Highway Infrastructure Limited
IPO Size: Rs. 130 cr
- Fresh Issue of Rs. 98 cr, for working capital Rs. 65 cr
- Offer for Sale (OFS) of Rs. 32 cr by the promoters (95% stake to reduce to 70% post IPO)
Price band: Rs. 65-70 per share
- Allocation: Only 30% for institutions and 40% for retail (HNI portion unchanged at 30%)
M cap: Rs. 502 cr, implying 26% dilution
IPO Date: Tue 5th Aug to Thu 7th Aug 2025, Listing Tue 12th Aug 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Indore-based Toll Collector and EPC Company
Highway Infrastructure Limited has 4 tollway collection road projects and engineering procurement and construction (EPC) projects in Madhya Pradesh, Gujarat, Uttar Pradesh, Rajasthan and Maharashtra. 77% of Rs. 500 cr annual revenue is generated from toll collection projects and 21% from EPC-infra projects.
Healthy Order Book
As of 31.5.25, order book rose to Rs. 666 cr, from Rs. 531 cr, as of 31.3.25 and from Rs. 346 cr, as of 31.3.24. Growing order book provides healthy revenue visibility.
Of the current outstanding order book, 90% or Rs. 607 cr comprises EPC projects, representing a book-to-bill of 5.7x, based on EPC revenue of Rs. 105 cr in FY25. However, execution remains the key, as EPC project revenue has risen at a CAGR of only 6% between FY23 to FY25.
Lower Business Margins
Similar to EPC contracts, company bids for annual toll collection projects with NHAI, with H1 being awarded to it, unlike EPC projects, where L1 is the winning bid. But toll collection is lower margin business. Despite annuity-like income in toll collection project, Highway Infrastructure’s EBITDA margin is just at 8%, lower than pure EPC companies’ 13-16% EBITDA margin. As a result, company’s net margin of 4% is also nearly half, that of pure EPC peers.
Revenue de-growth in FY25
Toll collection revenue declined 20% YoY in FY25, while EPC division revenue rose 15% YoY leading to 13% YoY drop in revenue to Rs. 496 cr. EBITDA declined 4% YoY to Rs. 40 cr, with PAT being flat at Rs. 22 cr. FY25 EPS stood at Rs. 3.4, on an equity of Rs. 29 cr (face value Rs. 5 each).
As of 31.3.25, net worth was at Rs. 113 cr, with Rs. 57 cr net debt. But working capital position deteriorated in FY25, with working capital days rising to 66 days, from 41 days in FY24, indicating weakening financials and 234 bps contraction in RoE to 19%
Unattractive Pricing
M cap of Rs. 500 cr and Enterprise value (EV) of Rs. 560 cr leads to a historic EV/EBITDA multiple of 14x and a PE multiple of 20x. J Kumar Infra, posting double digit growth is ruling at a historic PE of 14x, while HG Infra with Rs. 5,000 cr topline and 10% net margin is also ruling at 14x historic PE, making the pricing aggressive. Company’s margin is poorer than peers, with small scale of operations another negative. On the other hand, EPC order book provides long term revenue visibility, with IPO proceeds to finance working capital, to support growth. Thus, considering the positive and negative factors, IPO pricing is in-line.
In July 2024, promoters purchased 550 shares at Rs. 125 per share, but that price cannot be benchmarked as pre-IPO and is thus ignored.
5th Aug 2025 at 07:28 am