BUY

Initiating Coverage G R Infraprojects Ltd Target Price

24th March, 2022 Infra/Cons 1775

Experienced Road Developer; De-risking Through Diversification

(CMP as of Mar 23, 2022)
We initiate coverage on G R Infraprojects Limited (GRIL) with a BUY recommendation and
a Target Price (TP) of Rs 1,775/share, implying an upside of 23% from the current levels. CMP (Rs) 1443
The road sector is witnessing long-term structural changes on account of the government Upside /Downside (%) 23
push to the infrastructure development and many opportunities are emerging in the High/Low (Rs) 2277/1249
construction space such as the development of Airports, Metros, Railways, and Power
Market cap (Cr) 13948
Transmission. We believe GRIL is well-placed to capitalise on these opportunities by
leveraging its established track record and healthy financial position. Avg. daily vol. (6m) Shrs. 49,442

Investment Thesis No. of shares (Cr) 9.66

Robust order book; diversification to further de-risk the business. Shareholding (%)
As of Dec’21 end, GRIL’s order book stands robust at Rs 14,599 Cr (2x of FY21 revenue), June-21 Sept-21 Dec-21
comprising road projects (both EPC and HAM) as well as the Metro projects. The company’s
healthy cumulative order book of Rs 16,692 Cr including L-1 reflects comfortable revenue visibility Promoter 88.04 86.54 86.54
for the next 2 years. Recently, it has also diversified into the power transmission segment to
FIIs 0 2.87 2.55
leverage its existing infrastructure as well as to insulate its business from future uncertainties.
While it continues to capture opportunities in the construction space, it is increasingly eyeing MFs / UTI 0 6.47 6.81
opportunities from the public sector to capitalise on the government’s spending on Infra
development. Supported by the company’s healthy and diversified order book and emerging Banks / FIs 0 0 0
opportunities, we expect GRIL to deliver healthy revenue growth of 12% CAGR over FY22-FY24E. Others 11.96 4.12 4.1
Well-positioned to capitalize on strong industry tailwinds. Financial & Valuations
The central government has undertaken several initiatives to boost the development of the
country’s Highways and Expressways. Consequently, order inflows have gathered momentum in Y/E Mar (Rs Cr) FY22E FY23E FY24E
the last few years. Under Phase-I of the Bharatmala Pariyojana Highway Development program, Net Sales 7754 8529 9809
the government has approved 34,800 Km of national highways projects (out of 65,000 Km) and
has earmarked an outlay of 5.4 Lc Cr, to be utilized through both the EPC and HAM models. EBITDA 1204 1399 1677
Furthermore, the government has undertaken several policy initiatives such as a) The Land A
Net Profit 683 779 977
Acquisition act, b) Fast-tracking arbitration claims process, c) Introduction of new EPC EPS (Rs) 71 81 101
(Engineering, d) Procurement, and Construction) policy, and e) Implementing Hybrid Annuity
Model (HAM) and Toll Operate Transfer (TOT), among others. Additionally, the government’s PER (x) 21 18 14
Asset Monetization Plan and Gati Shakti Master Plan are expected to significantly aid in the overall EV/EBITDA (x) 12 10 9
development of the sector moving forward. These initiatives have created massive growth
opportunities for the company. P/BV (x) 3.3 2.8 2.4
ROE (%) 16 15.5 16
Established track record of timely project execution.
GRIL is one of the leading EPC contractors in India having a demonstrated project execution Key Drivers (%) (Growth in %)
experience of more than two decades. Leveraging this, it has efficiently delivered complex and Y/E Dec FY22E FY23E FY24E
prestigious projects including highways, bridges, flyovers, airport runways, and tunnels within the
scheduled timelines. Furthermore, with over 25 years of extensive experience, the management Net Sales 7 10 15
is well placed to take the company”s growth to the next level. We believe GRIL is well-positioned EBITDA -8 16 19
to capitalize on the emerging opportunities in the infrastructure sector in both EPC and HAM
projects from NHAI, airport runways, metros, railways, and power transmission. With superior Net Profit -12 14 25
order inflows, we expect the company to improve its margin profile from the current 16% to 17% Axis vs Consensus
by FY23E-24E.
EPS Estimates FY23E FY24E
Healthy financial position & asset monetization to support future growth.
Over the years, GRIL has reported strong financial performance and exhibited a robust credit Axis 81 101
profile which is reflected in its lean and robust balance sheet, low Debt/Equity Ratio, and high Consensus 90 112
interest coverage ratio. Furthermore, the asset monetization of the HAM portfolio will ease GRIL’s
liquidity. We expect the company’s capital structure to remain healthy from the medium to long- Mean Consensus TP (12M) Rs 1910
term perspective, enabling it to efficiently capture emerging opportunities moving forward.
ESG disclosure Score**
Valuation & Recommendation – Initiate with BUY
We estimate GRIL to report Revenue/EBITDA/APAT CAGR of 12%/18%/20% respectively over Environmental Disclosure Score NA
FY22-FY24E on account of its strong and diversified order book, healthy bidding pipeline, new
Social Disclosure Score NA
order inflows, its efficient and timely execution prowess, and emerging opportunities in the
construction space. Currently, the stock is trading at 18x FY23E and 14x FY24E EPS. We initiate Governance Disclosure Score NA
coverage with a BUY rating and value the company’s EPC business at 15x FY24E EPS and HAM
portfolio at 1x book value to arrive at a target price of Rs 1,775/share. TP implies an upside Total ESG Disclosure Score NA
potential of 23% from the CMP. Source: Bloomberg, Scale: 0.1-100
**Note: This score measures the amount of ESG data a company reports
Key Financials (Standalone) publicly and does not measure the company's performance on any data point.
All scores are based on 2020 disclosures
(Rs Cr) FY21E FY22E FY23E FY24E
Relative performance
Net Sales 7244 7754 8529 9809
145
EBITDA 1310 1204 1399 1677
Net Profit 781 683 779 977 105
EPS (Rs) 81 71 81 101
65
PER (x) NA 21 18 14
EV/EBITDA (x) NA 12 10 9 25
Jul-21 Sep-21 Oct-21 Dec-21 Jan-22 Mar-22
P/BV (x) NA 3.3 2.8 2.4
G R Infraproject BSE Sensex
ROE (%) 22 16 15.5 16
Source: company, Axis Research
Source: Capitaline, Axis Securities

