IRB Infra Shares Fall By18% in 2 Days as Cintra Offloads 6.8% Stake for Rs 2,656 Crore

In a significant development in the Indian infrastructure sector, shares of IRB Infrastructure Developers Ltd have plummeted nearly 18% over the past two trading sessions after its major investor Cintra, a subsidiary of Dutch infrastructure giant Ferrovial, sold a 6.8% stake in the company for approximately Rs 2,656 crore through block deals.

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Cintra Sells 41.2 Crore Shares at Rs 64.40 Each

According to regulatory filings, around 41.20 crore shares of IRB Infrastructure Developers, representing a 6.8% stake in the company, changed hands in two block deals on June 11, 2024. The transactions were executed at an average price of Rs 64.40 per share, amounting to a total deal value of Rs 2,656 crore.

Prior to the block deals, Cintra held a 24.86% stake in IRB Infra under the name of CINTRA INR INVESTMENTS B V as of March 31, 2024. The stake sale is likely to trigger a lock-in period of 150 days before Cintra can execute any further block deals to offload more stake in the infrastructure company.

IRB Infra Shares Tumble on Heavy Volumes

The block deals had a significant impact on IRB Infrastructure’s stock price, with the shares plunging 10.20% to hit a low of Rs 63 on the National Stock Exchange (NSE) on June 11. This took the stock’s two-day fall to nearly 18%, after it had already declined 9.05% to settle at Rs 70.15 on the previous trading day.

The sharp fall in IRB Infra’s shares was accompanied by heavy trading volumes. Nearly 42 crore shares changed hands on the NSE amid reports of Cintra’s stake sale.

Cintra’s Stake Sale Follows IRB Promoters’ Block Deal in May

Interestingly, Cintra’s stake sale comes just weeks after IRB Infrastructure’s promoters sold a 4% stake in the company through a block deal on May 30, 2024. In that transaction, IRB Holding Pvt Ltd and Deepali Virendra Mhaiskar offloaded up to 225 million and 15 million shares respectively.

The close proximity of these two major stake sales by key investors has raised eyebrows in the market and contributed to the sharp fall in IRB Infra’s stock price.

HSBC, Jefferies Reportedly Broker the Deal

According to reports, global investment banks HSBC and Jefferies acted as the brokers for Cintra’s stake sale in IRB Infrastructure. The banks are said to have managed the block deal process and reached out to potential institutional investors to gauge demand.

The involvement of such marquee names in the deal underscores the significance of the transaction and the continued interest of foreign investors in India’s infrastructure sector despite the recent volatility.

IRB Infra’s Strong Fundamentals and Growth Prospects

Despite the short-term impact on its stock price, IRB Infrastructure Developers continues to exhibit strong fundamentals and promising growth prospects. The company is one of India’s leading infrastructure players with a portfolio of over 20 BOT (build-operate-transfer) road projects across the country.

For the fourth quarter ended March 31, 2024, IRB Infra reported a robust 45.1% year-on-year jump in net profit to Rs 188.9 crore, while its revenue from operations grew 27.2% to Rs 2,061.2 crore. The company’s operating EBITDA also increased 17.3% to Rs 889.9 crore during the quarter.

IRB Infra’s management expects the uptrend in toll collections to gather further momentum in the coming months, driven by an increase in toll tariffs which came into effect from early June 2024. The company reported a 30% year-on-year rise in toll collections to Rs 536 crore in May.

Moreover, IRB Infra anticipates considerable order inflows worth Rs 2 lakh crore over the next 12-18 months in the BOT toll segment and expects to win projects worth Rs 25,000-30,000 crore, translating to a market share of around 15%.

Positive Sectoral Tailwinds

The Indian government’s continued thrust on infrastructure development, coupled with the improving economic environment, bodes well for companies like IRB Infrastructure. With Prime Minister Narendra Modi securing a third term in office, the infrastructure sector is expected to receive a major boost in the coming years.

Analysts remain bullish on IRB Infra’s prospects despite the recent stake sales by key investors. Brokerage firm HDFC Institutional Equities has raised its target price on the stock to Rs 72 per share, citing the improving outlook on order inflows, better-than-expected toll growth, and the likelihood of interest rate cuts going forward.

Conclusion

In conclusion, while the recent block deals by Cintra and IRB Infrastructure’s promoters have led to a sharp correction in the company’s stock price, the long-term growth story remains intact. IRB Infra’s strong fundamentals, robust order book, and the positive sectoral tailwinds are expected to support its performance going forward.

As the company continues to execute its projects efficiently and win new orders, it is well-positioned to capitalize on the immense opportunities in India’s infrastructure space. Investors with a long-term perspective may consider using the current dip in the stock price as an opportunity to accumulate shares of this leading infrastructure player.

However, as with any investment, it is crucial to conduct thorough research and consult with a qualified financial advisor before making any decisions. The infrastructure sector is inherently volatile and subject to various risks, including regulatory changes, execution delays, and funding challenges.

By carefully analyzing IRB Infrastructure’s financial health, competitive positioning, and growth strategies, investors can make informed decisions and potentially benefit from the company’s long-term value creation potential in the dynamic Indian infrastructure landscape.

C.K. Gupta

Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.