H.G. Infra Engineering Limited

Started in 2003, H.G. Infra Engineering Limited is an infrastructure construction, development and management company with extensive experience in area of road projects, including highways, bridges and flyovers. Company's main business operations include (i) providing engineering, procurement and construction ('EPC') services on a fixed-sum turnkey basis and (ii)undertaking civil construction and related infrastructure projects on item rate and lump sum basis, primarily in the roads and highway sector. They have also forayed into executing water pipeline projects and are currently undertaking two water supply projects in Rajasthan on turnkey basis which includes the designing, construction, operation and maintenance of the project. Company has executed or are executing projects across various states in India covering Rajasthan, Uttar Pradesh, Haryana, Uttarakhand, Maharashtra and Arunachal Pradesh. During the last five years, Company has completed 12 projects above the contract value of Rs 400.00 million in the roads and highways sector. As of July 31, 2017, company had a total Order Book of Rs 39,488.43 million, consisting of 29 projects in the roads and highways sector, six civil construction projects and two water supply projects. Company is pre-qualified to bid independently on an annual basis for bids by NHAI and MoRTH for contract values of up to Rs 8,066.60 million based on Company's technical and financial capacity as on March 31, 2017. Execution of projects from its public sector clients accounted for approximately 73.02%, 57.87% and 54.23% of its total revenue for the Fiscals 2017, 2016 and 2015, respectively. Their public sector clients include NHAI, PWD, MES and Jaipur Development Authority. They have also executed road construction contracts as a sub-contractor for private sector clients such as Tata Projects Limited and IRB-Modern Road Makers Private Limited. On financial performance front, HG Infra has posted turnover/net profits of Rs. 472.95 cr. / Rs. 10.9 cr. (FY14), Rs. 367.59 cr. / Rs. 4.64 cr. (FY15), Rs. 743.29 cr. / Rs. 35.35 cr. (FY16) and Rs. 1058.58 cr. / Rs. 53.33 cr. (FY17). For H1 of FY18, it has reported net profit of Rs. 29.28 cr. on a turnover of Rs. 569.53 cr. Thus company has posted healthy growth over last couple of years on consistent basis with a set back in FY15. HG Infra has posted an average EPS of Rs. 7.65 and average RoNW of 25.69% for last three fiscals. Issue is priced at a P/BV of 7.11 for NAV of Rs 37.95 on 30.09.17. Listed peers as per RHP are trading in range of 23 to 37 P/E ratio with average of 34 (as per market price on 22.01.18). If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 30, which looks fully priced when comparing with peers. On BRLM's front, two merchant bankers associated with this offer, have handled 21 public offers in the past three years, out of which 4 offers closed below the issue price on listing date. As per financials, company's growth is very good, RoNW is 25.69% for last three fiscals and issue is priced at P/E of around 30 as per latest earnings. Company has reported CAGR of 34% in revenues and 37% in PAT. As Government of India is on mega spending for creating National Highways and this company may get good no of projects from that and company may continue same growth for next 3-5 years. So we give SUBSCRIBE rating to this IPO with long term perspective.

• 1 Mr. Harendra Singh
• 2 Mr. Vijendra Singh
• 3 Mr. Girish Pal Singh