Multi Bagger: Ahluwalia Contracts (India) Ltd
Recommended Price Rs 32.10
Ashish Chugh, Investment Advisor Report
Dated: Jan 05, 2009
ACIL.
Ahluwalia Contracts (India) Ltd (ACIL), promoted by Mr. Bikramjit Ahluwalia in 1979, is an Engineering-Procurement- Construction (EPC) company with business interests in the construction of Buildings including Malls, Multi- storeyed residential complexes, offices, Hotels, IT parks and Hospitals. The company which has been primarily involved in civil construction in the residential and commercial real estate segment has now diversified into the urban infra BOT space.
Ahluwalia Contracts (India) Ltd (ACIL) currently operates in two areas of business – Construction & Ready Mix Concrete, and derives over 90% revenues from Construction business.
Completed Projects:
The company’s experience of comprises execution of projects across a wide spectrum which includes Corporate Buildings, Residential Complexes, Hospitals, Hotels, Malls & Government Buildings and Government projects. Some of the projects executed by the company are given as under:-
Current Projects:
The company has an order book of Rs 3750 crores as on 31st October 2008.
Some of the current projects are :-
The company has bagged one of the largest housing construction contracts in the country - the Residential Complex for Commonwealth Games 2010. The value of the township project is Rs 688 crores. The project was awarded by Emaar MGF Construction This is the largest project ACIL has received so far.
The company has bagged and order worth Rs 229 crores for upgradation and renovation of Dr. S P M Swimming pool complex in New Delhi for the Commonwealth Games.
Awarded Hotel Leela Venture, Chankyapuri, New Delhi project worth of Rs 83 crores.
Vedanta Aluminum, Orissa Project worth of Rs 118.55 crores.
NBCC, Kundli, residential Project worth of Rs 99.26 crores.
Elphinston Mills, Mumbai project worth of Rs 73.00 crores.
Henkel Switchgear, Mumbai project worth of Rs 130.78 crores.
Housing project at Gurgaon from Emaar MGF worth Rs197 crores.
Office Building for IDBI at BKC, Mumbai worth Rs 97 crores.
Office Building for PNB at BKC, Mumbai worth Rs 54 crores.
BOT Projects:
ACIL has ventured into the urban infra space with a maiden Rs 72 crores order on BOT basis from Rajasthan State Road Transport Corporation (RSRTC) for the construction of a model bus terminal with a commercial complex at Kota (Rajasthan). The total plot area is 26,343 sq meters, out of which 3,300 sq meters built up area for bus terminal is to be handed over to RSRTC and the remaining 23,000 sq meters commercial space will be licensed to the company for 40 years. The company will develop a total of 2, 50,000 sq ft at the existing site, where it proposes to develop a commercial complex, budget hotels, multiplex, etc. ACIL plans to bid for similar projects in Rajasthan, UP, Punjab, Uttaranchal, etc.
ACIL also plans to enter the asset ownership space in the multi level car parking segment. It had executed similar projects on a cash contract basis and hence, is pre-qualified in this space for BOT projects.
Conclusion:
The stock of Ahluwalia Contracts has seen a sharp fall from a high of Rs 393 touched in January 2008 to its current price of Rs 32. This is inspite of the fact that there has been a growth in both the topline and bottomline of the company in the first 6 months of the current FY - Topline has grown 50% and bottomline over 30% in the first half of the current FY.
The stock has been down primarily on concerns of a slowdown in Infrastructure spending by the government, and slowdown in real estate sector. Also, of late, a large FII has been pressing sales on the counter. We believe another reason for the depressed investor sentiment in the stock is probably due to the uncertainty regarding slow work progress at the Residential Complex at Commonwealth Games Village. Since Emaar MGF lacks sufficient liquidity to execute the project, it has approached the government for loan to execute the project – we believe that the issue will be sorted out soon and the stock of Ahluwalia Contracts can see a sharp upmove as soon as the uncertainty is lifted.
The company has a debt of Rs 55 crores as on 31st March 2008 –which is much lower than the peer group with similar revenues/ order book. The company’s market cap of Rs 200 crores looks small given its order book of Rs 3750 crores. The company’s operating profit for FY 08 was Rs 110 crores and the current market cap is infact less than 2 years of operating profits and less than 20% of the current FYs expected revenues. Promoters holding 74% stake in the company gives added confidence.
Ahluwalia Contracts is also bidding for the Stadium renovation projects for the Commonwealth Games. The company has bid for the Jawaharlal Nehru stadium renovation project worth about Rs 400 crores and the Talkatora stadium renovation project worth about Rs 250 crores. Besides, there are a few other stadium renovation projects to be undertaken in Delhi itself and Ahluwalia Contracts is prequalified for all the projects. Ahluwalia Contracts being a large player in civil construction segment in the NCR, we expect the company to continue to bag a few more large orders for Commonwealth Games. ACIL also plans to enter the asset ownership space in the multi level car parking segment. The company has bid for eight multilevel car parking projects, out of which it expects to win two to four projects. The average sizes for these projects are in the range of Rs 125-160 crore.
Ahluwalia Contracts has an order book of Rs 3750 crores (as on 31st October 2008). A significant portion of this order book comprises orders linked to the Commonwealth Games scheduled for end 2010. With the new government headed by Smt. Sheela Dixit in Delhi now in place, we may see the execution of these projects being put on the fast track from now onwards, since these projects have to adhere to strict time schedules. The concerns of slowdown as far as Ahluwalia Contracts is concerned therefore may be unfounded, even though a slowdown for one or two quarters is not totally ruled out.
The stock having dropped over 90% from a high of Rs 393 touched in January 2008 to the current levels of Rs 32 looks attractive for investment.
