Bharat Road Networks (BHARAT IN) (BRNL) is wanting to bring around US$100m up in its up and coming IPO. Continues will be for the most part used to pay down debts and financing the working capital of the organization.
BRNL is a Road Build-Operate-Transfer (BOT) organization in India concentrated on improvement usage, operation, and upkeeping of Highways and roadways projects.The organization is an subsidiary of Srei Infrastructure Finance (SREI IN).
In this insight, we will analyses the assets that BRNL operates, the road development and operation industry, as well as regulation and problems that the company may face in the future. We will also compare the company against other India’s road development peers.
Issue Detail:
»» Issue Open: Sep 6, 2017 – Sep 8, 2017
»» Issue Type: Book Built Issue IPO
»» Issue Size: 29,300,000 Equity Shares of Rs 10 aggregating up to Rs 600.65 Cr
»» Face Value: Rs 10 Per Equity Share
»» Issue Price: Rs 195 – Rs 205 Per Equity Share
»» Market Lot: 73 Shares
»» Minimum Order Quantity: 73 Shares
»» Listing At: BSE, NSE
Initial Public Offer of Kolkata based Bharat Road Network Limited (BRNL) opens on 6 September and will close on 8 September. Evaluated in the scope of INR 195 – 205 for every offer, the offer of 29,300,000 offers is relied upon to raise INR 600.65 crore at the upper end of the value band. Supported by SREI Infrastructure Finance, BRNL is a Road BOT (Build Operate Transfer) organization in India. Speculators can put their offer for least 73 shares and in products from there on. As we plunge further in Bharat Road Network IPO survey, we will check whether it has better prospects. Here are some basic insights about the IPO.
Bharat Road Network IPO Review: All Fresh Equity
BRNL IPO will have no Offer For Sale (OFS) segment and it will be third such IPO this year after Avenue Supermarts and Salasar Techno Engineering. As specified over, the organization intends to issue 29,300,000 offers and raise anyplace between INR 571.35 crore and INR 600.65 crore. These assets will be utilized as a part of two fundamental exercises:
Progressing of subordinate debt in form of interest free unsecured loan to subsidiary, STPL, for part financing of the STPL (Solapur Tollways Private Limited) Project – 5 crore
Acquisition of the subordinated debt in the form of unsecured loans/OCPIDs/warrants/OCDs, progressed/held by SREI to/in STPL, KEPL (Kurukshetra Expressway Private Limited) and MTPL (Mahakaleshwar Tollways Private Limited) – 2 crore.
Bharat Road Network IPO Review: Build, Operate, Transfer
Bharat Road Network is carrying out development, implementation, operation and maintenance of roads/highways projects.The organization has an undertaking portfolio comprising of six BOT extends starting at now. Out of these, two are operational under definite COD while three are operational under temporary COD. These tasks are in ventures in conditions of Uttar Pradesh, Kerala, Haryana, Madhya Pradesh and Odisha through associations with experienced EPC players. One of the activities in Maharashtra is under development.
Bharat Road Network ordinarily claims under half stake in the Special Purpose Vehicles (SPVs) for executing the ventures. It is just in the under-development Solapur venture that BRNL claims the greater part stake (99%). Another subsidiary is Orissa Steel Expressway Private Limited (OSEPL) which is 59.38% claimed by BRNL. By and by, this venture is being abandoned because of deferral in giving over of the imperative land and the organization is recovering INR 830.48 crore for cost brought about, fund costs, overheads and loss of benefit up to 31 March 2017. There is no clearness when and the amount of the claim will be granted to the organization.
Bharat Road Network IPO Review: Financial Execution
There is little that BRNL brings to the table as far as financials. The organization had income of just INR 14.93 crore in the most recent financial year. On this income, the organization posted lost INR 73.88 crore. Truth be told, it has posted misfortunes in each of the most recent five years (this is one reason retail assignment in the IPO is restricted to 10%). As the majority of its undertakings fall into the classification of partner organizations, it is not shocking that solidified incomes are little and misfortunes wide.
While its core expenses are still less compared to revenues, finance costs are simply very high at INR 43.5 crore in FY2017. No wonder losses are so high for BRNL.
Bharat Road Network IPO Review: Should you Invest?
As we have seen so far, there is little motivating to invest in the company, its market dominance or financial performance. To be fair, road BOT is a capital intensive business and BRNL’s projects are yet to mature so financial performance should improve from here. Considering the fact that almost all IPO proceeds will go towards acquisition of debt of associates, this is especially true. Nevertheless, its total debt of INR 568.4 crore and the resulting debt equity ratio of 1.2 will not be completely paid off by IPO funds. Besides, the funds will be used to acquire and not retire debt, it will simply be a case of moving borrowings from the books of associates to BRNL. Bharat Road Network will become a creditor to the project SPVs and will enjoy interest payments as revenue but it is a zero sum game on a consolidated basis.
The corporate parentage of SREI Infrastructure is certain yet it is important that the organization has not included any new venture as of late. It was granted STPL venture in 2012 and has exclusively centered around execution from that point onward. In spite of this, the moderate development in incomes and disappointing budgetary execution isn’t certainty motivating.
Bharat Road Network has recorded IRB Infrastructure Developers Limited, Sadbhav Infrastructure Project Limited, and Ashoka Buildcon Limited as companions, there is no benchmarking conceivable as BRNL is negative on every monetary parameter. Among different elements, speculators should see its budgetary execution in accordance with winning financing costs. With loan costs having declined altogether, there is very little extent of reprieve on this front.
All things considered, Bharat Road Network IPO survey uncovers the organization has solid and experienced promoter and has capacity to mastermind funds for its ventures. In any case, the shortcoming in its money related execution is excessively evident and the standpoint doesn’t look especially positive.
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