Patna, India – August 3, 2025 – The Indian stock market is abuzz with excitement as Highway Infrastructure Ltd. (HIL) gears up to launch its Initial Public Offering (IPO) from August 5 to August 7, 2025. With a price band of ₹65–₹70 per share and an issue size of ₹130 crore, HIL’s IPO is drawing significant attention from investors seeking exposure to India’s booming infrastructure sector. But is this IPO a golden opportunity for wealth creation, or does it come with hidden risks? Let’s dive into the financials, growth prospects, and investor considerations to help you decide whether to bid for this IPO.
The Company: Building India’s Infrastructure Backbone
Founded in 1995, Highway Infrastructure Ltd. is a key player in India’s infrastructure landscape, specializing in tollway collection, Engineering, Procurement, and Construction (EPC) projects, and real estate development. The company operates across 11 states and 1 Union Territory, leveraging advanced technologies like Automatic Number Plate Recognition (ANPR) and RFID-based Electronic Toll Collection (ETC) systems to streamline toll operations on high-traffic corridors like the Delhi-Meerut Expressway and GT Road. With a consolidated order book of ₹6,663.07 million as of May 2025, HIL is well-positioned in India’s infrastructure growth story.
The IPO comprises a fresh issue of ₹97.52 crore and an Offer for Sale (OFS) of ₹32.48 crore, with the proceeds earmarked for working capital requirements and general corporate purposes. But what do the financials and growth prospects tell us about the stock’s potential?
Financial Snapshot: A Mixed Bag of Performance
| Fiscal Year | Revenue (₹ million) | EBITDA Margin | PAT (₹ million) | PAT Margin | ROE | Debt-Equity |
|---|---|---|---|---|---|---|
| 2023 | 4,551.3 | 6.08% | 138.0 | 3.02% | 18.5% | 0.85 |
| 2024 | 5,734.5 | 6.70% | 214.1 | 3.71% | 21.4% | 0.69 |
| 2025 | 4,957.1 | 6.32% | 224.0 | 4.44% | 19.0% | 0.61 |
Key Observations:
- Revenue Decline in FY25: HIL reported a 13% drop in revenue from ₹576.58 crore in FY24 to ₹504.48 crore in FY25, primarily due to a setback in topline growth. This raises concerns about the company’s ability to sustain revenue momentum in a competitive sector.
- Profit Growth: Despite the revenue dip, Profit After Tax (PAT) grew by 4.6% from ₹18.96 crore in FY24 to ₹22.40 crore in FY25, driven by operational efficiencies and other income sources.
- Order Book Strength: As of May 2025, HIL’s order book stood at ₹6,663.07 million, with ₹595.30 million from tollway collection and ₹6,067.77 million from EPC projects, signalling robust future revenue potential.
- Asset and Net Worth Growth: Total assets increased by 14.3% to ₹231.56 crore, and net worth rose to ₹117.72 crore, indicating a stable financial structure.
Growth Prospects: Riding India’s Infrastructure Wave
India’s infrastructure sector is a cornerstone of the country’s economic growth, with government initiatives like Pradhan Mantri Gram Sadak Yojana (PMGSY), Jal Jeevan Mission, and Pradhan Mantri Awas Yojana (PMAY) driving demand for EPC and tollway services. HIL is strategically positioned to capitalize on this momentum, with several growth catalysts:
- Technological Edge: HIL is among the few toll operators in India using ANPR technology, enhancing efficiency on high-traffic routes like the Delhi-Meerut Expressway. The adoption of ETC and RFID-based payments further reduces operational delays, boosting revenue potential.
- Geographic Expansion: Operating across 11 states and 1 Union Territory, HIL has a strong presence in high-traffic corridors like GT Road and Mokha Expressway, which connect key ports such as Kandla and Mundra.
- Robust Order Book: The ₹6,663.07 million order book as of May 2025 ensures revenue visibility, with a balanced mix of tollway (9%) and EPC (91%) projects.