Uttam Kumar Srimal

Research Analyst
email: uttamkumar.srimal@axissecurities.in

Shikha Doshi
Research Analyst
email: shikha.doshi@axissecurities.in
1
Financial Story in Charts
Exhibit 1: Revenue to grow with superior project execution capabilities Exhibit 2: EBITDA to grow with stable margins

12000 70% 2000 20.4% 20.6% 25.0%

9,809 18.1%
10000 59% 60%
8,529 1600 15.5% 16.4% 20.0%
7,244 7,754 50%

(Rs.bn)
8000 1200 15.0%
6,028 40% 17.1%
6000 4,950
(Rs.bn)

30% 800 10.0%

4000 10% 20%
7% 400 5.0%
2000 1,007 1,241 1,310 1,204 1,399 1,677
22% 20% 15% 10%
0 0.0%
0 0% FY19 FY20 FY21E FY22E FY23E FY24E
FY19 FY20 FY21E FY22E FY23E FY24E
Revenue (Rs.Cr) Revenue Growth EBITDA EBITDA Margin

Source: company, Axis Securities Source: company, Axis Securities

Exhibit 3: PAT to showcase improvement Exhibit 4: Order book and revenue to grow in tandem

1,200 12.0% 11.4% 14.0% 25,000

10.8% 20,743 20,934
10.0% 12.0% 19,200 19,026 19,272
8.8% 9.1% 20,000
10.0% 15,861
800
8.0% 15,000
10,234 9,809
6.0% 10,000 7,754 8,529
6,028 7,244
400 4.0% 4,950
5,000 3,108
596 689 781 683 779 977 2.0% 4.3 4.9 3.6 3.6 3.5 3.4 3.1
0 0.0% 0
FY19 FY20 FY21E FY22E FY23E FY24E FY18 FY19 FY20 FY21 FY22E FY23E FY24E
PAT (Rs.Cr) PAT Margin (%) Order Book (Rs. Cr) Book/bill ratio Revenue (Rs. Cr)

Source: company, Axis Securities Source: company, Axis Securities

Exhibit 5: ROE & ROCE to remain stable Exhibit 6: Robust Revenue/EBITDA/PAT CAGR growth (FY22-FY24E)

50% 25%
41%
36% 20%
40% 20% 18%
31%
28%
30% 24% 22% 23% 15% 12%
22% 22%
20% 16% 15% 16% 10%
10% 5%
0% 0%
FY19 FY20 FY21E FY22E FY23E FY24E Revenue EBITDA PAT

RoE RoCE

Source: company, Axis Securities Source: company, Axis Securities

Exhibit 7: Cash Conversion Cycle to improve Exhibit 8: Equity Multiplier to improve

80 2.50
2.09
1.91 1.84
60 2.00 1.76 1.74 1.68 1.62
40 1.50

20 1.00

0 0.50
FY19 FY20 FY21 FY22E FY23E FY24E
0.00
Inventory days Debtors days FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Creditors days Cash conversion cycle

Source: company, Axis Securities Source: company, Axis Securities

2
Company Overview
• G R Infraprojects Limited (GRIL)– incorporated in Dec’95, is an integrated Road EPC company having
experience in the Design & Construction of various road/highway projects across 15 States in India. It
has also recently diversified into railway sector projects to de-risk its business model. Prior to the One of the premier
company’s incorporation, individual promoters were associated with M/s. Gumani Ram Agarwal - a EPC players in India
with over 25 years of
partnership firm engaged in the construction business, which was acquired by the company in 1996. rich experience in road
Since 2006, GRIL has executed over 100 road construction projects. It has extensive experience in construction
constructing state and national highways, bridges, culverts, flyovers, airport runways, and rail over-
bridges.
• Principal business operations are broadly divided into three categories
o Civil construction activities, through which it provides EPC services in the road sector.
o Development of roads, highways on a BOT basis, under annuity and hybrid annuity models
o Manufacturing activities through which it processes bitumen, manufactures thermoplastic road-
marking paint, electric poles, and road signage as well as fabricates and galvanizes metal
crash barriers.
• End-to-end infrastructure solutions provider: GRIL executes road projects as EPC contractors as
well as through the PPP model on a BOT basis with a focus on HAM projects. For projects on the EPC
and construction services basis, the scope of services typically includes design and engineering of the
project, procurement of raw materials, project execution at the site with overall project management up
to the commissioning of these projects. In addition, the company also undertakes repair and maintenance
of projects in accordance with contractual arrangements. For BOT projects, in addition to the construction
and development of the project, GRIL is also required to operate and manage the project during the
concession period.
• In-house integrated model: As part of its in-house integrated model, it has developed in-house
resources having key competencies to deliver a project from conceptualization to completion. This
includes the design and engineering team, three manufacturing units at Udaipur (Rajasthan), Guwahati,
(Assam) and Sandila (Uttar Pradesh) for processing bitumen, and thermoplastic road-marking paint, road
signage, and a fabrication and galvanization unit at Ahmadabad (Gujarat) for manufacturing metal crash
barriers and electric poles.
• Extensive experience: Over the past 25 years, GRIL has established itself as an efficient player in
segments such as roads and highways, bridges and airport runways. It has emerged as one of the leading
highway development, construction, and management companies in the country.
• IPO: The company came out with its IPO in July 2021 and raised Rs 963 Cr at an issue price of Rs
837/share. The issue was oversubscribed by 102.6x.

