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Sintex Industries acquires 30% stake in Durha Constructions
Sintex Industries' (Sintex) wholly owned subsidiary, Sintex Infra Projects, has signed a
definitive agreement with Durha Constructions Pvt. Ltd. (DCPL) to acquire 30% stake in the
company for `42cr, translating into 4.6x EV/EBITDA on FY2010 basis. The acquisition will
help Sintex to grow and strengthen its monolithic and prefab business and build an active
presence in the infrastructure sector, particularly the EPC business that throws tremendous
opportunities with robust growth in the Indian economy. Further, as part of the agreement
with the current owners of DCPL, Sintex intends to acquire majority ownership (~51%
stake) of the company on pre-agreed terms by FY2011-end.
DCPL is mainly engaged in civil and mechanical construction work in varied infrastructure
sectors viz. power, petrochemicals and cement for public as well as private entities. The
company has a strong presence in North India and has undertaken engineering,
procurement and construction (EPC) projects at Delhi International Airport, Hyderabad
International Airport and Indraprastha Power Station among others. DCPL’s current order
book stands at `750cr across various infrastructure sub-sectors. For FY2010, the company
registered revenue of `150cr with an EBITDA margin of 16.6% (`25.2cr).
DCPL has grown its revenue by more than 40% p.a. over the past two years. Sintex has
indicated that it expects the growth rate to sustain over the next two years. Moreover, it has
bought the stake at 4.6x EV/EBITDA (at EV of `115cr), which is reasonable, given the
strong value addition expected from DCPL’s experience in the EPC business. At the CMP of
`186, Sintex trades at 9.7x FY2012E EPS and at an EV/EBITDA of 7.3x on FY2012E
estimates. We maintain a Buy rating on the stock with a Target Price of `229.
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