CRISIL Research has assigned a CRISIL IPO grade of ‘4/5’ (pronounced ‘four on five’) to the proposed initial public offer (IPO) of Sadbhav Infrastructure Project Ltd (SIPL). The grade indicates that the fundamentals of the IPO are above average relative to the other listed equity securities in India. However, it is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. Nor is it a recommendation to buy/ sell or hold the securities it relates to (or any other securities); it does not comment on the issue price, future market price or suitability for a particular investor.
The assigned grade reflects SIPL’s established position in the build-operate-transfer (BOT) space in the road sector. It has a strong portfolio of 10 projects, of which seven are operational (including one project which is partially operational) and three are under development. In addition, SIPL is in the process of acquiring stakes in three projects currently owned by its parent Sadbhav Engineering Ltd (SEL), of which two projects are operational and one is under development. The restructuring is in accordance with the strategy to consolidate all BOT road projects under one company - SIPL. The grade factors in low execution risk since nine of the 13 projects are already operational (including the one which is partially operational); for the four under-development projects, land has been acquired and construction is on schedule. SIPL has an integrated in-house team responsible for different functions such as identification of prospective projects, evaluation of bids, and operation and maintenance of projects. The grade factors in SIPL’s rational and cautious approach with respect to the evaluation and timing of bids.