Sadbhav Engineering Share price and Fundamental Analysis

Company History

Sadbhav Engineering Limited (SEL), a leading Gujarat based company was incorporated on 3rd October 1988 as a private limited company after taking over the running business of M/s Bhavna Construction Co. The Company is engaged in the business of development of infrastructure facilities in areas of canals, irrigations projects, roads, bridges, mining activities on contract basis, dams including civil, electrical and mechanical contractor, designer and engineers, structural contractor, earthwork contractor for repairing, reconstruction, renovation, demolitions and construction of canals, irrigations projects, roads, bridge, dams. It is also engaged in business of energy generation through Wind Power Project.

The Company implemented and executed projects of national significance including construction of roads and highways, bridges, mining and irrigation supporting infrastructure. SEL has successfully constructed 9283 lane kms of roads and highways (both state and national highways) and are among the top most infrastructure companies in India.

The Company was awarded the first Sardar Sarovar Narmada Nigam Limited (SSNNL) Canal Project during the year 1989-90. SEL attained the status of Deemed Public Company on the turnover criteria at the end of the third financial year 1992. The first mine excavation project of the company was executed in the year 1992-93. First activities in the construction segment of the company were started in the year 1993 with the contract Strengthening and Widening of Sambalpur-Rourkela Road from L&T'. Sadbhav forayed into the road sector in 1995 and has established a good reputation for itself in the industry. The Company had acquired its first road project from the private sector, Reliance Industries Limited (RIL) in the year 1996. The work involved construction of roads in RIL's township and refinery site at Moti Khavdi, Jamnagar.

During the year 1999, SEL awarded four work orders, of an approximate value of Rs. 151 crore from SSNNL for the construction of canals. SEL subsequently got converted into a Public Limited Company vide fresh Certificate of Incorporation dated 17th May 2001 and in 2002, completed the construction of its first ever canal siphon across river Vatrak. The Company was successful in won the contract for the excavation of overburden and lignite mining at Vastan Mines of Gujarat Industries Power Corporation Limited (GIPCL), which was completed in 2003. SEL had been awarded the Excellence Award by the Institute of Economic Studies (IES) in October of the year 2005. The Company entered into the capital market with a public issue in the year 2006 and in the same year, it secured projects from Government of Andhra Pradesh Irrigation and CAD Department. During the year 2006-07, The Company had secured three projects worth Rs. 216.35 crores in Andhra Pradesh, thus extending its reach beyond Gujarat.

SEL had entered into joint venture with PBA Infrastructure Limited for Construction of Roads in Multi model International Hub Airport at Nagpur (MIHAN) Project Complex during the year 2006-07. The Cost of the project covers Rs. 14236.21 lacks of which company's shares includes Rs. 7118.10 lacks. Nagpur-Seoni Expressway project was started in September 2007, which an annuity based project with a concession period of 20 years including 30 months of construction period. During the year 2007-08, SEL had entered into a joint venture with JMC Project (India) Limited for the construction of new 4 lane Agra bypass in the state of Uttar Pradesh under Phase-II programme of North-South & East-West corridors. Commercial operations of the Ahmedabad ring road, the company's project began in May of the year 2008. Sadbhav Engineering, through its wholly-owned subsidiary had acquired 74% stake in Hong Kong-based Ocean Bright Corp, for an undisclosed sum during June 2008.

During the year 2015-2016, Sadbhav Infrastructure Project Limited (SIPL), a subsidiary Company acquired 6% stake in Ahmedabad Ring Road Infrastructure Limited from Patel Infrastructure Private Limited.

During the year 2015-2016, SIPL had acquired 60% stake in Dhule Palesner Tollway Limited from its existing shareholders, for making it 100% Subsidiary. The transfer of ownership formality which was pending as at March 31, 2016 has been completed on the date of this report.

Pursuant to share purchase-cum-shareholders' cum subordinated debt agreement subject to Maharashtra Border Check Post Network Ltd. (MBCPNL), dated September 18, 2013 SEL and SIPL have agreed to sell 5,940 equity shares (11.88% of the outstanding equity interest) and 4,963 equity shares (9.93% of the outstanding equity interest) of MBCPNL respectively to D. Thakkar Construction Private Limited. Further, SEL has also entered into a share purchase agreement dated November 04, 2014 to sell 5,000 equity shares (10.00% of the outstanding equity interest) of MBCPNL to SIPL in FY 2016.

In respect of MBCPNL, during the year 2015-16, the company received general resolution from government of Maharashtra for construction of additional 2 Check post on BOT basis.

During the year February 2016, the company sold 20% stake held in Mumbai -Nasik Expressway Limited (MNEL).

In terms of Memorandum of Understanding (MOU) dated January 17, 2017 between the Company and Sadbhav Infrastructure Project Limited (SIPL), SEL reduced its commitment, to sell investment in Maharashtra Border Check Post Network Ltd. (MBCPNL), to third party, from 22% to 9% and resultantly, transferred such 13% ownership/beneficial ownership in MBCPNL to the SIPL, raising SIPL holding to 91%. SEL reaffirms that consideration received by it aggregating to Rs 280.13 Million, is towards transfer of entire ownership of 91% in MBCPNL, and hence, no further payment is required to be made by SIPL to SEL. The procedural formalities for transfer of equity shares were in progress as on the date of balance sheet.

Sadbhav Infrastructure Project Limited (SIPL), a subsidiary Company executed share purchase agreements (SPAs) and other ancillary agreements on 1st July, 2019 inter-alia with IndInfravit Trust (Indinfravit), an infrastructure investment trust for the proposed sale of 100% of the equity shares held by SIPL (including through its nominees) in 9 subsidiary companies (including MBHPL, a subsidiary of Sadbhav Engineering Limited and other 8 SPVs is a step-down subsidiaries of Sadbhav Engineering Limited) at an enterprise value of approximately Rs 66,112 million. The Proposed Transaction is subject to completion of the conditions precedent and other additional conditions as detailed under the said SPAs. Indinfravit is backed by marquee investors such as Canada Pension Plan Investment Board (CPPIB), Allianz Capital Partners (ACP) and Ontario Municipal Employees Retirement System (OMERS) together holding ~ 77.7% stake.