3
Exhibit 9: Key Milestones

Period Description
• Commencement of Business;

1996-2000 • The takeover of business of Gumani Ram Agrawal;

• Forayed into the development of infrastructure projects

2001-2005 • Established centralized workshops with fabrication facilities at Udaipur

• Name changed to “G R Infraprojects Limited”;
2006-2010
• Commissioned 30,000 MT PA Bitumen emulsion/PMB unit at Udaipur
• Equity investment by IBEF I, IBEF and IDFC;
• Completed Shillong Bypass ~10 months before SCOD;

2011-2015 • Commissioned Second 30,000 MT PA bitumen emulsion unit at Guwahati (Assam);

• Commenced operations of 24,000 MTPA;
• Fabrication and galvanization unit for metal crash barriers at Ahmedabad (Gujarat).
• First HAM project awarded with Bid Project cost of Rs 1367 Cr;
• Divestment of equity stake in - Jodhpur Pali Expressway Limited and Shillong Expressway Limited;
2016-2019
• Awarded first railway project;
• The third bitumen emulsion manufacturing unit came up at Sandila, Uttar Pradesh
• Achieved PCOD for first NHAI HAM project, Phagwara – Rupnagar;
2020-2021
• The successful listing of the company on BSE and NSE on July 19,2021
Source: company, Axis Securities

Exhibit 10: Business Overview

Source: company, Axis Securities

4
Robust order book; diversification to further de-risk the business
• Strong and diversified order book: The company's strong and diversified order book position indicates a
sustainable revenue growth visibility for the next 2 years. As of 31st Dec’21, its road (HAM & EPC) and Metro Strong order book of
Rs 16692 Cr along
order book stood at Rs 14,599 Cr (2x of FY21 revenue). It has been judged as L-1 in HAM and Metro projects
with the government’s
worth Rs 907 Cr and Rs 1,185 Cr, taking the company’s total order book to Rs 16,692 Cr (2.30x of FY21 focus on developing
revenue). Though the company’s total order inflow to date has been low at Rs 4,400 Cr owing to hyper- road infrastructure
competitive intensity, we like its disciplined bidding strategy, project selection criteria and efforts to realise a augurs well for the
company. Diversifying
superior margin profile. into Power
• The company's order book has grown at an impressive CAGR of 24% over FY17-FY21. The management transmission to de-risk
expects robust order inflow moving forward. It has already submitted a bid for road projects (EPC and HAM) business.

and Metro projects aggregating to Rs 66,000 Cr. The company aims to generate 80% of its revenue from
the road sector and the balance from Metro projects and the Power Transmission Business over the next
three to five years.
• On-track execution and healthy margins profile: Currently, the company is executing 27 projects whose
total value stands at Rs 11,938 Cr. Out of the total order book, road orders, EPC, and HAM account for 28%
and 67% respectively while the railways and metro account for 5%. Of the 16 HAM projects, while 7 are
operational, 2 projects are currently under construction. In 4 projects, the company has been received an
appointed date and in the balance of 3 projects, the same are awaited and are expected by the end of
Q4FY22. Given the company’s robust track record in project execution, upcoming projects are expected to
be completed on schedule and the margin profile is expected to remain healthy.
• Diversifying into power transmission segment: With a demonstrated experience of more than 25 years,
the company has delivered various prestigious projects on highways, bridges, and flyovers amongst others.
The company has recently diversified into the power transmission business as well. Initially, it is planning to
bid for projects below Rs 1,000 Cr and plans to monetize them at an early stage after completion. The
company expects to generate healthy project IRR from the Power T&D business. The company has
submitted bids in two transmission projects through Tariff Based Competitive Bidding (TBCB) on the Built,
Own, Operate, and Transfer (BOOT) model where it has emerged as an L-1 bidder for a total projects cost
of Rs 800 Cr.
• Impressive growth outlook: With the company’s healthy and diversified order book and emerging
opportunities in the construction space, we expect GRIL to deliver a robust revenue CAGR of 12% over
FY22E-FY24E with stable margins between 16% to 17% during the period.

