HG Infra Engineering to list on BSE, NSE tomorrow

HG Infra Engineering, which has raised Rs 462 crore through initial public offer (IPO), will list its shares on stock exchanges on Friday. The equity shares will be listed on National Stock Exchange (NSE) as well as on BSE. This will be the sixth listing of the year after Aster DM Healthcare, which made its debut last month.

HG Infra's IPO opened for subscription during February 26-28, and was subscribed five times at a price band of Rs 263-270 per share. The IPO comprised fresh issue of shares aggregating up to Rs 300 crore besides an offer for sale (OFS) of up to 60 lakh scrips by two of its promoters.

Brokerage Prabhudas Lilladher, which recommended 'subscribe' on the issue, believes the outlook for the road sector is healthy and HG Infra's reasonable valuations leave room for listing gains. 

Proceeds of the IPO will be utilised towards purchase of capital equipment, repayment of certain indebtedness, and for other general corporate purposes. SBI Capital Markets and HDFC Bank managed the company’s IPO.

"The outlook in road sector continues to be very healthy with significant uptick in ordering under Bharatmala and improved focus from state to improve road infrastructure. Our calculation suggests company can deliver nearly 40% earning CAGR over FY17-20E. At the upper band of issue, post money market cap works out to be nearly Rs 17.6 billion," said Prabhudas Lilladher in a pre-IPO note. 

"We believe reasonable valuation will leave room for listing gains, however we would prefer to hold players with stabilized track record like Ashoka/Sadbhav/KNR over longer term," the note added. 

Angel Broking had a 'neutral' rating on the issue despite favourable valuations. 

"At the upper end of the price band, the P/E multiple works out to be 27 times (pre-issue equity base) and 33x (post-issue equity base) its FY17 EPS. This post issue valuations is largely in line with industry average valuations
and 10-30 per cent discount from valuation of industry leaders like Dilip Buildcon and KNR construction. However, in view of the limited track record (the company has grown enormously only in the last 2-3 years) and concentrated order book (over 95% of order book concentrated in 2 states), we would like to see more consistent performance from the company in future," said brokerage in its pre-IPO note.