Here’s how Bharat Road Network created networth before IPO

The Kolkata based Bharat Road Network has been referred to the National Company Law Tribunal (NCLT) by one of its lenders Religare Finvest for dues worth over Rs 51 crores.

The road-building company, promoted by SREI Infrastructure Finance Ltd, acquired equity in special purpose vehicles (SPVs) from SREI in FY15 & FY16.

BRNL is a minority in a majority of the other project SPVs like Guruvayoor Infrastructure Private Limited (GIPL), where they own 49 percent, Mahakaleshwar Tollways Private Limited (MTPL), where they own 48 percent, Kurukshetra Expressway Private Limited (KEPL) owning 49 percent, Ghaziabad Aligarh Expressway Private Limited (GAEPL) with 39 percent stake and Shree Jagannath Expressways Private Limited (SJEPL) where they own 40 percent. The project under construction is Solapur Tollways Private Limited (]STPL) where they own 99.02 percent.

BRNL's networth was at negative Rs 67 crores in FY16, which turned into positive Rs 596 crores in FY17. This was on the back of right issue in October 2016 of 1.8 crores shares at par that is Rs 10. The company also made a preferential issue of 2.67 crore shares to SREI at Rs 205 per share in November 2016. So, practically, the company acquired a positive networth just ahead of the IPO.

As per the objects of the issue, most of the IPO money was meant to repay SREI, in terms of debt. Of Rs 601 crore raised by the company, over Rs 430 crore was used to repay SREI for sponsor investment and debt taken on its behalf, amounting to about 75 percent of the issue proceeds.

Therefore the projects with majority control have been in limbo since the beginning. The Orissa Steel Expressway is under foreclosure, handed back to NHAI. While STPL, where the company has 99 percent stake, is yet to be completed, since 7-8 years and has been delayed to December 2018, as per the latest update by the company.

With almost no operating projects under control, the company intends to buy 51 vpercent in a Kerala SPV. The main cause of concern seen is that where the company doesn't have majority control, the performance/contribution to financials have been much higher than the ones where BRNL is a major stake holder. The company has increased its stake in GIPL from 49 percent to 74 percent and now intends to take it to 100 percent. GIPL would be the only operational projects under control.