MOSL: SADBHAV ENGINEERING (Neutral)-Asset monetization to help deleverage balance sheet
SADBHAV ENGINEERING: Asset monetization to help deleverage balance sheet; Focus now shifts to improving execution
(SADE IN, Mkt Cap USD0.6b, CMP INR248, TP INR275, 11% Upside, Neutral)
SIPL sells nine operational road projects to IndInfravit at an EV of INR66.1b
Sadbhav Infrastructure Project Limited (SIPL) has entered into a definitive agreement with Indinfravit for the sale of its entire equity holding in nine of its operational road projects at an enterprise value of INR66.1b. SIPL has an equity investment of INR15b in these nine projects against which it will receive equity value of INR25.5b, thus valuing the deal at 1.7x its investment. The consideration will be split into 10% of IndInfravit units and INR19b of cash. The deal will also help to deleverage the balance sheet by reducing debt to the tune of INR40.6b.
Incrementally, SIPL will (a) handle routine and major maintenance of the nine assets (INR40b contract for remaining concession period) as well as other projects that InvIT will invest into, (b)receive project management fees (toll collection fees for nine projects), and (c) have the right to claims worth INR4b from its various projects. Further, there is also a ROFO option with IndInfravit with respect to all future operational assets of SIPL.
Sadbhav Engineering Limited is a construction company. The Company is engaged in the construction and maintenance of roads and highway, and irrigation system (canal). The Company is also engaged in the site preparation for mining, including overburden removal and other development. The Company's segments include EPC Contracts and BOT (Toll & Annuity). The Company has projects in the roads and highways, bridges, rail metro projects, irrigation supporting infrastructure, and the mining sector. Its engineering, procurement, construction (EPC) projects in roads and highways are Rohtak-Hissar section, Malavalli-Pavagada section, Ambala-Kaithal section, and Yamunanagar-Saha Barwala-Panchkula section of Haryana. The Company's Mining sector deals with excavation of overburden and mining of minerals, such as coal, uranium and lignite. It has excavation work at Mangrol lignite mines, Gujarat. It is also engaged in the construction of earthen dams, syphon, remodeling and improvement of canals.
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