Shares of IRB Infrastructure Developers rallied over 11% to hit a 21-week high of ₹241.5 in intraday trade on the BSE on Monday after the highway construction company said it executed definitive agreements for the implementation of the Ganga expressway project. The stock price also got a boost after domestic brokerage Ventura initiated coverage on IRB with a “BUY” for a target price of ₹729.2 (SOTP methodology), a potential upside of 239% over the next 30 months.

The brokerage opined that the construction company is at the threshold of accelerated growth given its expanding footprint and improved balance sheet. However, low traffic growth due to a fall in economic activity remains the key risk for the company.

IRB Infra in an exchange filing on Sunday said that it executed a project implementation agreement on October 15 with Meerut Budaun Expressway Ltd (MBEL), a wholly-owned subsidiary of IRB Infra, and financial investor Anahera Investment, an affiliate of GIC Private Ltd, to implement Ganga expressway project. IRB Infra will also act as the project manager of MBEL to implement the project.

As per the deal, the company’s and the financial investor’s contribution to the project is proposed to be in the ratio of 51:49, respectively. Both parties have agreed to infuse around ₹533.20 crore by way of subscription to equity shares in a single tranche and ₹1,599.75 crore by way of subscription to non-convertible debentures of MBEL in multiple tranches. As many as 53.32 crore equity shares of MBEL of face value of ₹10 each are proposed to be subscribed by the company and the financial investor in the ratio of 51:49, while 159,975 NCDs of MBEL of face value of ₹1,00,000 each in the specified ratio, in multiple tranches.

“IRB Infrastructure Developers will be paid approximately ₹10,459 crore over the concession period as aggregate consideration for providing EPC and O&M works to MBEL for the Ganga Expressway Project,” it said in a filing to the BSE on Sunday.

Reacting to the news, IRB Infra share price gained as much as 11.5% to hit a 21-week high of ₹241.5 in intraday trade on the BSE. The stock finally closed 10.67% higher at ₹239.15, against the Friday’s closing price of ₹216.1. There was a surge in volume trade as 4.19 lakh shares changed hands over the counter as compared to two-week average volume of 0.61 lakh stocks.

IRB Infra shares currently trades 60% higher than its 52-week low of ₹179.05 touched on 20 May, 2022, and 31% lower than its 52-week high of ₹346.95 on October 25, 2021. With a market capitalisation of ₹14,442 crore, the stock delivered 13% returns in the past year, outperforming its sector by 11.9% during this period. On year-to-date (YTD), the midcap stock has gained 8%, while it has risen 7% in a month.

The consensus recommendation from three analysts for IRB Infrastructure Developers is “Strong Buy”, while three have given “hold” call on the stock, as per Trendlyne.

For April-June quarter of 2022 (Q1 FY23), IRB Infrastructure reported more than 5-folds growth in a consolidated net profit at ₹363.19 crore, compared to ₹71.91 crore in the corresponding period of the previous fiscal. The consolidated income climbed to ₹1,995.40 crore as against ₹1,670.48 crore in the year-ago period.

The company’s debt to equity ratio is higher than 1, which implies that its assets are financed through debt. The total debt increased from ₹6,218.3 crore to ₹13,822.5 crore in FY22, mainly on account of upfront payment to Maharashtra State Road Development Corporation (MSRDC) for Mumbai-Pune Phase 2. 

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