Bharat Road Network IPO review (Avoid)

Review By Dilip Davda on Aug 30, 2017

Bharat Road Network Ltd (BRNL) a road sector infra arm of SREI group is a road BOT company in India, focused on development, implementation, operation and maintenance of roads/highways projects. It is involved in the development, operation and maintenance of national and state highways in several states in India with projects in states of Uttar Pradesh, Kerala, Haryana, Madhya Pradesh, Maharashtra and Odisha through partnerships with experienced EPC players in the local space where the project is located. At present, all of its projects are implemented through special purpose vehicles, either through Subsidiary or in partnership with other infrastructure players.

BRNL perform a range of project management functions, including design, engineering, EPC management and quality control. It also provides project advisory activities including, project management consultancy, project conceptualization, commissioning, operation and management of the projects during the entire life cycle of its projects. BRNL also undertakes debt syndication, refinancing and financial restructuring of its projects. Currently it has a project portfolio consisting of six (6) BOT Projects, of which two (2) are Projects operational under Final COD, three (3) are Projects operational under Provisional COD and one (1) is a Project under Construction. Its Projects operational under Final COD and Projects operational under Provisional COD are located in the states of Kerala, Madhya Pradesh, and Haryana, Uttar Pradesh and Odisha, respectively. BRNL’s Project under Construction is located in the state of Maharashtra. Its Projects operational under Final COD and Projects operational under Provisional COD cover approximately 1,622.44 lane kms, including major and minor bridges and approximately 12 lane kms and 60.72 lane kms are under construction at the GAEPL Project and SJEPL Project, respectively for which the company is awaiting final COD. Company’s Project under Construction involves development of 400.24 lane kms, including major and minor bridges. Further, as of March 31, 2017, the average residual Concession Period of its BOT Projects (based on concession agreements as of March 31, 2017) was approximately 18 years and six (6) months in comparison with average debt maturity profile of approximately 10 years, as on March 31, 2017.

To part finance its (1) Advancing of subordinate debt in form of interest free unsecured loan to its Subsidiary, STPL, for part financing of the STPL Project (“STPL Sponsor Investment”); (2) Acquisition of the subordinated debt in the form of unsecured loans/OCPIDs/warrants/OCDs, advanced/held by SREI to/in STPL, KEPL and MTPL (“Identified SPVs”); and (3) General corporate purposes funding needs the company is coming out with a maiden IPO of 29300000 equity shares of Rs. 10 each via book building route to mobilize Rs. 571.35 cr. to Rs. 600.65 cr. (based on lower and upper price bands). Price band of the issue is Rs. 195-205 per share. It opens for subscription on 06.09.17 and will close on 08.09.17. Minimum application is to be made for 73 shares and in multiples thereon, thereafter. Post allotments, shares will be listed on BSE and NSE. BRLMs to this issue are Inga Capital Pvt. Ltd., Investec Capital Services (India) Pvt. Ltd. and SREI Capital Markets Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 34.90% of the post issue paid up capital of the company. Issue has reservation of 75% for QIBs, 15% for HNIs and 10% for retail investors. Since incorporation till October 2016 it issued equity shares as par and raised further equity by issuing 26650000 equity shares at a price of Rs. 205 per share in November 2016. This issue helped company in showing positive net worth with premium collected. Post issue its current paid up equity capital of Rs. 54.65 crore will stand enhanced to Rs. 83.95 crore.

On performance front, BRNL has (on a consolidated basis) reported turnover and losses of Rs. 41.49 cr. / Rs. – (8.38 ) cr. (FY15), Rs. 4.25 cr. / Rs. – (49.84) cr. (FY16) and Rs. 14.93 cr. / Rs. – (36.74) cr. (FY17). It has posted inconsistency in top and bottom lines for all these years. Company has been incurring losses and has carried forward losses too. However, premium collected in preferential issue to promoters in November 2016 has helped company to show positive net worth as on 31.03.17. It has posted average negative EPS of (Rs. 22.13) and (Rs. 48.51) on standalone and consolidated basis for last three fiscals. Average RoNW for last three financial years stands at – (7.29%) and – (159.46%) on standalone and consolidated basis. With the help of premium on preferential issue made in November 2016, it’s NAV as on 31.03.17 stood at Rs. 77.17 (standalone) and Rs. 78.64 (consolidated). Thus asking price has a negative P/E which is not measurable.

On BRLMs front, Inga Capital Pvt. Ltd., one of the BRLMs, associated with the issue has handled 3 public issues n the past 3 years, out of which 1 issue closed below the issue price on listing date. Investec Capital Services (India) Pvt. Ltd. and SREI Capital Markets Ltd, other BRLMs associated with the issue have not handled any public issues of equity shares in the past 3 years.

Conclusion: Company has carried forward losses that will take time for wiping off. Hence there is no harm in giving this IPO a miss.


Conclusion / Investment Strategy

Company has carried forward losses that will take time for wiping off. Hence there is no harm in giving this IPO a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Aug 30, 2017

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Bharat Road Network IPO FAQs

  1. 1. Why Bharat Road Network IPO?

    The initial public offer (IPO) of Bharat Road Network Limited offers an early investment opportunity in Bharat Road Network Limited. A stock market investor can buy Bharat Road Network IPO shares by applying in IPO before Bharat Road Network Limited shares get listed at the stock exchanges. An investor could invest in Bharat Road Network IPO for short term listing gain or a long term.

  2. 2. How is Bharat Road Network IPO?

    Read the Bharat Road Network IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Bharat Road Network IPO what should investors do?

    Bharat Road Network IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Bharat Road Network IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Bharat Road Network IPO good?

    Our recommendation for Bharat Road Network IPO is to avoid.

  5. 5. Is Bharat Road Network IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Bharat Road Network IPO.

  6. 6. When will Bharat Road Network IPO allotment status?

    The Bharat Road Network IPO allotment status will be available on or around Sep 13, 2017. The allotted shares will be credited in demat account by Sep 14, 2017. Visit Bharat Road Network IPO allotment status to check.

  7. 7. When will Bharat Road Network IPO list?

    The Bharat Road Network IPO will list on Monday, September 18, 2017, at BSE, NSE.

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