Ashoka Buildcon shares jump 4% on Jaora Nayagaon stake sale. Nuvama sees stock at Rs 110

Shares of Ashoka Buildcon climbed 4 per cent in Monday's trade after the company said that its subsidiaries Ashoka Concessions and Viva Highways have entered an agreement with National Investment & Infrastructure Fund (NIIF) to sell its entire interest in Jaora Nayagaon Toll Road (JTCL).

Following the development, the stock rose 4.01 per cent to hit a high of Rs 85.50 on BSE.

Ashoka Buildcon will sell 74 per cent of its economic interest in JTCL toll project. The equity value for the transaction will be Rs 691 crore (100 per cent stake). The balance 26 per cent stake in the project is held by Macquarie group. The 74 per cent stake translates to Rs 510 crore equity value. The project has a debt of Rs 150 crore. Adjusting for the Rs 180 crore loan given by JTCL to ACL, the net cash inflow for the company will stand at Rs 330 crore, said Nuvama Institutional Equities.

The equity invested in the project was Rs 290 crore. The company expects the transaction to be completed by July-August 2023.

Nuvama said Ashoka Buildcon had earlier entered into a transaction with KKR to sell five BOT projects for Rs 134 crore.  Out of this, it would use Rs 1,200 crore to provide an exit to SBI-Macquarie (SBI-M), which had invested in Ashoka Concessions (ACL).

"Ashoka Buildcon had also agreed to sell the Chennai ORR annuity project to NIIF for an aggregate financial consideration of Rs 690 crore; out if this, Rs 450crore will flow to Ashoka Buildcon. The company expects the completion of these deals by end-FY23. The conclusion of these transactions will simplify the corporate structure and result in significant deleveraging for the company," Nuvama said.

Nuvama said the BOT stake sale has been a major overhang on the Ashoka Buildcon stock for the past couple of years. The proposed deals will de-lever the balance sheet, allow management to focus on the EPC business, and reduce risk perception among investors, it said.

"We had already removed the five assets (to be sold to KKR) from our valuations earlier. We now remove the Chennai ORR and the JTCL project also. At the same time, we increase P/E multiple from 3 times to 6 times in light of the expected reduction in leverage levels and a simplified corporate structure. On balance, retain ‘BUY/SN’ with a revised target of Rs 110," it said.

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