Exhibit 11: Current order book split – Segment-wise as of Dec’21 Exhibit 12: Client Wise Distribution as of Dec’21

5% 0%
2% 3%
7%

28%

67%
88%

Roads (HAM) Roads (EPC) Railways Others NHAI UPEIDA RVNL Others

Source: Company, Axis Securities

5
Well-positioned to capitalize on strong industry tailwinds.
• Healthy pace of road construction in India: The construction industry contributes over 8% of the country’s
GDP and plays a critical role in its economic upliftment. Moreover, over the last five years till FY21, highway Massive development
construction in India has grown at an impressive CAGR of 17% and is expected to continue growing at a in road sector
similar cliff over the next five years despite the pandemic-imposed headwinds. National Highways (NHs) supported by the
government’s
constitute ~2% of the total road network, covering ~1.43 Lc Km and carry ~40% of the road traffic in India. The
proactive policy would
creation and operation of quality road infrastructure continue to be major requirements for enabling the overall aid in the company’s
growth and development of the Indian economy in a sustained manner. growth

• Undepenetrated highways network provides huge growth opportunities: The Indian road network spans
across 6.30 Mn Km, but highways and expressways together constitute only 5% of its total road network,
implying a significant growth headroom for the company. NHAI (National Highways Authority Of India) and
MORTH (Ministry of Road Transport and Highways) has set ambitious targets for road construction through
Bharatmala and Sagarmala Pariyojana, which will aid in the overall development of the sector and
consequently provide a huge opportunity to GRIL.
• Proactive government thrust: In the past five years, the infrastructure sector has witnessed a steady stream
of investments primarily led by the government’s implementation of the National Highways Development
Project (NHDP). Various states continue to emphasise improving the rural and state road network. The
National Highways Authority of India (NHAI) is increasingly shifting its focus on the execution of high-value
projects such as expressways, which augurs well the overall road infrastructure space. The unveiling of the
Gati Shakti Master Plan promises to achieve superior coordination among various stakeholders, which in turn,
would ensure faster completion of ensuing projects.
• National Infrastructure Pipeline: The road sector is expected to be the largest beneficiary of a National
Infrastructure Pipeline (NIP) with an expected investment of Rs 111 Tn over 2020-25 and projects worth Rs
19.6 Tn identified (19%) for the sector.
• National Monetization Pipeline: Under the National Monetization Pipeline (NMP), the union government has
set a target to garner Rs 1,60,000 Cr by monetizing roads assets over the NMP period FY2022-25. According
to CRISIL, the National Monetization Pipeline (NMP) alone could address 15-18% of NHAI’s funding
requirement for FY22 and FY23, which would ensure the rapid pace of infrastructure development in the
country.
• Proactive policy support for the road construction development: In addition to the thrust to the highway
network, the government’s host of policy initiatives such as the land acquisition act, fast-tracking process of
arbitration claims, introducing new EPC (Engineering, Procurement and Construction) policy, and bringing in
models such as Hybrid Annuity Model (HAM) and Toll Operate Transfer (TOT) are going to accelerate the
pace of road construction in India.

Exhibit 13: Total Estimated Infra Capex

40 25% 40%
23% 15%
22 18% 21 17%
14 16 15 16%
20 13 20%
3.8 3.6 3.3
3.3 2.5 2.4
0 0%
FY20 FY21 FY22 FY23 FY24 FY25

Total Infra Capex (Rs tn) Road Capex (Rs tn) % Share

Source: NIP Task Force Report

Exhibit 14: Length Constructed (Km)

13327
15000 10855 10237
9829
8231
10000 6061 5835
4260 4410
5000
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 (Upto
Dec. 21)

Source: MORTH AR 2021-22

6
 Exhibit 15: NHAI Project Awards, Construction (KM)

8000 6500
6000 4788 4218 4500
3979 3519
4000 3264 3211 3124
2222
2000
0
2018-19 2019-20 2020-21 2021-22 (Till Mar,7) 2022-23 (Target)

Awards Construction

Source: NHAI

Exhibit 16: List of Greenfield Expressways planned under Phase 1 of Bharatmala Pariyojana
Targeted Completion
# Corridor Name Length (KM) Total Capital Cost (Cr)
Year

1 Delhi-Mumbai Expressways 1382 98,299 FY23

2 Ahmedabad-Dholera 109 4,192 FY24

3 Bengaluru - Chennai 262 16,730 FY25

4 Delhi-Amritsar-Katra 669 39,486 FY25

5 Kanpur-Lucknow Exp 63 4,183 FY25

Expressways Total 2485 1,62,890

Source: MORTH AR 2021-22

Exhibit 17: List of 17 Greenfield Access Controlled Highways planned under Phase 1 of Bharatmala Pariyojana
Targeted Completion
# Corridor Name Length (KM) Total Capital Cost (Cr)
Year
1 Ambala – Kotputli 313 11,375 FY22
2 Amritsar - Bhatinda - Jamnagar 917 22,757 FY24
3 Raipur - Vishakhapatnam 465 16,122 FY25
4 Hyderabad Vishakhapatnam 222 5,921 FY25
5 UER II 75 7,010 FY24
6 Chennai – Salem 277 9,681 FY25
7 Chittoor Thatchur 116 4,754 FY24
8 Bangalore Ring Road 281 14,337 FY25
9 Delhi - Saharanpur – Dehradun 329 17.085 FY24
10 Durg, Raipur Arang 92 2,689 FY25
11 Hyderabad – Raipur 330 8,737 FY25
12 Surat - Nashik - Ahmednagar - Solapur 711 28,212 FY25
13 Solapur - Kurnool - Chennai 335 10.538 FY25
14 Indore - Hyderabad 687 15,014 FY25
15 Kharagpur – Siliguri 235 5,671 FY25
16 Kota Indore (Garoth to Ujjain) 135 2,609 FY25
17 Nagpur – Vijayawada 405 14,666 FY25
Total Greenfield Access Controlled Corridors 5924 1,97,198
Source: MORTH AR 2021-22

