Water management company VA Tech Wabag has raised Rs 120 crore from marquee investors for "growth capital", through a preferential issue of equity shares at Rs 160 apiece.
The company has been able to do this at a time when most infrastructure management players are still struggling to recover from the coronavirus-induced lockdowns.
Of the sum raised, Rakesh Jhunjhunwala has invested Rs 80 crore, Basera Home Finance has invested Rs 24 crore, and Jai Corp promoter Anand Jain, the balance Rs 16 crore.
This is nearly 10 percent of the company's market capitalisation. Already, the company's share price has gained 80 percent in three weeks.
| In Rs Cr | FY19 | FY20 | FY21e |
| Revenue | 2,781 | 2,557 | 2,034 |
| EBITDA | 194 | 217 | 110 |
| EBITDA % | 7.00% | 8.50% | 5.40% |
| Profit | 105 | 91 | 25.1 |
| Source: ICICI Securities | |||
As on March 2020, the company had an order book of Rs 5,947 crore, and broking firm ICICI Securities expects it to grow 6 percent in the current financial year. However, revenues and profitability are likely to be lower, year-on-year, according to the brokerage.
The company gets a majority of its revenues from municipal corporations. Industries and maintenance segments provide the rest.
It’s worthwhile to note that unlike many other infrastructure management companies, VA Tech Wabag has a relatively low level of net debt in relation to its net worth. As on March 2020, the company’s debt stood at Rs 482 crore, and it had cash and cash equivalents worth Rs 320 crore. In comparison, its net worth at the end of the previous financial year stood at Rs 1,174 crore
What’s the street thinking?
Brokerage Phillip Capital says the company has a strong order book and expects execution to pick up in FY21. It adds that “the current pandemic will only accelerate investments in sanitation and water treatment”, which will spur long-term demand.
ICICI Securites is a little more circumspect. It says the current working capital stretch is impacting near-term cash flow and delay in collections could hurt earnings.
With an FY20 EPS of Rs 19.3 per share, as on August 26, the company trades at a trailing price to earnings ratio of 10.98 times.
