BRNL IPO

Bharat Road Network Limited IPO (BRNL IPO), in which SREI Infrastructure Finance Ltd is a corporate promoter, is coming out with a fresh issue of 29.3 million shares and an Offer for sale which will result in a 34.9% stake dilution on a post-issue basis. At the upper end of the price band (Rs 195 – Rs 205), the IPO size works out to Rs 600.65 crore. The Kolkata based, Road developer BRNL is seeking a valuation of over 1,721 crore through the IPO issue that begins on September 6, 2017. BRNL which was incorporated in 2006, is engaged in road projects on build-operate-transfer (BOT) basis through special purpose vehicles (SPVs), either through its subsidiaries or in partnership with other infrastructure companies. Bharat Road Network Limited has entered into an agreement in Feb 2017, whereby all road and highway assets of SREI are to be managed by BRNL.

Comparison with Listed Peers
Rs. In Crore
Parameter/ScripBRNLAshoka BuildconIRB InfraSadbhav Infra 
Revenue (FY 17)10.252979.3558451348
Revenue Growth 1 yr-2.15%14.70%13.98%81.62%
Opearting Profit    
EBITDA6.8061014.923048.29924.09
EBIDTA%66.39%34.07%52.15%68.55%
Profit Bef Tax-36.734-46.4983.94-353.5
Restated Profit Aft Tax-73.885-9.65715.47-353.14
NPM %-720.76%-0.32%12.24%-26.20%
Equity54.6593.57351.45352.23
Book Value157.39115.241502.78
RONW %-17.19%-0.45%13.57%-360.81%
Face Value1051010
EPS-13.52-0.5220.36-10.03
Current Market Price205.00192.75217.75101.65
Price/ earning-15.16-373.8010.70 –
Price / Book Value1.301.671.4536.56
CAGR Revenue  3 yrs2.15%18.45%16.60%53.27%
Market Cap in Rs. Crore1120.333607.127652.823580.42
Market Cap/Sales109.291.211.312.66
About Bharat Road Network Limited

Incorporated in 2006, Bharat Road Network is a road and highways BOT company in India, focused on development, operation and maintenance of roads & highways projects. At present, all of its projects are implemented through special purpose vehicles, either through subsidiary or in partnership with other infrastructure players. BRNL project portfolio consisting of six (6) BOT Projects, of which two (2) are Projects operational under Final COD (Commercial Operation date), three (3) are Projects operational under Provisional COD and one (1) is a Project under Construction. ion and maintenance of roads & highways projects and has six road assets which as per the company are valued at around Rs 6,700 crore. 

About Ashok Buildcon:

 Ashoka Buildcon is amongst one of the largest highway developers in the country and is executing prestigious projects for the central as well as state governments. Ashoka Buildcon Ltd. is engaged in 2 business segments:

  1. Engineering Procurement and Construction (EPC) business for Roads and Power Distribution Projects
  2.  
  3. Development of roads and highways on Build, Operate and Transfer (BOT) through Ashoka Buildcon Ltd. as well as through subsidiary Ashoka Concessions Ltd. (66% stake)
Ashoka Buildcon is exclusive EPC and O&M contractor for all its group projects including that of Ashoka Concessions The Company has in house execution capabilities with owned construction equipment bank around Rs.2,700 Mn. The company has successfully executed ~ 1,275 (EPC) + ~ 3,765 DBFOT(Design, Build, Finance, Operate and Transfer ) Lane kms till date and currently executing another ~ 1,436 Lane kms. 
About IRB Infrastructure

IRB Infrastructure Developers Limited (“IRB”) incorporated in 1998, has strong in-house integrated execution capabilities and is One of the leading Infrastructure Development company in India in road and highway sector. The company has successfully executed numerous BOT projects in roads and highways sector, including improvement of National highways and sections of Golden Quadrilateral. The company has setup first Listed Infrastructure Investment Trust in India under the name “IRB InvIT Fund”.

The country’s first ever BOT project namely Thane Bhiwandi Bypass was executed by the Group. IRB Infra has one of the largest BOT portfolio in the country with total road length of around 11,828 Lane Kms as BOT operator. Out of this, portfolio of 3645Lane Kms has been transfered to IRB InvIT from May 9, 2017. IRB Infa holds market share of 18.79% on the Golden Quadrilateral and out of this, 7.15% has been transfer to IRB InvIT Fund.

About Sadbhav Infrastructure Project Ltd.

Sadbhav Infrastructure Project Ltd.(SIPL) was promoted by Sadbhav Engineering Limited (SEL) in 2007 to operate Road BOT projects for Sadbhav Group. It owns a project portfolio consisting of ten operational BOT projects, one partially operational project and seven Hybrid Annuity (HAM) projects under development. Besides this, acquisition of stake in Mysore Bellary Highway Project Limited (MBHPL) from SEL & JV partner is under process. Construction has begun for 3 HAM (hybrid annuity model) projects.

Sadbhav Infrastructure Project Ltd. has track record of completing nine out of ten operational projects on time or before scheduled date. SIPL enjoys benefit of an integrated structure with presence across the entire road sector value chain with strong finance, execution and toll collection and O&M capabilities.

Assessment:

  • BRNL reported a loss of Rs 29.32 crore on consolidated revenues (operations) of Rs 8.3 crore for the eight months ended 30 November 2016.
  • The IPO of Bharat Road Network Limited comprises a fresh issue of 29.3 million shares and will result in a 34.9% stake dilution on a post-issue basis. Thus its Post issue its current paid up equity capital of Rs. 54.65 crore will stand enhanced to Rs. 83.95 crore.
  • While Bharat Road Network Limited has also been making consistent losses., this could change as some of the company’s road projects are on the verge of completion
  • Company has been continuously posting net losses and consequently  it has carried forward losses. While the original shares were given at par, company in Nov, 2016  made a  preferential issue of  266.5 lac equity shares at a price of Rs. 205 per share in November 2016 which has shored up its books value and turned its networth +ve.
  • As evident from the Peer Anlysis, Bharat Road Network Limited IPO (BRNL  IPO) appears to be asking for a stiff price compared to the valuation enjoyed by its peers.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.