Recently listed GR Infraprojects is down over 50 per cent from its all-time high of ₹2,158 it touched in October 2021 (IPO offer price was ₹837). It touched its 52-week low in end-March this year and is hovering around those levels. In the last year, the stock has been beaten down predominantly due to bribery charges of ₹4 lakh to NHAI officials the company faced in June 2022.  However, the company has recently seen good order inflows.

Business 

The company started in 1995 as an integrated road engineering, procurement, and construction (EPC) player with experience in design and construction of road/highway projects. It has presence in 19 States in the country and undertakes projects in Railways and power transmission in addition to the road projects.  

The orderbook as on December 31, 2022, was ₹14,073.36 crore with 92 per cent orders flowing from NHAI, 2 per cent from Rural Electrification Corporation, 2 per cent from Rail Vikas Nigam and the balance from others. Although the company started as an EPC player, the orderbook now is dominated by HAM (Hybrid Annuity Model) projects, which account for 87 per cent of total orderbook. The increased share of HAM projects is expected to continue, as per the management. According to an HDFC Securities report, during FY23, HAM was the preferred mode of award by NHAI and 75 per cent of the awards were HAM, 21 per cent EPC and remaining through other modes.

The orderbook to bill ratio of the company (based on FY22 revenue) is 1.66 times which gives revenue visibility of around 1.5 years. In June 2022, the company was charged with bribing NHAI officials for clearing road project bills. This led to a month-long ban from bidding for projects in November 2022. The company has made legal representation in Guwahati court where the case has been filed and is still in progress.  However, the company is now eligible to bid for projects.

GR Infraprojects, in Q4 FY23, received order for four road projects worth ₹3,713 crore. It was also awarded with the project of developing Multi Modal Logistics Park (MMLP) Indore for ₹758.1 crore and an EPC tunnel project worth ₹587.59 crore.

The company had given an order inflow guidance of ₹15,000 crore for FY23 and as per BSE filings has bagged orders worth close to ₹5,889 crore. Since HAM projects require equity infusion from the contractor, the company needs to infuse ₹1,580 crore over the next 2-2.5 years, which translates to ₹600-700 crore per year.

Therefore, the company has decided to launch its own InvIT called Bharat Highways InvIT and has also filed a draft offer document with SEBI. The benefit of an InvIT is that it allows to monetise the projects of the company and thus free capital for fresh projects. However, Budget 2023 has made the distributions from InvITs i.e., the repayment of capital/principal, taxable as income from other source. This may make the InvITs less attractive among investors, though.

Financials

The company reported a revenue of ₹7,020.9 crore for 9 months FY23, which is 15.8 per cent high YoY. EBITDA for 9 months FY23 is ₹1,883 crore — 53 per cent higher YoY and the PAT for the same period ₹1064.7 crore whereas it was ₹555.35 crore for the same period previous year. EBITDA margin for 9months FY23 was 26.82 per cent, which is 6.58 percentage points higher than previous period. Similarly, the PAT margin was 15 per cent for 9months FY23, which is 6 percentage points higher than the previous period.

The consolidated debt is ₹5,650 crore, and the debt-to-equity ratio is 1.17.. Generally, companies with HAM-heavy orderbook tend to face pressures when the interest rate cycle turns upwards. GR Infraprojects states that the increased interest cost is being taken care of by the NHAI through increased disbursal amounts. The company’s debt levels, and interest costs need to be monitored. It has a cash and bank balance of ₹885.5 crore. The working capital days declined to 82 in December 2022 quarter from 85 days in the September quarter.

GR Infraprojects is currently trading at a trailing PE of 7.18x as against peers like KNR Constructions (15.7x) and PNC Infratech (9.6x).

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