Sadbhav Infrastructure Project IPO – Should you invest?

Sadbhav Infrastructure Project IPOSadbhav Infrastructure Project IPO – Should you invest?

Ahmedabad based, Sadbhav Infrastructure Project IPO will open for subscription on 31st August, 2015. Sadbhav Infrastructure Project Limited is leading road BOT companies in India. Its revenues increased by 5 times in last 4 years. What are the positive factors of Sadbhav Infrastructure Project IPO? What are the hidden factors of Sadbhav Infrastructure Project Ltd IPO? Why should you ignore such IPO’s as of now?

About Sadbhav Infrastructure Project Limited

Sadbhav Infrastructure Project Limited one of the leading road BOT companies in India that specialises in the development, operation and maintenance of highways, roads and related projects. (Source: CRISIL Report, dated October, 2014 as amended on August 4, 2015) The Company, a subsidiary of Sadbhav Engineering Limited, was incorporated in 2007 as a developer and operator for highways, road and related projects on a BOT basis. All of their projects are implemented and held through special purpose vehicles, including joint venture entities.

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They are pre-qualified on an annual basis to bid either directly or through joint ventures for DBFOT projects, subject to certain eligibility criteria, of project values up to Rs. 26,500.00 million by the NHAI up to December 31, 2015. They are involved in the development, operation and maintenance of national and state highways and roads in several states in India including Maharashtra, Gujarat, Rajasthan, Karnataka, Haryana, Madhya Pradesh and Telangana and border check posts in the state of Maharashtra.

They have a project portfolio consisting of ten BOT projects of which six road projects are fully operational, one is the partially operational border check posts and the remaining three projects are in various stages of development. Nine of the ten BOT projects are toll projects (including user fee for the border check posts in Maharashtra), while the remaining one is an annuity project. Their operational projects cover approximately 1,531.16 lane kms and the projects under development cover approximately 1,061.48 lane kms. In addition, as of May 31, 2015, our Subsidiary MBCPNL completed 13 check posts and is developing 9 more check posts for their MBCPNL Project.

Issue details of Sadbhav Infrastructure Project IPO

  • IPO opens: 31-Aug-2015
  • IPO closes: 2-Sep-2015
  • Face Value: Rs 10 per share
  • Issue price band: Rs 100 to Rs 103 per share
  • Minimum Shares: 145 shares
  • Minimum amount: Rs 14,500 at lower price band
  • Issue size: Rs 425 Crores
  • Lead Managers: Edelweiss Financial Services Ltd, Kotak Mahindra Capital Company Limited,  Inga Capital Private Limited,  ICICI Securities Limited
  • and Macquarie Capital Securities (India) Pvt. Ltd.
  • Listing: BSE and NSE
  • Download Sadbhav Infrastructure Project Limited IPO Prospectus at this link

Purpose of the IPO:

a) Offer for Sale

The Selling Shareholders will be entitled to the proceeds of the Offer for Sale net of their proportion of Issue related expenses. The Company will not receive any proceeds from the Offer for Sale. Other than the listing fees which shall be borne by the Company, the expenses in relation to the Issue will be borne by the Company and the Selling Shareholders in proportion to the Equity Shares contributed to the Issue.

b) Fresh Issue

The Company proposes to utilise the Net Proceeds from the Fresh Issue towards funding of the following objects:

1. Repayment/pre-payment, in full or part, of certain loans availed by the Company from ICICI Bank Limited and SEL, their corporate Promoter;

2. Equity investment and advancing of sub-ordinate debt to its subsidiary, SUTPL, for part financing of the SUTPL Project; and

3. General corporate purposes.

Company Financials (restated consolidated)

  • Company generated revenue of Rs 896.65 Millions for the year ended Mar-11 and Rs 5,280.49 Millions for the year ended Mar-15 indicating a CAGR of 56%.
  • Company posted a Profit of Rs 98.84 Millions for the year ended Mar-11 and a Loss of Rs 3,015.61 Millions for the year ended Mar-15.  
  • Its diluted EPS for FY 2015 is minus Rs (9.74).

Sadbhav Infrastructure Project IPO-Financials

Reasons to invest Sadbhav Infrastructure Project IPO

  • Good revenue growth in last 4 years where its revenue increased by more than 5 times.
  • Company may get benefits of Governments massive spending on infra developments in coming years. However, one has to wait the progress of such developments.

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Reasons not to invest in Sadbhav Infrastructure Project IPO

  • Company has been incurring losses in last 3 years from FY 2013 to FY 2015.
  • Other risk factors (Internal and external) can be read in prospectus Page. SEBI website for this IPO prospectus has some problem to download, hence unable to provide complete negative factors. Would update as soon as it is up.

Recommendation / Investment strategy

  • Thought it is asking for Rs 100 to Rs 103 issue price, since it has negative EPS, we cannot ascertain the P/E Ratio.
  • Sadbhav Infrastructure Project revenues have been growing aggressively in last 4 years. However, company has been incurring huge losses in last 3 years. For such loss making company, an issue price of Rs 100 to Rs 103 is very very high. Investors should stay away from such IPO’s.

Please note that one of the Leading IPO portal shows that this company is generating profits after tax in last 3 years giving false impressions. The above table of revenue and losses are from Edelweiss which proves that company is incurring losses. Investors should read restated consolidated statements and be careful and should check prospectus from SEBI website before believing such false statements.

Disclaimer: I do not have interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.

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Sadbhav Infrastructure Project IPO


  • Rajiv

    Thanks Suresh for continuously bringing in these informative articles that help us in taking informed decisions. Can you also suggest a few of share to invest for long term purpose ….kind of new Infosys etc in making ? I understand that you may not like to directly speak in favor of any company but indicative ideas will be of immense help to passive investors like me in these uncertain times.
    New Delhi

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