MOSL: KNR CONSTRUCTIONS (Buy)- Satisfactory progress on new HAM projects; Focus to shift to timely execution
KNR Constructions: Satisfactory progress on new HAM projects; Focus to shift to timely execution
(KNRC IN,Mkt Cap USD0.5b, CMP INR226, TP INR320, 42% Upside, Buy)
We met the management of KNR Construction. Our key takeaways:
In principle, financial closures in place for three of the four HAM projects
KNRC has received in principle financial sanctions for three of the four HAM projects the company has won from NHAI and the fourth project is expected to achieve financial closure by August 2018. Full financial closure should happen once KNRC has 80% land available on 3H basis to execute the projects. Currently, three projects have 50-60% physical land available and one project has 80% land available. With financial sanctions in place for the three projects, focus will now be on NHAI making 80% of the land available, which will aid timely execution of the projects in hand.
In advanced-stage talks to rope in financial partner for HAM projects
KNRC is in advanced-stage talks to rope in an equity partner in the four NHAI HAM projects it has won. The financial partner will infuse money by way of optionally-convertible bonds during the construction stage, the bonds will have 14% cost of borrowing, and on completion of the project, the bonds will be converted to equity. The due diligence for the projects is expected to be completed by August 2018 and the transaction is likely to be completed by September 2018. KNRC plans to remain as an asset-light EPC player and hive off the projects post completion.
KNR Constructions Limited. KNR Constructions Limited is an India-based holding company. The Company is a multi-domain infrastructure project development company. The Company undertakes engineering, procurement and construction (EPC) contracts, as well as build-operate-transfer (BOT) projects across various sectors, such as construction and maintenance of roads, highways, flyovers and bridges. Its range of verticals also include irrigation projects, water management, agriculture and trading business. It has completed approximately 5,890 kilometers of projects across over 10 states in India. Its urban water infrastructure management project is Challaghatta Main Valley Project, which involves the remodeling of primary and secondary storm drains, bridges/culverts and related works in Challaghatta Main Valley in Bangalore City. The Company's irrigation and water management projects include Shankara Samudram Balancing Reservoir, Eastern Kosi Canal system, Reservoir across Mathadivagu and Budpur Balancing Reservoir.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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