Ashoka Buildcon to benefit from road sector: Sharekhan

MUMBAI: Sharekhan is of the view that with 17 projects already operational and three more to get operational this fiscal, there is good revenue visibility for Ashoka Buildcon in terms of toll revenue.

“Ashoka has witnessed an impressive growth rate both in terms of revenue and net profit over the past few years. Its revenue and profit after tax (PAT) grew at a compounded annualised growth rate (CAGR) of 45% and 108% respectively over FY2006-10.

With 17 projects already operational and three more to get operational this fiscal, there is good revenue visibility in terms of toll revenue. Further its strong order book position of Rs 3200 crore provides strong visibility in the EPC revenue growth in the coming years.

Ashoka being one of the major toll players, is set to benefit from the tremendous opportunity available in the road sector.

The offer is priced in a band of Rs297 to Rs324, resulting in a price/book value (BV) of 2.3-2.5x its FY2010 book value respectively. This is largely in line with the average valuations of its peer group companies. However, we see a lot of value in the two new projects bagged recently where financial closure is awaited. These two projects would provide upside in the near future,” the report said.

Ashoka Buildcon has entered the capital market with an issue size of Rs 225 crore in the price band of Rs 297-324 per share.

The company plans to use the IPO proceeds for investment in capital equipment, meet working capital requirements, repayment of loans and funding the subsidiaries for prepayment/repayment of their loans.