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Bharat Road IPO gets a thumbs down from analysts

LiveMint logoLiveMint 06-09-2017 Ami Shah

Mumbai: Analysts are cold to Bharat Road Network Ltd’s (BRNL) Rs600 crore initial public offering (IPO) opening on Wednesday, expecting the loss-making company’s weak financial performance to continue in the near term.

For the fiscal years 2017, 2016 and 2015, the Kolkata-based company’s consolidated revenue from operations was Rs10.25 crore, Rs75 lakh and Rs8.43 crore, respectively. For these fiscal years, its consolidated loss was Rs73.89 crore, Rs92.54 crore and Rs26.42 crore, respectively.

“Due to operational inefficiency, BRNL is in loss since five years with heavy debt. Therefore, the asking price has a negative P/E (price to earnings ratio), which is not measurable,” Asit C. Mehta Intermediates Ltd said in a note on Monday, recommending investors to avoid the issue.

The road-building company, promoted by SREI Infrastructure Finance Ltd, plans to sell up to 29.3 million shares in a fresh issue of shares. The company has priced its shares in a band of Rs195-205. The company will dilute 34.9% stake in the IPO. At the upper end of the price band, BRNL will raise around Rs600 crore. The share sale ends on 8 September.

Centrum Broking Ltd too asked investors to stay away.

“The company has been reporting losses and hence valuations are not comparable to peers like IRB Infrastructure Developers, Sadbhav Infrastructure Project, Ashoka Buildcon. Fluctuation in the financial performance (loss making company with stretched working capital cycle) remains a concern for us,” Centrum Broking said in a note on Monday.

Angel Broking, however, had a neutral view, rating the IPO “neutral”.

According to Angel Broking, BRNL is present only in the BOT (build-operate-transfer) project segment and lack of presence in the EPC (engineering, procurement and construction) segment makes its highly dependent on traffic growth and price increase for improving its profitability.

“Though BRNL’s projects are spread across India, the past track record of the numbers doesn’t give enough confidence about sharp improvement in the near term,” Angel Broking said in a note on Tuesday, adding it believes the issue price leaves limited scope for appreciation.

Founded in 2006, BRNL is involved in the development, operation and maintenance of national and state highways in Uttar Pradesh, Kerala, Haryana, Madhya Pradesh, Maharashtra and Odisha.

The company has a portfolio of six BOT road projects, of which five are operational and one is under construction.

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