7
Established track record of timely project execution
• A recognised brand in the construction space: GRIL is a leading EPC player in the road sector with
The company’s robust
over 25 years of deep experience, leveraging which it has successfully scaled its operation over the
order book and
years. The company has made a significant investment in brand building and has emerged as a marquee execution prowess has
contractor in the construction space. Since 2006, it has successfully executed over 100 road construction enabled it to grow its
projects spread across 15 states and is currently executing 27 projects. It has 1 BOT (Built, Operate and business on a
consistent basis.
Transfer) and 16 HAM projects. These comprise 7 HAM projects which are currently operational and 2
HAM that is under construction. 4 projects have received the appointed date while for 3 projects, the
company awaits the appointed date and the balance projects are EPC contracts. Currently, 88% of the
order book is from NHAI.
• Efficient project execution: Over the years, the company has gradually added facilities to support and
supplement the road construction business. Its strong and integrated in-house Design & Engineering
expertise coupled with years of experience in the infrastructure space has helped the company control
the entire process of each project from conceptualizing to final commissioning. The company has
proactively invested to acquire the necessary construction equipment to achieve efficient project
execution, enabling it to promptly deliver projects.
• Qualified for bidding large projects: With strong execution credentials and backed by its financial and
technical qualifications, GRIL has been able to qualify for bidding large projects and can bid for a single
project up to a ticket size of Rs 10,000 Cr. The ability to bid for a large project size offers the company a
significant competitive advantage by creating entry barriers for other smaller incumbents, which in turn,
helps the company maintain its margin profile.
• Well-nurtured marquee clientele: The company has worked on several projects with various states and
central governments over the last two decades. It has built deep and long-running relationships with key
infrastructural development authorities both in the public and private sectors such as the NHAI, MoRTH,
and central Public Works Department. The company continues to receive orders from these clients owing
to its quality work and strict adherence to project delivery timelines.
• Satisfactory revenue growth: The company’s revenue has grown at a healthy 23% CAGR over FY17-
FY21 to Rs 7,244 Cr in FY21 from Rs 3,182 Cr in FY17. Its EBITDA margins remained stable between
17-18% during this period.

Exhibit 18: Company Overview: GRIL Snapshot

Source: Company, Axis Securities

8
Healthy financials and asset monetization to aid in business growth
• Strong financial position: The company delivered Revenue/EBITDA/APAT growth of 33%/32%/26%
Strong financials lend
CAGR over FY18-FY21, resulting in steady accretion and strengthening of its Reserves and Net Worth
support for the future
(which grew at 33% CAGR over the same period to Rs 3,604 Cr in FY21 from Rs 1,538 Cr in FY18). The growth of the
company has low debt and its lean balance sheet and its superior operating ratios along with high return company. Asset
monetization to help
ratios manifest its excellent long-term performance in the highly competitive construction space. Credit
free capital for future
rating agency CARE has also reaffirmed its stable rating on the company’s debt instrument. growth.

• Over FY17-FY21, the company generated OCF of Rs 2,300 Cr and FCF of Rs 600 Cr. Its FCF/OCF ratio
stands healthy at 26%, indicating a superior liquidity profile. Furthermore, its working capital management
also stands robust. The company uses various sources of funding to optimise its cost of debt and keep it low. While the industry is facing
problems of financial closure and fundraising, GRIL’s robust balance sheet position, superior credit profile, and brand image have helped
it overcome these challenges and stay ahead of the curve.

• Monetization of HAM Assets:. The company is seeking to monetize its HAM assets portfolio either through direct selling of the assets
to the prospective investors or taking the invITs (Infrastructure Investment Trust) route. The company intends to finance equity investment
in balance HAM projects through internal cash generation and monetization of its completed HAM projects. Deleveraging through the sale
of the above assets is expected to help GRIL sustain future growth while maintaining its financial profile. We believe the company is well-
placed to bid for more projects by leveraging its robust financial position, enabling it to maintain its elevated growth pace moving forward.

