GR Infraprojects planning IPO to raise Rs400 crore
Motilal Oswal’s PE fund and IDFC Investment Advisors are looking to partially sell their stake through the public offer
Mumbai: GR Infraprojects Ltd is planning to raise around Rs.400 crore through an initial public offering (IPO) to fund its growth and provide exit route to some investors, according to two people aware of the development.
“The firm has been meeting several bankers to discuss its plans for an IPO, and they have recently appointed three to four investment banks to manage the process,” said one of the two people cited above, requesting anonymity.
The Delhi-based infrastructure firm is involved in engineering, procurement and construction (EPC) services for highways, flyovers, bridges, buildings, air-field development, road upgradation, etc.
Private equity (PE) investors Motilal Oswal Private Equity’s India Business Excellence Fund and IDFC Investment Advisors are looking to partially sell their holdings through the IPO, said the person adding that the company will look to sell shares to the public in the next financial year.
“They have recently won some good projects from the National Highways Authority of India and have a significant portfolio of ongoing projects. This year itself, they have won orders worth over Rs.2,000 crore,” said the second person cited above, also requesting anonymity.
GR Infraprojects has about 1,887 lane km of NHAI projects under development, according to the company’s website.
Collectively, these projects are worth over Rs.3,000 crore.
“Most of the infrastructure firms are debt-laden, and road is probably the only space in the broader infrastructure sector where some progress has been seen in the last 12 months. Hence, road companies are keen to tap the markets to raise funds, which will help them in taking up new projects that are coming up for bidding,” said the second person mentioned above.
However, not every road company will be able to raise capital, the second person said adding that investors will be selective.
“Investors are preferring EPC over BOT (build, operate, transfer). The number of players bidding for the EPC projects have reduced, and that will result in better margins for these firms. In the BOT space, investors are keen to invest only in companies where majority of the projects in the portfolio are completed,” he said.
A road EPC contract involves all services required to construct a road project but does not include ownership of the asset, post construction.
A road BOT contract, on the other hand, involves construction and ownership of the asset for a predetermined period.
GR Infraprojects is in discussions with investment banks, and will take a decision regarding the IPO only after getting approval from its investors, said Vinod Agarwal, managing director at the firm.
IDFC Investment Advisors and Motilal Oswal Private Equity declined comment for the story.
In 2011, Motilal Oswal Private Equity’s India Business Excellence Fund and Hybrid Infrastructure Portfolio, managed by IDFC Investment Advisors, invested Rs.80 crore to acquire a minority stake in the company.
According to the firm’s filings with the Registrar of Companies, India Business Excellence Fund and IDFC Investment Advisors hold 9.9% and 5.9% stake in GR Infraprojects, respectively.
GR Infraprojects’ revenue declined 10% to Rs.773.58 crore in the year ended 31 March 2014 from Rs.861.92 crore in the previous fiscal. Net profit fell 32% to Rs.35.97 crore from Rs.53.32 crore.
Three road companies—Sadbhav Infrastructure Project Ltd, PNC Infratech and MEP Infrastructure Developers Ltd—have raised funds through IPOs this year.
“As compared to other spaces within the infrastructure sector, we have seen road companies come with IPOs, as the road sector has a more clear roadmap. There is relatively more clarity in terms of the number of projects that will come up for bidding, thus giving investors a fair idea of the scope for growth in order books,” said Vishwas Udgirkar, senior director at consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd.
For investors looking to invest in road IPOs, diversification of the company’s portfolio, in terms of the number and nature of clients and geographic diversification of projects are key parameters, he added.
Since the start of the year, 31 firms have filed their draft IPO papers with the Securities and Exchange Board of India (Sebi).
So far this year, 15 firms have raised Rs.6,348 crore through public offers, according to data from Prime Database.
This is already more than the entire sum raised in the last two years. In 2014, five firms raised Rs.1,201 crore through IPOs. In 2013, three firms had raised Rs.1,284 crore.