News Analysis

G R Infraprojects: Impressive listing gains

Maulik Madhu BL Research Bureau | Updated on July 19, 2021

The stock is now trading in line with valuation of peers

G R Infraprojects (G R Infra), a Gujarat-based integrated EPC player focussed on road and highway construction projects, listed at around ₹1,700 today, more than doubling from the issue price of ₹837. At the time of writing this, the stock had extended the listing gains and was trading at ₹1,777 — a gain of around 112 per cent from its IPO price.

The company came out with an IPO on July 7, 2021.The issue was oversubscribed 168.6 times by qualified institutional buyers (QIB) and 12.6 times by retail investors. Overall, the issue was oversubscribed 102.6 times.

Why you can subscribe to G R Infraprojects IPO

At the issue price of ₹837, the G R Infra stock was priced at a reasonable 8.5 times its FY21 earnings. This was significantly below the stock valuation of the relatively less leveraged infrastructure peers such as KNR Construction and PNC Infratech. G R Infra’s EBITDA (earnings before interest and tax) and net profit margins are at par with those of KNR Construction and higher than those of PNR Infratech.

At the latest market price of ₹1,777, G R Infra discounts its FY21 earnings by 18 times, bringing its P/E multiple close to the 16-18 times of its peers.

Good order book

G R Infratech’s has a strong order book and debt-to-equity ratio of just under 1 time as of March-end 2021 and high profit margins of 24-25 per cent during FY19 to FY21. We had recommended a buy for the IPO given its reasonable valuation, strong order book and prospects for the industry. Investors with a high risk appetite can continue holding the stock despite the impressive listing gains.

478 infrastructure projects show cost overruns worth Rs 4.4 lakh crore

G R Infraprojects had an order book of ₹19,026 crore as of March-end 2021. This translates into an order book to sales ratio of 2.4 times, providing revenue visibility for the next couple of years. The ratio was 2.6 times in FY20. The company’s timely execution record over the past three years too lends some comfort. In FY19, G R Infraprojects completed 80 per cent of its projects before the scheduled date.

NHAI’s plan to award ₹2.25 lakh crore of projects in FY 2022 (up from ₹1.7 lakh crore a year ago) and the Road Ministry’s target to award projects worth ₹15 lakh crore projects in the next two years, too bode well for road construction companies.

Published on July 19, 2021

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