Bharat Road Network IPO sails through, subscribed 1.06 times on Day 3

The Srei Infrastructure Finance-led firm is offering shares in Rs 195-205 price range. NSEBSESREI InfrastructureLoading data…

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          ChartsValuation & Peer ComparisonCommunity BuzzPEER COMPANIESAshoka BuildconEXPAND TO VIEW ALL NEW DELHI: The IPO of Bharat Road Network got fully subscribed on Day 3 of the bidding process on Friday.

          According to BSE and NSE data, the issue saw bids for 3.10 crore shares, which was 1.06 times the issue size of 2.93 crore shares on offer.

          The Srei Infrastructure Finance-led firm is offering shares in Rs 195-205 price range.

          The issue constitutes 34.90 per cent of the post issue paid-up equity share capital of the company.

          The company intends to utilise the net proceeds from the issue towards advancing of subordinate debt in form of interest free unsecured loan to its subsidiary, STPL, for part financing of the STPL Project among others.

          The IPO will close on September 8. Analysts are neutral to negative on the issue, given that valuations do not offer much on table when compared with listed peers such as Sadbhav Infra, Ashoka Buildcon and IRB Infrastructure Developers.

          Angel Broking noted that the company manages over Rs 6,685 crore of road assets including five operating projects and one under construction project aggregating to 2,095 lane km, with average residual life of approximately 18 years and 6 months.

          The broking firm noted that the company is presented only in Build–operate–transfer (BOT) project segment and lack of presence in the engineering, procurement & construction (EPC) segment makes its highly dependent on the traffic growth and price increase for improving its profitability.

          «Though BRNL’s projects are spread across India, the past track record of the numbers doesn’t give enough confidence about sharp improvement in the near term. At the issue price band, the stock is offered at 2.6 times its pre-issue BV and 1.5-1.6 times its diluted BV. Even established players like IRB, with strong portfolios are trading at similar valuations and hence, we believe the issue price leaves limited scope for further appreciation,” the brokerage said.

          Centrum Broking has ‘avoid’ rating on the issue. It noted that the company is loss-making and valuations could not be comparable to peers like IRB Infrastructure Developers, Sadbhav Infrastructure Project, Ashoka Buildcon.

          «Fluctuation in the financial performance (loss making company with stretched working capital cycle) remains a concern for us. The government’s focus on improving infrastructure investments has resulted in many structural reforms, leading to the road sector coming back into focus. The conversion of the benefits of these opportunities into financial numbers is expected to be prolonged,» the brokerage said.

          Even though the current IPO market has been witnessing a bullish sentiment, we suggest investors to avoid the issue as we expect weak financial performance to persist in the near term, it said.

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