Equity investment in HAM assets: The company has infused Rs 1,300 Cr in the form of equity and subordinated debt by Dec’21 in HAM
assets. Total equity requirement in Q4FY22 stands at Rs 120 Cr, Rs 500 Cr in FY23, and Rs 500 Cr in FY24. We estimate that internal
accruals would be sufficient to meet equity requirements moving forward.
Exhibit 19: Leverage Ratio

0.80
0.59 0.59
0.60 0.50 0.53 0.47
0.45
0.38 0.37 0.35
0.40 0.29 0.24
0.21 0.19 0.19 0.17 0.16
0.20 0.08 0.13

0.00
FY19 FY20 FY21 FY22E FY23E FY24E

Debt/Equity (x) Net debt/Equity (x) Net debt/EBITDA (x)

Source: Company, Axis Securities

Exhibit 20: Efficiency Ratio

8.0 6.7
5.2 5.8 5.3 5.2 5.5
6.0 4.1 4.0 3.6 3.2 3.0 3.1
4.0
1.8 1.7 1.7 1.5 1.5 1.5
2.0
0.0
FY19 FY20 FY21 FY22E FY23E FY24E

Net Sales/Total Assets Net Sales/GFA Net Sales/Net FA

Source: Company, Axis Securities

Exhibit 21: Interest Coverage Ratio

15.0 11.4
9.5 8.5 9.4 9.2 9.4
10.0

5.0

0.0
FY19 FY20 FY21 FY22E FY23E FY24E

Source: Company, Axis Securities

9
Outlook & Valuation
We initiate coverage on GRIL with a BUY recommendation and value its EPC business at 15x FY24E High order book, better
execution, and
EPS and HAM portfolio at 1x book value to arrive at a target price of Rs 1,775/share. The TP implies
favorable industry
an upside of 23% from the CMP. Over the years, the company has transformed itself into one of the tailwind to drive the
leading EPC contractors and has grown its order book and revenue at a healthy rate with good company’s overall
margins. GRIL has also increased its geographical footprint, leading to superior scalability and growth, moving
forward; The company
recognition. The current order book is healthy and order inflows are expected to be robust, backed by
continues to
the government’s focus on augmenting road infrastructure in India. We expect the company to diversifying to de-risk
maintain a healthy Book to Bill ratio moving forward. its business.

The company’s outlook over FY22E-24E continues to be robust given its high order book with 2-3
years of revenue visibility, encouraging traction in road projects, favourable industry tailwind, and a
robust track record of high-quality and timely project execution. These factors will ensure higher
revenue growth for the company going forward. Furthermore, its diversification in the power
transmission segment will open new avenues of growth. Apart from the road projects, GRIL also
expects to gain from orders in Railways and Metros and has lined up various projects.
We expect the company to report Revenue/EBITDA/APAT CAGR of 12%/18%/20% over FY22-
FY24E. The stock is currently trading at 18x and 14x FY23E and FY24E EPS. We initiate coverage
on GRIL with a BUY recommendation and value its EPC business at 15xFY24E EPS and HAM
portfolio at 1x book value to arrive at a Target Price of Rs 1,775/share. TP implies an upside of
23% from the CMP.

Exhibit 22: Peer Comparison

EBITDA Margin (%) EV/EBITDA (x) P/B (x) P/E (x) ROE (%) ROCE (%)
Sr No Company M/Cap ( Cr) Rating TP (Rs)
FY23E FY24E FY23E FY24E FY23E FY24E FY23E FY24E FY23E FY24E FY23E FY24E

1 KNR Construction 7,979 BUY 340 19 19 11 10 3 2.6 20 16 17 17 23 23

2 PNC Infratech Ltd 6,383 BUY 380 13.5 13.5 6.5 5.5 1.6 1.4 11 9 16 16 21 21

3 H G Infra Eng Ltd 3,727 BUY 890 16.5 16.5 10 9 2.8 2.3 9 8 15 16 22 23

4 PSP Projects Ltd 1,949 BUY 620 13.7 13.7 7 6 2.4 1.9 11 9 23 23 33 33

5 GR Infraprojects Ltd 13,941 BUY 1775 16.4 17 10 9 2.8 2.3 18 14 15 16 22 23

Source: Company, Axis Securities

10
Management Profile
Key Management Personnel
Mr. Vinod K Agarwal
Chairman& Whole Time Director
Mr. Ajendra K Agarwal
Managing Director
BE, Jodhpur University
Mr. Ramesh Ch. Jain
Whole Time Director
BE, Rajasthan University
Mr. Vikas Agarwal
Whole-time Director
BCom, MSU, Udaipur
Mr. Anand Rathi
Chief Financial Officer
CA, CS
Source: Company, Axis Securities
Experience
One of the promoters of the company, Mr. Vinod Agarwal has 25 years of experience in the road
construction industry. He looks after the strategy and policy formulation and liaises with various
departments of the government and also overlooks various processes including project bidding,
tendering, and planning. He is also the president of the National Highways Builders Federation.
Mr. Ajendra K Agarwal is one of the promoters of the company and has 25 years of experience in
the road construction industry. He is responsible for overseeing the overall functioning of the
company, especially its operational and technical aspects. He heads the in-house design team and
is actively involved in continuous value engineering using the latest specifications and
methodologies. He is also the head of the budgeting, planning, and monitoring process which has
leveraged the timely completion of projects.
He has experience of over 27 years in the roads construction business. Before joining the company,
he was associated with NHAI. He joined the company on January 16, 2015, and is responsible for
the monitoring of the construction of roads, highways, and bridges. He is also responsible for the
bidding process for new projects in the company.
He has been associated with the company since April 1, 2006, and has over 15 years of experience
in the road construction industry. He is responsible for overseeing the functioning of running projects
of the company.
He has several years of experience in the field of accounts and finance. He is responsible for, inter
alia, evaluating optimum financing options, building financial models, financial research and analysis,
evolving the strategy of our company including mergers and acquisitions and negotiating
transactions, policy implementation and liaising with banks and financial institutions for obtaining
funds
11
Key Risk& Mitigation
• Competition Risk: The company competes with several regional, national, and multinational companies The company is
and the competitive intensity varies with the geography and business segments. Since there are low entry exposed to different
kind of risks. The
barriers, developers are not required to have major technological capabilities.
management remains
Risk Mitigation: With a strong track record of over two decades in the engineering and construction space, cautious and vigilant to
mitigate these risks
the company’s target is to bid for larger projects by leveraging its capabilities in this space and relatively
through its well-
lower competitive intensity for such projects. The company bids for projects that require robust financial instituted risk
capacity and a high execution track record and also aims to complete projects before time and win the early mitigation framework
completion bonus.

