There are two positive new developments for Maytas Infra Ltd. One, Saudi Arabia-based Saudi Binladin Group (SBG) is to invest Rs300 crore in Maytas. Two, the corporate debt restructuring (CDR) cell has approved the debt restructuring proposal for the company. After the restructuring, the overall debt on Maytas’ balance sheet will come down to around Rs800 crore from Rs1,800 crore.
In the process, Maytas’ equity base should expand, as the company will make a preferential allotment of equity to SBG and also issue preference shares to convert a part of its debt. SBG will buy a 20% stake in Maytas at Rs195.30 per share. This values Maytas at Rs1,500 crore.
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Maytas is likely to use the funds received for its working capital needs and pay off some debt. These developments improve the financial leverage of Maytas. However, earnings per share will be affected to that extent, as the equity base will go up.
SBG is a contractor and developer, and is engaged in the building of roads, railways, tunnels, buildings, airports and townships. The deal is expected to enable Maytas rebuild its strengths in the engineering and construction space, and also allow SBG to access the opportunities in the booming Indian infrastructure business. After the conclusion of the deal, SBG will become a co-promoter of Maytas along with Infrastructure Leasing and Financial Services Ltd (IL&FS). After the preferential allotment and CDR, IL&FS’ stake in Maytas will stand at 28.27%. And after the deal, both IL&FS and SBG will make an open offer for an additional 20% stake from the market. This is because under the Sebi takeover code, any acquisition of 15% or more triggers an open offer and the acquirer needs to make an offer for at least another 20% of the target company. While that augurs well, it’s not unknown that Maytas has not declared its financial results since the September 2009 quarter. The company sought extension of time to announce its results “in view of certain impending issues” after the Satyam scam. Maytas was originally promoted by Teja Raju, elder son of Satyam founder B. Ramalinga Raju, who admitted to fudging the software firm’s numbers to the tune of several thousand crores. Maytas’ numbers for the last three quarters are expected by the month-end and should offer more clarity on its financial performance.
Maytas’ current order book is Rs7,000 crore, which is around five times fiscal 2009 revenue. According to it, most of the historical orders were from the irrigation sector,and the new ones are from roads, buildings and power. Going forward, the company will look at new projects in more lucrative sectors such as oil and gas, and railways.
The company’s stock went up by 15% in the first four trading sessions last week to Rs216.25 on 17 June, from Rs188 on 11 June. However, it corrected by 5.4% in the last two trading days to Rs204.50. At current levels, the stock appears to be discounting all the positive news flow.
Graphic by Naveen Kumar Saini/Mint
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