Bharat Road Network IPO has opened today for subscription and the road BOT player is competing with Dixon Technologies for public funds. Priced in the range of INR195 – 205 per share, the sale of 29,300,000 shares is expected to raise INR600.65 crore at the upper end of the price band. The company is backed by SREI Infrastructure Finance; however, this fact parentage has not helped the matters as several brokerage houses have placed negative calls. Owing to concerns mentioned below, Bharat Road Network IPO recommendations are mostly negative. Here is a closer look.
Choice Broking has suggested investors to AVOID the IPO citing lack of profits and high valuations. “BRNL is a loss making entity. At the higher price band of Rs. 205 per share, its share is valued at a P/BV multiple of 1.4x (to its restated FY17 BVPS of Rs. 146.3) as against peer average of 1.7x (excluding Sadbhav Infrastructure Project Ltd.),” noted its note on the IPO.
Asit C. Mehta Intermediates echoed the negative sentiment. “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,” analysts said in their research note.
Bharat Road Network IPO recommendations went further in negative territory as ICICI direct placed an Avoid call, stating that the issue is richly valued at 1.4x FY17 P/B multiple. “At the higher end of the IPO price band of Rs 205, the stock is valued at 1.4x FY17 Price-to-book value (post issue), which appears to be at par with other established player like IRB Infrastructure (1.4x FY17 P/BV). Looking at the quality of projects (most projects commissioned in the past few years), we believe it should be at a discount to IRB,” said the research note.
Centrum Broking isn’t bullish on BRNL IPO either and has advised 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, further adding to negative Bharat Road Network IPO recommendations.
Angel Broking has a neutral view on the IPO, although it observed that the pricing left limited scope for further gains. “At the issue price band of `195-205, the stock is offered at 2.6x its Pre Issue BV and 1.5x-1.6x its diluted BV. Even established players like IRB, with strong portfolios are trading at similar valuations and hence, we believe the issue price leaves limited scope for further appreciation. Hence, we have a NEUTRAL rating on the issue,” said its research note.