• Time Risk: Risks inherent to long-term road projects such as construction delays owing to material
shortages, unanticipated cost increases, cost overruns, inability to negotiate satisfactory arrangements with
joint venture partners, and arbitrations may adversely impact the company’s revenue growth and profitability.

Risk Mitigation: The company has an integrated in-house operating model which enables it to cut its
dependence on third-party vendors and supply chain partners. This significantly supports the company’s
commitment to the timely completion of projects.

• Market Risk: Risk that changes in market prices such as foreign exchange rates, interest rates and equity
prices may affect the company’s income or the value of its holdings of financial instruments.

Risk Mitigation: The company avoids excessive exposure in foreign currency revenues and costs.

• Input Cost Risk: Raw material prices, especially steel prices, have witnessed a sharp upward trajectory in
the recent past. The principal products the company uses in its business include structural steel, cement,
bitumen, concrete, metal plate, cable, and various electrical and mechanical components. The availability
and prices of these products may vary significantly in the future due to various factors, including demand,
producer capacity, market conditions, and specific material shortages.

Risk Mitigation: The company purchases high-quality raw materials directly from market leaders and has
put appropriate measures in place to mitigate cost escalation. This ensures on-time supply of the right
quality, price, and materials.

12
Industry Overview
• Indian construction industry: The Indian construction industry is the engine of the Indian economy and is
responsible for propelling the country’s overall development as good infrastructure is the basis for all other Overall outlook for the
projects in the country. In light of its crucial role, the Indian government spends ~9% of India’s GDP on construction industry is
robust on account of
Infrastructure services comprising construction of power, bridges, dams, roads, and urban infrastructure
high government
development which also forms the base and supporting factor for other services sectors. spending. We expect
• The government’s sharp focus on infrastructure: Of the total construction spending in the infrastructure industry to grow at a
CAGR of 6% over
sector, roads had a share of 48.3% in FY15-FY19. Investments were largely driven by the government’s
FY20-FY25
implementation of the National Highways Development Project (NHDP) and continued emphasis on improving
the rural and state road network by various state governments has supported growth.
• Robust private investment to drive industry growth: India is expected to become the third-largest construction
market globally by 2022. Large investments in infrastructure have been providing momentum to the overall PE
(Private Equity) and VC (Venture Capital) investments in India, which recorded an all-time high investment of
$14.5 Bn in FY19. CRISIL Research expects private construction investments in national highways to increase
2x to Rs 1.5 Tn over FY21-FY25 compared with the previous five years.
• Road Capex to increase at 5-10% CAGR over FY22-FY25: According to CRISIL, the overall road Capex
(central + state + rural) will increase at a 5-10% CAGR over FY22-FY25. It also expects road tender awarding to
rise at a steady pace, underpinned by a consistent increase in awarding by NHAI and MoRTH. Road construction,
which has been moving up at an impressive pace, is expected to cross the 40km/day mark moving forward
• National Infrastructure Pipeline: The National Infrastructure Pipeline (NIP) has a mission to improve the
country’s project preparation and attract investments into infrastructure. The aim is to provide world-class
infrastructure to Indian citizens and thereby improve their quality of life. The NIP will support and encourage even
more infrastructure projects and create jobs by employing the latest technology to enhance service standards,
efficiency, and safety across the Indian construction industry. The idea is to improve citizens’ ease of living and
provide equitable access to infrastructure, thus, making growth more inclusive.
• Healthy long-term outlook: The government introduced significant policy reforms to augment foreign direct
investment (FDI) inflows to further boost investment and enhance infrastructure in the country. The Indian
government’s policy reforms resulted in total FDI inflows of $16.3 Bn in construction activities in infrastructure
from FY01 to FY20. The Indian government plans to invest ~$1.4 Tn on the country’s infrastructure across
major sectors of the construction industry, creating massive opportunities for both national and international
stakeholders.

Exhibit 23: Outlays for the road under respective Union Budget (US$ Bn)

25 19.91
20 17.03 15.48
12.90 14.22 13.14
15
10 7.10
5
0
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

Source: Industry, Axis Securities

Exhibit 24: Growing National Highways Network (KM)

132,500 132,995 136,440 140,995

150000 126,500
114,158
91,287 97,830 101,010
100000

50000

0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Source: MORTH AR 2021-22.

