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Sadbhav Engineering has sold its 20 per cent stake in the Mumbai-Nashik Expressway project to Gammon Infrastructure Projects for Rs 72 crore.
The 99.5-km four-laning project between Vadape and Gonde in Maharashtra was housed in a special purpose vehicle and was developed through a consortium made up of Sadbhav (20 per cent), Gammon Infra (75 per cent) and BE Billimoria (5 per cent).
The stock of Sadbhav Engineering moved up over 5 per cent in trade, though it ceded some gains since. The stock is currently up around 3.5 per cent.
Consolidation drive
The toll-based Mumbai-Nashik project has been operational from May 2010, and involved a project cost of Rs 794 crore.
The SPV’s revenues, which had grown well since the collections began, took a dive in the 2013-14 fiscal. Revenues of Rs 94 crore in that year was below the Rs 131 crore of the fiscal before. The sluggish economy has a direct bearing on commercial road traffic and therefore toll collections.
The stake sale, while pending approval, comes on the back of Sadbhav starting to consolidate its road project portfolio. The road major has been upping stakes where it has the majority share.
It has, for instance, received approval from the NHAI to take its stake up to 100 per cent in the key Hyderabad-Yadgiri project, where toll collections grew 15 per cent in the September 2014 quarter.
Similarly, the company has agreed to acquire its partner’s stake in the Ahmedabad Ring Road project to hold the entire equity in the project, where toll revenues were up 18 per cent in the September quarter over the year-ago period.
Similarly, reducing stakes where it has a minority share, such as the Mumbai-Nashik project works along the same lines, and brings in fund flows that can be used for purposes such as working capital.
Sadbhav has also recently faced trouble with some small-scale joint venture partners whose deteriorating financial position prompted the company to step in to compensate. With scale enough now to tackle large projects on its own, the company can afford to move away from using joint ventures to expand.
Sadbhav's standalone sales grew 36 per cent in the first half of the current fiscal over the year-ago period, while net profit shrunk 16 per cent on higher tax payouts.
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