Buy Sadbhav Engineering; target of Rs 265: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com`s research report on Sadbhav Engineering“Sadbhav Engineering (SEL) has announced that the Board of Directors of the company has considered and approved fund raising by way of a qualified institutions placement (QIP) for an amount not exceeding Rs 250 crore. The proceeds from the QIP will mainly be used to fund its growth (capex requirement and WC requirement), going ahead. We maintain our BUY recommendation on the stock given its strong order book is providing revenue visibility, well funded equity for BOT projects portfolio, strong execution track record and better earnings growth.” “The Board of Directors on September 9, 2014 has approved fund raising by way of a QIP for an amount not exceeding Rs 250 crore. Proceeds from the QIP will mainly be used to fund its capex and WC requirement. Before this QIP, we believe 80 lakh warrants issued to promoters would also get converted into equity. Overall, we anticipate Sadbhav’s equity base would get diluted by 12.6% (including promoter warrants) to 17.1 crore equity shares while promoter holding will be maintained at ~47.3%. SEL has an equity commitment of Rs 250 crore over the next two years for the current BOT portfolio. To fund the same, it intends to use proceeds from the QIP along with NCD proceeds of Rs 130 crore at SIPL. Consequently, we do not see any equity gap in the SIPL BOT portfolio. In terms of financial closure, all BOT projects (except Mysore Bellary) are financially closed. Currently, the daily toll collection (except MNEL and DPTL projects where it has a minority stake) stands at ~Rs 1.2 crore/day. Going ahead, we anticipate toll collections will jump 2x to Rs 2.6 crore/day once all projects are operational in FY17E.”  “SEL remains our top pick in the sector on the back of a strong order book providing revenue visibility, well funded equity for BOT projects portfolio, strong execution track record and better earnings growth. We maintain our BUY recommendation with an SOTP based target price of Rs 265. We have valued SEL’s 80% stake in SIPL (BOT subsidiary) at Rs 160.9/share and construction business at Rs 104/share (at 7x FY16 EV/EBITDA),” says ICICIdirect.com research report.  

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