Ashoka Buildcon, Sadbhav Engineering gain up to 6% in range-bound market

Sadbhav Engineering soared 6% to Rs 230 after the company said it received an appointment letter dated January 5, 2019 for road contract worth Rs 1,620 crore of Maharashtra Samruddhi Mahamarg.

Shares of infrastructure companies Ashok Buildcon and Sadbhav Engineering rallied up to 6% on BSE in an otherwise range-bound market on Tuesday.

Sadbhav Engineering soared 6% to Rs 230 apiece after the company in its press release said it had received road contract worth Rs 1,620 crore of Maharashtra Samruddhi Mahamarg. The stock was trading at its highest level since October 22, 2018 on the BSE.

The contract is for construction of access controlled Nagpur Mumbai Super Communication Expressway (Maharashtra Samruddhi Mahamarg) in the state of Maharashtra on EPC Mode for Package 5, From Km. 217.023 to Km. 259.900 (Section -Village Kinhiraja to Village Kenwad) in District Washim, Sadbhav Engineering said in a statement.

The construction period of the project is 30 months with defect liability period of 48 months and the contract value of the project as per contract agreement is Rs 1,620 crore, it added.

Ashoka Buildcon was trading 4% higher at Rs 132 on back of a two-fold jump in trading volumes. A combined 236,260 equity shares changed hands on the counter on the BSE and NSE till 12:51 pm. In comparison, the S&P BSE Sensex was up marginally by 0.08% at 35,879 points.

Motilal Oswal Securities expects awarding activity in infrastructure space to pick up in 4QFY19, similar to awarding activity in FY18.

FY19 saw a slow start in awarding of fresh projects, given changes in the top management of the National Highway Authority of India (NHAI), delay in financial closure of the existing projects and land acquisition issues faced by NHAI in new projects to be awarded.

In 3QFY19, ordering activity in the road sector was driven by states, while NHAI ordering remained muted. Marquee projects like Mumbai Nagpur Expressway/Purvanchal Expressway and the Coastal road project have been ordered out by the state governments on an EPC basis with execution expected to begin soon. All projects put together provide an EPC opportunity of Rs 47,000 crore, the brokerage firm said in Q3FY19 results preview.

With financial closure becoming stringent and banks being selective in extending credit to companies, we believe that the sector will see consolidation. Companies with a healthy balance sheet would benefit the most. Stringent financial closure would also lead to moderation in competition (witnessed in recently invited tenders), and thus, improvement in pricing and margins of the financially strong players, it added.