Ashoka Buildcon targets winning new road projects worth Rs4,000-5,000 crore2 min read . Updated: 01 Jul 2016, 09:53 PM IST
The target comes in the wake of India pushing for higher investments in building new highways and revamping existing ones
Mumbai: Road developer Ashoka Buildcon Ltd is targeting winning new road projects worth ₹ 4,000-5,000 crore this fiscal as India pushes for higher investments in building new highways and revamping existing ones. The company disclosed this target in recent interactions with analysts.
The company expects to bid for at least half of the projects, which are to be awarded in the next two months across the build, operate, transfer (BOT), engineering, procurement and construction (EPC), and hybrid annuity models (HAM). About ₹ 40,000 crore worth of road projects are to be awarded in the next 30-45 days, ICICI Securities analysts Nimit Shah and Rohit Gupta wrote in their 16 June report.
Ashoka Buildcon will likely achieve its target of winning ₹ 4,000 crore to ₹ 5,000 crore worth of projects given the large shelf of projects, Edelweiss Financial Advisors Ltd analysts Parvez Akhtar Qazi and Rita Tahilramani wrote in a 28 June note to clients.
High traffic growth, healthy balance sheet and strong road project awards trajectory will be positive for Ashoka Buildcon, the Edelweiss duo wrote. “With many developers facing balance sheet issues, BOT projects are likely to witness limited competition, resulting in lucrative IRRs (internal rate of returns) on these projects," they wrote.
India has set itself the target of awarding 25,000km of road projects in 2016-17 under the ministry of road transport and highways and the National Highways Authority of India, compared to the 10,000km awarded in 2015-16. This has resulted in strong prospects for developers such as Ashoka Buildcon and others, including Sadbhav Infrastructure Projects Ltd, PNC Infratech and KNR Constructions Ltd.
“Due to a healthy balance sheet, we expect the company (Ashoka Buildcon) to take up new projects in the BOT and hybrid annuity segment; while a strong presence in EPC segment will aid FY16-18 order book to grow at 15% CAGR, as per our estimates," Antique Stock Broking analysts Rahul Modi and Dhaval Patel said in a 28 June report.
Incorporated in 1993, Ashoka Buildcon is a road developer and also undertakes EPC projects in the power transmission and distribution (T&D) sector. In 2012, private equity funds jointly managed Australia’s Macquarie Group and State Bank of India agreed to invest ₹ 700 crore in a unit of the infrastructure company. All of the company’s BOT-toll projects are collecting toll revenue, with traffic growth of 9% in fiscal 2016.
“Traffic across the company’s BOT portfolio is expected to continue to grow at a healthy rate of 7-8% annually. However, lower WPI-led toll revision of about 2% this year would restrict toll revenue growth to 8-10% YoY," Shah and Gupta of ICICI Securities wrote in their report.
Ashoka Buildcon’s current order book stands at ₹ 4,100 crore. As on 31 March, Ashoka Buildcon had a consolidated debt of ₹ 4,047.91 crore. Up to Thursday’s close, its shares had lost 10.73% of its value, while the Sensex lost 2.81% in the same period.
Road projects in India have always been awarded in one of the three formats—BOT annuity, BOT-toll and EPC. In BOT annuity, a developer builds a highway, operates it for a specified duration and transfers it to the government, which pays the developer annuity over the concession period. Under BOT-toll, a concessionaire generates revenue from the toll levied on vehicles using a road. In EPC, the developer builds with government money. HAM is the fourth model that the government approved earlier this year. Under HAM, the government commits up to 40% of the total project cost.