Share Tips Prices Targets: IVRCL restructuring rational report by Motilal Oswal
It seems analyst community is convinced with the move taken by the IVRCL Infrastructure management to transfer the BOT assets to its listed subsidiary IVR Prime Urban Developers Ltd. Angel Broking given some positive opinion recently and Motilas Oswal has come out with some more details after the meeting the management. here is the key highlights of Motilal on the event:
IVRCL has announced restructuring of its BOT assets portfolio wherein it will transfer its holding companies to IVR Prime Urban (62.4% subsidiary). The effective date for the transfer will be April 1, 2009. The merger will be through share issue of 59.5m shares in IVR Prime Urban to IVRCL. Thus the stake of IVRCL in IVR Prime Urban will increase to 80.5% post the restructuring. Further details (e.g. incremental net worth of IVR Prime Urban post acquisition) will be available after Court approval for the transaction (expected by 1QFY11).
- IVRCL’s BOT assets plus future opportunity valued at Rs9b: IVRCL has invested equity of ~Rs4.5b in the BOT assets. At the CMP of Rs152/sh for IVR Prime Urban, the transaction is being valued at Rs9b (P/BV of 2x).
- Rationale for the transaction: Boost to IVR Prime Urban – increased net worth (up~85%), debt raising possibilities (~Rs5b), possible equity dilution: The restructuring will lead to increased focus on BOT projects, and also provide a higher net worth to bid for large projects. We estimate that at possible transaction value of Rs13.5b (at say 3x P/BV), the net worth of IVR Prime Urban as at March 2010 including capital reserves (~Rs8.5b) and minority interest (~Rs1.7b) will increase to ~Rs20b+. This compares with net worth of Rs10.9b as at March 2009 (including minority interest of Rs1.5b).
- Valuation and view: We currently value the BOT portfolio of IVRCL at 1.5x P/BV, and thus the proposed transaction at 2x P/BV (based on CMP of IVR Prime Urban) will add marginally (~2.6%) to SOTP value of IVRCL. The transaction could lead to increased focus on BOT projects without necessitating further equity dilutions in IVRCL. We maintain Buy with price target of Rs382/sh for IVRCL.
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