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http://content.icicidirect.com/mailimages/ICICIdirect_IVRCL_ManagementMeetUpdate.pdf
Multiple near term catalysts…
We met the management of IVRCL. The key takeaway are a) sale of Noida
land parcel leading to debt reduction of | 125 crore, b) negotiation of sale
of its three key projects aggregating | 500 crore, which would support its
equity requirement of | 200 crore for ongoing projects (not considering
new win projects) and potentially further reduce its debt, going ahead and
iii) the court decision on merger of IVRCL & IVRCL Assets expected on
April 17, 2012. Furthermore, media reports indicate that the Subhash
Chandra-promoted Essel Group has raised its stake in IVRCL to 12.3%,
surpassing the promoters holding of 11.2% (promoter holding would
increase to ~13.5% post merger of IVRCL Assets & Holding). This entire
saga, we believe, would lead to retaining/gaining management control, in
which institutional holding of 42.5% would play a critical role, going
ahead.
ƒ Debt paring, equity funding through BOT assets & land parcel sale
IVRCL currently has gross debt of | 2600 crore of which it expects debt
reduction of | 125 crore due to sale of three NCR plot for | 200 crore. The
company is also in talks with one of the large groups in the infra space to
sell its three BOT projects (two operational and one under construction).
Together, these projects are expected to free up ~| 500 crore. These
should help in supporting equity funding requirement of ~| 200 crore for
current ongoing projects (excluding new projects wins) and reducing the
debt at the parent level.
ƒ Essel group acquires 12.3% stake in IVRCL
Media reports indicate that the Essel Group has raised its stake in IVRCL
to 12.3%, surpassing the promoters holding of 11.2% (promoter holding
would increase to ~13.5% post merger of IVRCL Assets & Holding). This
entire saga would lead to retaining/gaining management control, in which
institutional holding of 42.5% (refer Exhibit 2 for holding pattern >1%)
would play a critical role, going ahead.
V a l u a t i o n
At the CMP, the stock is trading at 7.7x FY13E EPS (after incorporating the
subsidiary values) and 0.9x FY13E P/BV. While we do not see any upside
at the current level on fundamental grounds, news flows related to Essel
group acquisition have led to a sharp rise in the counter (run up of 170%
in the last three and half months) and it may remain in momentum in the
near term. Hence, we have assigned a HOLD rating to the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_IVRCL_ManagementMeetUpdate.pdf
Multiple near term catalysts…
We met the management of IVRCL. The key takeaway are a) sale of Noida
land parcel leading to debt reduction of | 125 crore, b) negotiation of sale
of its three key projects aggregating | 500 crore, which would support its
equity requirement of | 200 crore for ongoing projects (not considering
new win projects) and potentially further reduce its debt, going ahead and
iii) the court decision on merger of IVRCL & IVRCL Assets expected on
April 17, 2012. Furthermore, media reports indicate that the Subhash
Chandra-promoted Essel Group has raised its stake in IVRCL to 12.3%,
surpassing the promoters holding of 11.2% (promoter holding would
increase to ~13.5% post merger of IVRCL Assets & Holding). This entire
saga, we believe, would lead to retaining/gaining management control, in
which institutional holding of 42.5% would play a critical role, going
ahead.
ƒ Debt paring, equity funding through BOT assets & land parcel sale
IVRCL currently has gross debt of | 2600 crore of which it expects debt
reduction of | 125 crore due to sale of three NCR plot for | 200 crore. The
company is also in talks with one of the large groups in the infra space to
sell its three BOT projects (two operational and one under construction).
Together, these projects are expected to free up ~| 500 crore. These
should help in supporting equity funding requirement of ~| 200 crore for
current ongoing projects (excluding new projects wins) and reducing the
debt at the parent level.
ƒ Essel group acquires 12.3% stake in IVRCL
Media reports indicate that the Essel Group has raised its stake in IVRCL
to 12.3%, surpassing the promoters holding of 11.2% (promoter holding
would increase to ~13.5% post merger of IVRCL Assets & Holding). This
entire saga would lead to retaining/gaining management control, in which
institutional holding of 42.5% (refer Exhibit 2 for holding pattern >1%)
would play a critical role, going ahead.
V a l u a t i o n
At the CMP, the stock is trading at 7.7x FY13E EPS (after incorporating the
subsidiary values) and 0.9x FY13E P/BV. While we do not see any upside
at the current level on fundamental grounds, news flows related to Essel
group acquisition have led to a sharp rise in the counter (run up of 170%
in the last three and half months) and it may remain in momentum in the
near term. Hence, we have assigned a HOLD rating to the stock.
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