Bharat Road Network IPO – Should you Invest in this IPO?

Bharat Road Network IPO - Should you Invest in this IPOBharat Road Network IPO Review


SREI group owned, Bharat Road Network IPO would open for subscription on 6th September, 2017. Bharat Road Network Ltd is one of the leading road BOT company in India. Its revenues grew at 49% CAGR in last 5 years. It incurred losses in the last 5 years. Such loss making companies are coming for IPO and trying to attract investors. Are there any positive factors of investing in this IPO? What are the hidden factors in Bharat Road Network IPO? Is Bharat Road Network IPO Price is reasonably priced? In this article, I would provide some interesting insights and do Bharat Road Network Limited IPO Review. Pls read complete article before you take investment decision in this IPO.

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About Bharat Road Network Ltd


Bharat Road Network is part of SREI Group. Bharat Road Network Ltd is incorporated in 2006 and they are a road BOT company in India, focused on development, implementation, operation and maintenance of roads/highways projects. They are 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 its Subsidiary or in partnership with other infrastructure players.

Bharat Road Network IPO Issue details


  • IPO open date: 6-September-2017
  • IPO close date: 8-September-2017
  • Face Value: Rs 10 per share
  • Issue price band: Rs  195 to Rs 205  per share
  • Issue size: Rs  600 Crores on higher price band
  • Bharat Road Network IPO Lot size: 73 shares and in multiples of 73 shares
  • Minimum investment: Rs 14,965 on higher price band
  • Leading Managers: INGA Capital and Investec Capital Services
  • Listing: BSE / NSE
  • Download Bharat Road Network IPO RHP Prospectus at this link.

Objects of the Bharat Road Network Ltd IPO issue


Company proposes to utilise the funds which are being raised through the Issue towards funding the following objects:

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.

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Company Financials (Consolidated reinstated)


1) The company generated revenue of Rs 3.05 Crores for the year ended Mar-13 and Rs 14.9 Crores for the year ended Mar-17.  

2) The company posted a loss of Rs 16.8 Crores for the year ended Mar-13 and loss of Rs 73.8 Crores for the year ended Mar-17.

3) Since it incurred losses, EPS is negative in the last 5 years.

Consolidated Financial Summary of Bharat Road Network IPO

Company Financials (Standalone reinstated)


1) The company generated revenue of Rs 3.05 Crores for the year ended Mar-13 and Rs 20.1 Crores for the year ended Mar-17. 

2) The company posted a loss of Rs 16.6 Crores for the year ended Mar-13 and loss of Rs 30.7 Crores for the year ended Mar-17.

3) Since it incurred losses, EPS is negative in the last 5 years.

Reasons to invest in Bharat Road Network IPO


1) Its posted strong revenue growth in the last 5 years. Its consolidated revenues grew at 49% CAGR in last 5 years. Its standalone revenues grew at 60% CAGR in last 5 years.

Risk Factors / Reasons not to invest in a Bharat Road Network Ltd IPO


  • Its been incurring losses in the last 5 years. Investors would not get anything as there are no profits.
  • There are various outstanding litigations involving its Company, its Directors, its Promoters, its Subsidiaries and Associates, which if determined against us, may adversely, affect its business.
  • They had negative net cash flows from operating activities, investing activities, financing activities and restated losses in the past and may continue to have negative net cash flows and losses in the future.
  • They have reported losses in the past and cannot assure that they would be able to achieve profitability in the future. If they continue to incur losses, the results of its operations and financial condition may be materially and adversely affected.
  • Delays in the achieving financial closure for its future projects or delays in completion of construction of current and future projects could lead to termination of the concession agreements or cost overruns, which could have an adverse effect on its cash flows, business, results of operations and financial condition.
  • Its business depends on its ability to successfully bid for or acquire projects. its inability to successfully bid for or acquire projects could have an adverse effect on the growth of its business.
  • Any reduction or suspension of toll collection in relation to its BOT Projects may adversely affect its profitability cash flows and results of operations.
  • Its business is significantly dependent on various Government entities and could be adversely affected if there are adverse changes in the policies adopted by such Government entities.
  • Its ability to negotiate the standard form of concession agreement may be limited, and the concession agreements contain certain other restrictive terms and conditions which may be subject to varying interpretations.
  • Other risk factors (Internal and external) can be viewed in the draft prospectus.

What does other brokers commenting about this IPO?


VCCircle says Bharat Road Network Ltd IPO is looking at valuation overkill in its IPO.

Several leading experts in the stock markets indicate that IPO price is very very high.

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Recommendation / Investment strategy – Bharat Road Network IPO


1) Company is asking for an issue price band of Rs 195 to Rs 205. Since the company is not earning profits, the P/E price cannot be compared with its peer to check whether the issue price is over priced or under priced.

2) Company revenues grew at 49% CAGR in last 5 years. However it incurred losses in the last 5 years. Company expects to get into profits in the long term. Investors would not get anything in the short term to medium term in terms of dividends. I would advice investors to stay away from such IPO’s where there is nothing left for investors.

Disclaimer: I do not have an 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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Suresh

Bharat Road Network IPO – Should you Invest in this IPO

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