State Bank of India to jointly invest $150 mn in Ashoka Buildcon arm

August 21, 2012

State Bank of India’s (SBI) private equity funds with Australia’s Macquarie Group will jointly invest $150 million in Ashoka Buildcon’s subsidiary – Ashoka Concessions Ltd.

Shares of Ashoka Buildcon surged as much as 9.56 per cent in morning trade on the Bombay Stock Exchange and touched an early high of Rs 279.40. It was later trading at Rs 272, higher by 6.67 per cent at 11.53 am on BSE.

“Macquarie SBI Infrastructure Fund and SBI Macquarie Infrastructure Trust – which are PE funds managed by SBI and Macquarie – will together invest $150 million in Ashoka Concessions,” a statement said.

Commenting on the development SBI Macquarie Infrastructure Management CEO Suresh Goyal said: “We remain optimistic on the India infrastructure story of which roads sector is a critical component. This is a long term partnership and together we will look forward to talking this business to greater heights.”

Infrastructure firm Ashoka Buildcon has an unexecuted orderbook of around $1 billion and currently has a portfolio of 25 BOT road projects.

It had witnessed the first private equity placement from IDFC Private Equity in 2006.

“We are pleased to have the SBI Macquarie joint venture as an investor in our road BOT business. We are confident that this will help us strengthen our position as a leading highway developer in India,” Ashoka Managing Director Satish Parakh said.

Ernst & Young acted as the exclusive financial advisor to Ashoka for this fund raising exercise.


PINC recommends `Buy` on Ashoka Buildcon

October 24, 2011

PINC Research has recommended `Buy` on Ashoka Buildcon with a price target of Rs 363 as against the current market price (CMP) of Rs 240 in its report dated Oct 14, 2011. The broking house gave the following rationale:

What`s the theme:

Ashoka Buildcon (ABL), with an experience of ten years in BOT road projects, currently has 23 projects in its portfolio, with 16 projects being operational. The company is among the few BOT developers that has seen a complete life cycle of a project and has handed over four BOT assets back to the government. ABL also has a strong in-house EPC arm, which executes in-house and third-party contracts.

What will move the stock:

1) Post the IPO, ABL is aiming for the next league with an aggressive but calculated bidding strategy. In FY11, the company won projects of more than Rs 30 billion. We expect it to maintain a market share of 3.5% in NHAI bidding in FY12-13. 2) No dilution likely in the medium term; ABL would require equity of Rs 8 billion in the next three years, which is likely to be met from internal accruals and securitization of the existing projects.

Where are we stacked versus consensus:

Our FY12 and FY13 earnings estimates are Rs 21.6 and Rs 25.7, 12.1% and 15.3% lower than consensus estimates respectively. We expect top-line growth of 12.5% and 19% to Rs 20.1 billion and Rs 23.3 billion in FY12 and FY13 vs. consensus forecasts of 46.8% and 21.5% to Rs 19.1 billion and Rs 23.2 billion, respectively. We value BOT (on a DCF basis) at FY12E and FY13E equity multiples of 1.6x and 1.1x, respectively. Our SOTP-based target price is Rs 363, where BOT is valued at Rs 208 and EPC at Rs 155 (9x FY12E earnings). The stock offers an upside potential of 51% at our SOTP-based target price of Rs 363 vs. consensus target of Rs 344.

What will challenge our target price:

1) Lower IRR owing to further increase in interest rates; 2) Lower traffic growth; 3) Slowdown in execution of current orders; and 4) Adverse impact on tolling charges from any changes in government policy.


Ashoka Buildcon To Raise Upto $150Mn For Road Projects

October 18, 2011

Ashoka Buildcon is selling stake in it’s newly formed road development subsidiary to raise upto $150Mn.

The company has formed a holding company for eight of its road projects, which are together worth around Rs 6,000 crore. The holding company currently includes six projects of National Highways   authority of India (NHAI) that the company is executing on build-own-operate basis, and two state road projects.

Ernst & Young is advising Ashoka Buildcon on the deal.

Given a typical 75:25 debt equity funding structure for highway projects, it will need Rs1500Cr as equity for the holding company.

Nashik based Ashoka Buildcon mainly constructs and operates roads and bridges on a BOT basis. It also undertakes EPC Contracts to construct distribution transformers and electricity substations.

Ashoka Buildcon On BSE

According to it’s website, it currently has a portfolio of 23 BOT road projects totalling approximately 3,498.35 kilometres of lanes in Maharashtra, Madhya Pradesh, Chhattisgarh, Karnataka and Orissa, of which 17 are in operation and six are under construction.

GMR Infrastructure is also planning to raise upto Rs960Cr for it’s road projects. It recently won a road project involving six-lane conversion of the existing Kishangarh-Ahmedabad highway.