Ashoka Buildcon’s subsidiary Ashoka Concessions has entered into a share purchase agreement with Galaxy Investments II Pte, a KKR entity, for the sale of its entire stake in five toll assets. Brokerages see strong upside on Ashoka Buildcon shares as they believe announcement of this deal removes a big overhang from the infrastructure stock.
“The sale of the toll road assets was expected for a while as the management was looking to provide an exit to SBI Macquarie. It is now looking to accelerate the sale of its other assets, which includes Jaora Nayagaon and the Chennai ORR project, to free up further capital,” Motilal Oswal said in a note.
The brokerage has retained its Buy rating on the infra stock with a target price of ₹175 per share, implying an upside of 75% from current level. Motilal believes that with this sale, a big overhang has been removed and the management’s focus now shifts to business operations and new business opportunities.
Another brokerage PhillipCapital sees strong upside of over 96% on Ashoka Buildcon stock as it has a target price of ₹200 per share. While the deal culmination might take another 9-12 months, a big concern has been addressed. Due to this concern, the stock has been trading at exceptionally low multiple (6x FY23 PE) – which, the brokerage expects to be rerated significantly now.
“We continue to like the stock and view Ashoka a perfect proxy to play the road segment, with proven execution capabilities and healthy portfolio mix of EPC-BOT-HAM projects. Its strategy to diversify into power, railways and buildings segments also augurs well for the company, as it grows,” said analysts at PhillipCapital.
While the transaction is taking place below book value, it is overall positive for the company, as it leaves the company with surplus cash post settlement with SBI-McQ, and also removes the long-standing overhang on the stock, they added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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