. This gives a good revenue visibility for the coming years. The company as on 31st March 2021, has one operational BOT (annuity) project and 14 road projects under HAM. Of the 14 projects, 5 projects are currently operational, 4 projects are under construction and construction is yet to commence on 5 projects. The company has also bid for projects in Metros & High‐speed rail and wants to further diversify by wining projects in these segments.

Integrated business model ensures timely execution

GR Infra has a strong integrated business model. As on 31st March 2021, GR Infra’s equipment base comprised of over 7,000 construction equipment and vehicles. Its inhouse integrated model reduces dependence on third party suppliers for key raw materials, construction equipment and other products and services required in the development and construction of its projects. It has also set up a central procurement team that procures major materials and engineering items required for its projects. As part of its in‐house integrated model, it has developed inhouse resources with key competencies to deliver a project from conceptualization to completion. It has inhouse design and engineering team, three manufacturing units at Rajasthan, Assam and Uttar Pradesh for processing bitumen, thermoplastic road‐marking paint & road signage and a fabrication & galvanization unit at Gujarat for manufacturing metal crash barriers and electric poles. Its integrated business model facilitates execution of projects within scheduled timelines

Well placed with ready monetizable assets & low leveraging

The total investment done by the company as of March 2021 in all its operational and under construction BOT & HAM projects was Rs.13.0 bn and balance to be done is Rs. 12.0 bn. The company expects to achieve the balance investment from internal accruals but if there is a need of excess capital it has operational 1 BOT (Annuity) and 5 HAM projects which it can monetize. The company also has very low debt with net debt to equity of 0.2x. Hence, the company is well placed to meet its funds requirement for growth with low debt and ready monetizable assets.

Valuation gives scope for upside, recommend subscribe

Assuming a 15% PAT CAGR over FY21‐FY23E (on standalone basis) the issue at its upper price band is valued at ~7x to its FY23E EPS (adjusted for investment in HAM projects). This is at an attractive valuation as compared to peers, hence we assign a Subscribe rating to the issue.

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