Shares of IRB Infrastructure Developers Ltd surged as much as 10 per cent during the early trading session on Thursday after the domestic brokerage firm Kotak Institutional Equities (KIE) upgraded the stock and saw another 20 per cent in the infrastructure player.
IRB Private InvIT holds a portfolio of 10 existing BOT assets and five recently awarded assets. Road sector awarding has shifted to TOT and BOT projects, with NHAI’s focus on managing its debt levels. With a Rs 44,400 crore BOT pipeline for FY2024, we see players such as IRB, with its strong balance sheet, best placed to benefit, said Kotak.
In an exchange filing on Wednesday, IRB Infra said, "Fitch Ratings has assigned a final rating of 'BB+' to the $540 million senior secured partially amortising notes due 2032 issued by IRB Infrastructure Developers." The outlook is stable, said the company in an exchange filing.
Due to ballooning debt levels, BOT projects have also started making a comeback after years of focus on EPC and HAM projects as 100 per cent of the construction cost is borne by the developer. The Ministry of Road Transport and Highways has amended the model concession agreement for BOT and TOT mode of awarding, which bodes well for the IRB Infra, said Kotak's report.
"Some of the key amendments include central government support to concessionaires to complete projects; longer tolling period in case of a competing road project; and clarity on compensation to be paid in case of force majeure. We believe with the amendments in place, the final hurdle to award BOT projects has been cleared," the brokerage added.
Shares of IRB Infra surged more than 9.8 per cent to Rs 59.25 on Thursday, commanding a total market capitalization of close to Rs 36,000 crore. The scrip had settled at Rs 53.96 crore in the previous trading session. The stock has surged more than 160 per cent from its 52-week lows so far.
"We revise estimates by 1-7 per cent for FY2024-26 driven primarily by adjusting our traffic estimates for the private InvIT projects. We upgrade IRB Infra to 'add' from 'sell', after a 22 per cent decline since our downgrade. We increase our fair value to Rs 65 (from Rs 60) driven by adjustments to our traffic estimate for Private InvIT assets," said Kotak Institutional Equities.
Recently, Cintra, a subsidiary of the Spanish infrastructure giant Ferrovial, has acquired a 24 per cent stake in IRB Infrastructure Trust. This acquisition marks a strategic investment by Cintra in India's infrastructure sector and underscores its commitment to partnership and growth opportunities in the country.
The acquisition of a significant stake in IRB Infrastructure Trust highlights Cintra's confidence in the trust's asset portfolio and its potential for generating long-term returns. It also signifies Cintra's strategic alignment with IRB's vision and objectives in developing and operating infrastructure assets.
Recently, another brokerage firm Motilal Oswal had shared its view on the stock with a 'neutral' rating and a target price of Rs 60. "IRB will benefit from the growing EPC and O&M order book, which stood at Rs 36,200 crore as of December 2023. With a robust tender pipeline of projects to be awarded by NHAI and a healthy order book, we expect it to register a 12 per cent revenue CAGR over FY24-26E with sustained margins, Motilal said.
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