Motilal Oswal 's research report on KNR Construction
KNR completes monetization of Walayar road project: KNR has completed the sale of the Walayar road project to Cube Highways at an enterprise value of INR5.1b. Debt on the project stands at INR1.3b. Thus, the deal’s equity value is estimated to be ~INR3.8b or P/Inv of ~1x. While this is almost in line with the announced deal value in Jan’20, part of the proceeds is subject to the fulfillment of certain conditions. In lieu of an equity value of INR3.8b, KNR is likely to immediately realize a payment of INR3.1b, while the remaining INR0.7b would flow in over the next two years. Further NHAI claims and other governmental instrumentalities amount to INR1.7b – a pass-through to KNR as and when realized. We are yet to factor in any arbitration proceeds in our model. Any such realization could further boost the balance sheet.
Outlook
We maintain our Buy rating, with higher TP of INR310 (prior: INR295), based on: (a) unchanged 12x Mar’22E EPS to the EPC business and (b) the book value of road assets.
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