- Government Contracts: HIL’s participation in government schemes like PMAY and PMGSY provides long-term revenue stability, despite the risk of policy-related delays.
- Diversification Plans: The company aims to expand into new states and explore verticals like wayside amenities, potentially diversifying its revenue streams beyond toll collection (77% of FY25 revenue).
However, investors should note that HIL’s real estate segment, which focuses on residential and commercial properties, contributes minimally (less than 2%) to revenue, limiting diversification benefits.
Risks to Consider: Proceed with Caution
While HIL presents a compelling case, several risks could impact its growth trajectory and stock performance:
- High Dependency on Toll Collection: Tollway operations account for 77% of revenue, making HIL vulnerable to sector-specific disruptions, such as changes in toll policies or traffic patterns.
- Revenue Concentration: The company’s heavy reliance on Madhya Pradesh for operations poses geographic risk, as regional disruptions could impact financials.
- Working Capital Intensity: HIL’s business requires significant working capital, supported by fund-based and non-fund-based banking facilities, which could strain liquidity during project delays.
- Short-Term Toll Contracts: Most toll contracts are 12 months long, requiring frequent rebidding, which introduces uncertainty.
- EPC Risks: Fixed-price EPC contracts expose HIL to material cost escalations, potentially squeezing margins.
- Government Dependency: Overreliance on government contracts risks delays due to budget constraints or policy shifts.
Investor Perspective: Should You Bid?
From an investor’s standpoint, HIL’s IPO offers a mix of opportunity and caution. Here’s a breakdown to guide your decision:
Reasons to Bid:
- Infrastructure Boom: India’s infrastructure sector is poised for growth, with government spending expected to drive demand for toll and EPC services.
- Strong Order Book: The ₹6,663.07 million order book ensures revenue visibility, particularly in the EPC segment.
- Technological Advantage: HIL’s use of ANPR and ETC systems positions it as a leader in efficient toll management.
- Modest Profit Growth: A 4.6% PAT increase in FY25, despite revenue challenge, reflects operational resilience.
- Grey Market Premium (GMP): As of August 2, 2025, the GMP ranged from ₹35 to ₹40, suggesting a potential listing gain of 50–57% above the upper price band of ₹70.
Reasons to Hesitate:
- Revenue Decline: The 13% revenue drop in FY25 raises concerns about topline stability.
- High Toll Dependency: With 77% of revenue from tolls, HIL is exposed to sector-specific risks.
- Fully Priced Valuation: Analysts note the IPO is fully priced based on FY25 earnings, limiting upside potential for short-term investors.
- Capital-Intensive Business: High working capital needs and dependency on banking facilities could strain finances during project delays.
The Verdict: A Long-Term Play with Short-Term Appeal
For long-term investors, HIL’s IPO is a compelling opportunity to gain exposure to India’s infrastructure growth, backed by a robust order book and technological edge. The company’s focus on government-backed projects and expansion plans into new verticals like wayside amenities could drive future growth. However, the revenue decline in FY25, high toll dependency, and capital-intensive operations make it a riskier bet for short-term gains.
Recommendation: Subscribe for long-term gains, particularly if you believe in India’s infrastructure story and are comfortable with medium-term volatility. For short-term investors, the GMP of ₹35–₹40 suggests potential listing gains, but caution is advised due to the fully priced valuation and revenue challenges. Always consult a SEBI-registered financial advisor and review the Red Herring Prospectus (RHP) before investing.
DISCLAIMER
______________
“BrightStake” is only an Educational Platform and is not registered under any SEBI Regulations. All Information on this page is for Educational and Entertainment purposes only. Our content does not constitute any Trading or Investment advice. We make no representation of the Timeliness, Accuracy, Profitability, or Suitability of any share on this Website, and we cannot be held liable for any Irregularity or Inaccuracy. Our research is solely for educational purposes, so please build your knowledge with us and use your strategy for investment.