13
Financials (Standalone)
Profit & Loss (Rs Cr)
Y/E March FY21 FY22E FY23E FY24E
Net sales 7,244 7,754 8,529 9,809
Other operating income 0 0 0 0
Total income 7,244 7,754 8,529 9,809
Cost of materials consumed 111 295 324 363
Civil construction cost 5,277 5,536 6,039 6,866
Changes in inventory -4 -9 0 0
Changes in work in progress 0 0 0 0
Contribution (%) 25.7% 24.9% 25.4% 26.3%
Other Expenses 550 728 768 902
Operating Profit 1,310 1,204 1,399 1,677
Other income 127 131 128 147
PBIDT 1,438 1,335 1,527 1,824
Depreciation 227 290 340 376
Interest & Fin Chg. 140 131 149 147
Extraordinary Inc./ (Exp.) 0 3 0 0
Pre-tax profit 1,071 916 1,038 1,302
Tax provision 291 233 260 326
PAT 781 683 779 977
Source: company, Axis Securities

Balance Sheet (Rs Cr )

Y/E March FY21 FY22E FY23E FY24E
Total assets 4,588 5,427 6,185 7,142
Net Block 1317 1427 1487 1411
CWIP 55 55 55 55
Investments 246 346 746 1146
Wkg. cap. (excl cash) 2301 2792 3232 3841
Cash / Bank balance 542 680 538 561
Other assets 127 127 127 127

Capital employed 4,588 5,427 6,185 7,142

Equity capital 48 48 48 48
Reserves 3556 4239 5018 5995
Minority Interests 0 0 0 0
Borrowings 896 1051 1031 1011
Other Liabilities 88 88 88 88
Source: Company, Axis Securities

14
Cash Flow (Rs Cr )
Y/E March FY21 FY22E FY23E FY24E
Profit before tax 1071 916 1038 1302
Depreciation 227 290 340 376
Interest Expenses 140 131 149 147
Non-operating/ EO item -609 -291 -240 -409
Change in W/C -112 -131 -128 -147
Income Tax -269 -233 -260 -326
Operating Cash Flow 447 683 899 943
Capital Expenditure -515 -400 -400 -300
Investments -10 -100 -400 -400
Others -301 -69 -72 -53
Investing Cash Flow (826) (569) (872) (753)
Borrowings 261 30 30 30
Interest Expenses -134 -131 -149 -147
Others 5 125 -50 -50
Financing Cash Flow 132 24 (169) (167)
Change in Cash (247) 138 (142) 23
Opening Cash 513 166 304 162
Closing Cash 266 304 162 185
Source: Company, Axis Securities

15
Ratio Analysis (%)
Y/E March FY21 FY22E FY23E FY24E
Growth Indicator 20% 7% 10% 15%
Sales Growth 6% -8% 16% 20%
Ebitda Growth 13% -12% 14% 25%
PAT Growth
PROFITABILITY RATIOS 18.1% 15.5% 16.4% 17.1%
EBITDA Margin 10.8% 8.8% 9.1% 10.0%
Adjusted net margin
EFFICIENCY RATIOS (x)
Capital Turnover 2.0 1.8 1.7 1.6
Total Asset Turnover 1.7 1.5 1.5 1.5
Fixed Asset Turnover 5.3 5.2 5.5 6.7
Debtor days 44 45 45 45
Inventory days 65 70 70 70
Payable days 45 48 50 51
Cash Conversion Cycle (days) 64 67 65 64
Leverage ratios
Debt to equity 0.37 0.35 0.29 0.24
Net debt to equity 0.19 0.17 0.16 0.13
Net debt to EBITDA 0.53 0.59 0.59 0.47
Interest coverage 9 9 9 11
PER SHARE DATA
Diluted EPS (Rs) 81 71 81 101
Book value per share (Rs) 373 443 524 625
DPS (Rs) 0.0 0.0 0.0 0.0
Return Ratios
Return on equity 22% 16% 15% 16%
Return on capital employed 31% 22% 22% 23%
VALUATION RATIOS

P/E 0 21 18 14
P/BV 0.0 3.3 2.8 2.3
EV/EBITDA 0.0 12.2 10.4 8.6
Source: Company, Axis Securities

16
 GR Infra Project Price Chart and Recommendation History

(Rs)

Date Reco TP Research

23-Mar-22 BUY 1,775 Initiating Coverage

Source: Axis Securities

17
 About the analyst

Analyst: Uttam Kumar Srimal

Email: uttamkumar.srimal@axissecurities.in

Sector: Cement/Infra

Analyst Bio: Uttam K Srimal is PGDBF from NMIMS with 21 years of experience in Equity Market/Research.

About the analyst

Analyst: Shikha Doshi

Email: shikha.doshi@axissecurities.in

Sector: Cement/Infra

Analyst Bio: Shikha Doshi is Master of Science in Finance from Illinois Institute of Technology, Chicago.

Currently handling Cement/Infra sector.

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Depository participant services & distribution of various financial products. ASL is
a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed public company and one of India’s largest private sector bank and has its various subsidiaries
engaged in businesses of Asset management, NBFC, Merchant Banking, Trusteeship, Venture Capital, Stock Broking, the details in respect of which are
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the views expressed in this research report accurately reflect my/our views about the subject issuer(s) or securities. I/We (Research Analyst) also certify that no
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ASL does not have any financial interest in the subject company. Also I/we or my/our relative or ASL or its Associates may have beneficial ownership of 1% or
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18
 DEFINITION OF RATINGS

Ratings Expected absolute returns over 12-18 months

BUY More than 10%

HOLD Between 10% and -10%

SELL Less than -10%

NOT RATED We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NO STANCE We do not have any forward looking estimates, valuation or recommendation for the stock

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19