Bharat Highways InvIT IPO opens today: Should you subscribe to the issue?

Bharat Highways InvIT IPO opens today: Should you subscribe to the issue?

Bharat Highways InvIT’s Rs 2,500 crore-initial public offering (IPO) kicks-off for bidding on Wednesday, February 28 and can be subscribed till Friday, March 1. Bharat Highways Infrastructure Investment Trust (InvIT) is offering its units in the fixed price band of Rs 98-100 apiece. Investors can apply for a minimum of 150 units and its multiples thereafter.

Bharat Highways Infrastructure Investment is an infrastructure investment trust established to acquire, manage, and invest in a portfolio of infrastructure assets in India. The Trust is authorized to carry on the activities of an infrastructure investment trust under the SEBI InvIT Regulations.

Brokerage firms, tracking the issue are mostly positive on it citing its improving leverage position, attractive valuations, strong portfolio and future growth prospects. However, absence of operating track record, debt concerns, inability to capture growth, and rising costs are the key risks for the company.

As the lender will utilize net proceeds of the fresh equity issue to repay/prepay loans to the Project SPVs that will enhance the InvIT’s leverage position, said StoxBox. “At the current P/BV multiple of 0.8 times based on book value as of September 2023, we believe the company is reasonably valued and advise investors to ‘subscribe’ to the issue for long-term perspective,” it said.

The brokerage flagged the risk that the InvIT is a newly settled trust and does not have an established operating history, which will make it difficult to accurately assess its future growth prospects. Its failure and inability to identify and acquire new infra-assets that generate comparable revenue, profits, or cash flows may have an adverse effect on its business, the brokerage added.

Bharat Highways InvIT is looking to raise a total of Rs 2,500 crore via its primary offering by selling 25 crore fresh units. This includes a sponsor contribution of Rs 664.5 crore by Aadharshila Infratech, while IDBI Trusteeship Services is the trustee for the issue.

Not more than 75 per cent of the offer size has been reserved for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get not less than 25 per cent of the issue. Minimum bid size for bidders other than anchor investors is Rs 15,000.

Bharat Highway InvIt intends to acquire and manage a portfolio of infrastructure assets in India, with a focus on road projects. With the support of its sponsor and associate, the company intends to expand its portfolio through strategic acquisitions, including assets offered under a right of first offer agreement, said Arihant Capital Markets in its IPO note.

“The government targets constructing 100 km of highways daily and plans to build 65,000 km of national highways, with enhanced public investment, prioritizing infrastructure development under initiatives like BharatMala Pariyojana. However, fluctuations in interest rates and inflation, as well as reliance on government assistance, present challenges,” it said with a ‘subscribe’ rating.

Bharat Highways InvIT raised a total of Rs 825.97 crore from anchor investors but allocated 8,25,97,350 units at the issue price of Rs 100 apiece. Anchor books included names like Societe Generale, ICICI Prudential Mutual Fund (MF), HDFC MF, Kotak MF, Quant MF, Nippon Life India, Axis MF, Aditya Birla Sun Life, UTI MF, Baroda BNP Paribas MF and DSP MF among others.

The net proceeds from the issue shall be utilized towards providing loans to the Project SPVs for repayment/ pre-payment, in part or in full, of their respective outstanding loans and general purposes.

Its portfolio consists of seven roads, all of which are operated on a hybrid annuity model (HAM) basis in Punjab, Gujarat, Andhra Pradesh, Maharashtra, and Uttar Pradesh. These roads are operated and maintained based on concession rights granted by the NHAI and are owned and operated by the Project SPVs, which are currently wholly owned by GR Infra.

For the period ended on September, the InvIT reported a profit after tax at Rs 101.35 crore, with a revenue of Rs 388.54 crore, while its bottomline came in at Rs 527.05 crore with a revenue of Rs 1,537.47 crore for the financial year ended on March 31, 2023.

InvIT has also entered into a ROFO agreement with GR Infra under which GR Infra has granted InvIT a right of first refusal over certain other assets owned and being developed by GR Infra. It has been assigned a rating of CRISIL AAA/Stable (Reaffirmed) from Crisil Ratings, a provisional rating of CARE AAA, Stable from CARE Ratings and a provisional rating of IND AAA/Stable from India Ratings and Research.

ICICI Securities, Axis Bank, HDFC Bank and IIFL Securities are the book running lead managers of the Bharat Highways InvIT IPO, while Kfin Technologies is the registrar for the issue. Listing of units is likely to be done on Wednesday, March 6 on both BSE and NSE.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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