Despite "avoid" rating, Bharat Road get fully subscribed on last day of IPO

On the last day of issue, the initial public offer (IPO) of Bharat Road Network got fully subscribed, as showed by NSE data. 

By 1258 hours, the issue was 118% oversubscribed. The IPO received bids 3,44,77,608 equity shares. With this IPO, the company has planned to raise nearly Rs 600 crore with the public issue of 2.93 crore equity shares. 

For the IPO, the company has set price band in the range of Rs 195-205 per share. Post IPO, promoter and promoter group’s stake would be reduced to 65.1%. 

INGA Capital, Investec Capital Services and Srei Capital Markets are managing the IPO.

The objective of this issue, out of Rs 600 crore, to utilise Rs 372 crore in funding working capital requirements, Rs 51 crore for advancing of sub-debt to STPL project and Rs 177 crore towards general corporate purposes. 

The build-operate-transfer (BOT) company has a forte in highway and road construction. BRNL develops, implements, operates, and maintains road and highway projects. 

The company has several national and state highway projects in states such as Uttar Pradesh, Kerala, Haryana, Madhya Pradesh, Maharashtra, and Odisha through partnerships with experienced EPC players in the local space where projects are located. 

Before the beginning of the IPO, the anaylysts had given "Avoid" rating as due to operational inefficiency, BRNL is in loss since five years with heavy debt. 

Vrinda Aditya, Analysts at Asit C. Mehta in an IPO note said, "Business has grown at a CAGR of 37% during FY13-17. For FY17, the company’s revenue was Rs.149.28mn. Due to operational inefficiency, BRNL is in loss since 5 years with heavy debt. Therefore, the asking price has a negative P/E, which is not measurable. We recommend to ‘AVOID’ the issue."