Ashoka Buildcon’s subsidiary, Ashoka Concessions, has entered into a share purchase agreement with Galaxy Investments II Pte, an entity of KKR, for the sale of its entire stake in five toll assets. Brokerages see a sharp rise in Ashoka Buildcon shares as they believe the announcement of the deal removes a large surplus from infrastructure stock.
âThe sale of the toll highway assets had been overdue for some time as management sought to offer SBI Macquarie an exit. It is now looking to accelerate the sale of its other assets, including Jaora Nayagaon and the Chennai ORR project, in order to free up more capital, âMotilal Oswal said in a note.
The brokerage kept its buy rating on the infra share with a price target of ??175 per share, which implies an increase of 75% from the current level. Motilal believes that with this sale a big overhang has been removed and management is now focused on business operations and new business opportunities.
Another brokerage firm PhillipCapital sees a sharp rise of over 96% on Ashoka Buildcon stock as it has a target price of ??200 per share. While it may take another 9 to 12 months for the deal to come to fruition, one major concern has been resolved. Due to this concern, the stock traded at an unusually low multiple (6x FY23 PE) – which the brokerage expects to revalue significantly now.
âWe continue to love the action and see Ashoka as a perfect proxy to play in the road segment, with proven execution capabilities and a healthy portfolio of EPC-BOT-HAM projects. Its strategy of diversifying into the power, rail and buildings segments also bodes well for the company as it grows, âPhillipCapital analysts said.
While the trade is below book value, it is overall positive for the company as it leaves the company with excess cash after settlement with SBI-McQ, and also removes the long-standing stock surplus. , they added.
The opinions and recommendations expressed above are those of individual analysts or brokerage firms, not Mint.
Never miss a story! Stay connected and informed with Mint. Download our app now !!