Bharat Road Network closes below IPO price on institutional selling

Bharat Road Network (BNRL) ended 7% lower at Rs 195, closing below its initial public offer (IPO) price of Rs 205 per share on Tuesday after heavy selling by institutional investors on the first day of its listing. The stock hit an intra-day low of Rs 187 on the National Stock Exchange (NSE. A combined 3.22 million shares changed hands on the counter on the NSE and BSE today.

On Monday, September 18, 2017, BNP Paribas Arbitrage, JM Financial Asset Management, JM Financial Mutual Fund and Nomura Singapore had sold 7.32 million shares of Bharat Road Network for Rs 153 crore, the stock exchanges data shows.

The company had raised Rs 600 crore though IPO, which was over-subscribed by only 1.81 times. The IPO received bids for 53 million shares against the total issue size of 29.3 million shares. The portion set aside for qualified institutional buyers (QIBs) was subscribed 1.33 times, non institutional investors 1.63 times and retail investors 5.69 times.

BRNL is a BOT (build–operate–transfer) company, which is focused on development, implementation, operation and maintenance of roads and highway projects. The company manages over Rs 6,685 crore of road assets including five operating projects and one under construction project aggregating to 2,095 lane km, with average residual life of approximately 18 years and 6 months.

“Though BRNL’s projects are spread across India, the past track record of the numbers doesn’t give enough confidence about sharp improvement in the near term. At the issue price band of Rs 195-205, the stock is offered at 2.6x its pre issue book value (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” Angel Broking had said in an IPO note.

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