Highway Infra IPO review

•    The company is engaged in infrastructure development and management business with related services.
•    Toll collection is a priority segment followed by EPC and Real Estate segments.
•    The company marked growth in its bottom lines for the reported periods, but marked a set back in top line for FY25.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Highway Infrastructure Ltd. (HIL) is an infrastructure development and management Company. The Company is engaged in the business of tollway collection, EPC Infra and real estate business. While the Company’s business spans facets of infrastructure development and management, tollway collection stands out as a significant mix of its business, driving its revenues and financial performance followed by EPC Infra business which comprises of executing construction development projects of different types like roads, bridges, tanks, irrigation related construction and civil buildings etc., for customers. As on May 31, 2025 its consolidated Order Book is Rs. 666.31 cr., comprising of Rs. 59.53 cr. in tollway collection business and Rs. 606.78 cr. in EPC Infra business.

HIL is one of the few toll operators who have managed tollway collection based on ANPR technology on Delhi-Meerut Expressway. The Company has operated tolls on some of the known inter-state and intra-state expressways across 11 states and one Union Territory. The Company employs updated Electronic Tollway Collection (ETC) systems, which leverage Radio Frequency Identification (RFID) tags and digital payment platforms to facilitate seamless and contactless toll payments. This model not only reduces congestion at toll plazas but also enhances operational efficiency by reducing transaction times and errors, thereby resulting in overall better management. (Source: CareEdge Report).

HIL’s projects usually use both fund-based and non-fund-based banking facilities to meet the working capital requirements. Fund-based facilities provide the cash flow to cover operating expenses, while non-fund-based facilities such as bank guarantees, etc. are used by it to offer as a security under bid terms and are crucial for securing contracts in EPC Infra and tollway collection projects. For securing bank guarantees, it needs to provide cash margin in the form of fixed deposits. The requirement to set aside incremental cash margins for additional contracts contributes to the overall need for higher working capital.

One of the primary revenue streams for the Company is the operation and management of tollway collection systems on highway projects. Such projects are procured by way of a competitive bidding process. As on May 31, 2025, it has completed 27 tollway collection projects and are currently operating 04 tollway collection projects. Its approach to tender bidding in the tollway collection and EPC Infra businesses is largely guided by its in-house cost analysis and competitor evaluation. HIL’s successful bids are typically secured as H1 for toll projects and L1 for EPC Infra business.

It is currently executing projects across Indore, Bhopal, Dhar, Ratlam and Khandwa in Madhya Pradesh, India. The company has experience in executing projects of different types like roads, bridges, tanks, irrigation related construction and civil buildings etc. In this segment, it caters to both private and public sectors. In public sector, the Company has completed many projects awarded by the public sector entities and in private sector to companies like Shubham City Homes, Shubham Builders, Shubham Energy, Adroit Associates Pvt Ltd, etc. It has participated and completed projects in government schemes like Pradhan Mantri Awas Yojna (PMAY), Pradhan Mantri Gram Sadak Yojna (PMGSY) and Jal Jeevan Mission.

As of May 31, 2025, it had 364 employees on its payroll. It also hires contract workers as and when required.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO worth Rs. 130.00 cr. for 18571428 equity shares at the upper cap. The issue consists fresh issue worth Rs. 97.52 cr. (approx. 13931428 equity shares at the upper cap), and an Offer for sale for 4640000 equity shares (worth Rs. 32.48 cr. at the upper cap). The company has announced a price band of Rs. 65 – Rs. 70 per equity shares of Rs. 5 each. The issue opens for subscription on August 05, 2025, and will close on August 07, 2025. The minimum application to be made is for 211 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25.89% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 65.00 cr. for working capital, and the rest for general corporate purposes.

The company has allocated not more than 30% for QIBs, not less than 30% for HNIs and not less than 40% for Retail investors.

The sole Book Running Lead Manager (BRLM) to this issue is Pantomath Capital Advisors Pvt. Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Asit C. Mehta Investment Intermediates Ltd. is a syndicate member. 

The company has issued initial equity shares at par value. It has also further shares in the price range of Rs. 10 – Rs. 62.50 per share (based on Rs. 5 FV) between February 2006, and November 2010. It has also issued bonus shares in the ratio of 10 for 1 in March 2018, and 2 for 1 in August 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 0.51, and Rs. 0.74 per share. 

Post-IPO, its current paid-up equity capital of Rs. 28.90 cr. will stand enhanced to Rs. 35.86 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 502.04 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (On a consolidated basis) posted a total income/net profit, of Rs. 456.83 cr. / Rs. 13.80 cr. (FY23), Rs. 576.58 cr. / Rs. 21.41 cr. (FY24), Rs. 504.48 cr. / Rs. 22.40 cr. (FY25). Quantum jump in net profit from FY24 raises eyebrows. 

For the last three fiscals, the company has posted an average EPS of Rs. 3.13 and an average RoNW of 19.71%. The issue is priced at a P/BV of 3.44 based on its NAV of Rs. 20.37 as of March 31, 2025, and at a P/BV of 2.33 based on its post-IPO NAV of Rs. 30.01 per share (at the upper cap).

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 22.44. Based on FY24 earnings, the P/E stands at 23.41. 

The company has posted PAT margins of 3.02% (FY23), 3.71% (FY24), 4.44% (FY25), its RoCE margins of 19.47%, 24.45%, 16.56%, respectively for the referred periods.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has already adopted a dividend policy in July 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Udayshivakumar Infra, IRB Infra, H G Infra., as their listed peers. They are trading at a P/E of NA, 26.8, and 13.6 (as of August 01, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
This is the 11th mandate from Pantomath Capital in the last three fiscals. Out of last 10 listings, all listed with premium ranging from 1.18% to 100.45% on the date of listing.