Shares of PNC Infratech hit an over three-month high at Rs 338.55, as they rallied 6 per cent on the BSE in Thursday’s intra-day trade in an otherwise subdued market on reports that KKR’s roads Highways Infrastructure Trust is in talks to acquire a portfolio of 12 road projects from the company for an enterprise value of about Rs 9,000 crore.
The portfolio on sale comprises 11 hybrid annuity model (HAM) roads and one build-operate-transfer (BOT) road. These projects are located across Uttar Pradesh, Madhya Pradesh and Rajasthan, the Economic Times reported quoting people aware of the development.
"There were four bidders for the PNC portfolio. The company has gone ahead with KKR and the PE firm has recently started due diligence on the assets. The portfolio has an enterprise value of around Rs 9,000 crore, with debt of around Rs 6,900 crore," the newspaper reported.
PNC Infratech highlights that company in Q4 had indicated Eleven HAM and one BOT project (Bareilly Almora) are under block to monetise having debt of Rs 6,900 crore and equity of ~ Rs 1,700 crore (seven operational; rest likely by next three to four months). It has received offers from four investors. It indicated that the definitive agreement could be signed (expected by Q3FY24 end).
The indicative deal implies P/B of 1.24x. Most importantly, the strong inflow of equity of around Rs 2,100 crore (on deal consummation) would massively increase the scale of PNCs ability to execute and grow the revenues, ICICI Securities said in a note.
PNC Infratech is engaged in diversified construction activities such as construction of highways, bridges, flyovers, airport runways and allied activities. The company has over two decades of experience in executing road projects and its major clients include National Highway Authority of India (NHAI), Airports Authority of India (AII), Haryana State Roads & Bridges Development Corporation Limited (HSRDC), Uttar Pradesh State Highway Authority (UPSHA), Delhi State Industrial & Infrastructure Corporation of India (DSIIC), Military Engineering Services (MES), Public Works Department (PWD), UP Expressways Industrial Development Authority (UPEIDA) and Dedicated Freight Corridor Corporation of India.
As on March 31, 2023, PNC Infratech has a robust order book of Rs 15,600 crore. Contract under execution is over Rs 20,500 crore which is over 2.9 times of FY23 revenue including contract worth Rs 4,854 crore not yet included in order book, the company said.
The strong order book position aiding revenue visibility has continued to remain a credit strength. Furthermore, around 60 per cent of the order-book of the company is from NHAI thereby precluding counterparty risk. Under the Union budget 2023-24, an allocation of Rs 2.70 trillion to Ministry of Road Transport and Highways (MoRTH) marks nearly a 10 per cent jump in the allocation made under the budget 2022-23.
CARE Ratings believes that PNC Infratech shall monetise certain projects over next one year thereby freeing up growth capital for future investments with minimal reliance on external debt. As articulated by the company, these monetisation initiatives are at various stages of development.
The company has also been regularly increasing its fixed asset base commensurate with its increase in the order book, which provides it operational flexibility for faster machinery deployment and site mobiliation in order to start and expedite project execution. The strong order book position and track record of timely execution provides adequate revenue visibility for the medium term, rating agency said in rationale.