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Anandrathi
Dilip Buildcon (Buy)
CMP: ₹425.25
Target: ₹586
Of the required about ₹570 crre infusion, Dilip ideally would infuse about ₹290 crore for its 51 per cent share; Cube would then invest its share (as OCDs) provided the five projects have adequate RoW, and attained suitable physical progress, among other conditions. At the COD, toward its investment, Dilip would receive about ₹180 crore on conversion into equity of the OCDs (with rights to a 49 per cent stake); the balance receipts of about ₹230 crore would come two years from the COD. Subject to adjustment for the liabilities, the deal pegs the equity value for the 100 per cent stake at about ₹702 crore.
For its 51 per cent stake, Dilip is set to receive about ₹409 crore, amounting to about 1.4x its about ₹290 crore committed equity investment. Adjusting for the monies to be received and equity infused for the opportunity costs involved (assumed at 10 per cent), the deal would apparently be realised at about 1.1x.
Valuation: The stock (excluding investments) trades at around the P/Es of 7.1x FY20e and 6.6x FY21e. We currently have a BUY rating on it, with a target price of ₹586.
Risk: Slower-than-expected pace of execution.
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