Ashoka BuildCon – IPO

Business of Ashoka Buildcon

Ashoka Buildcon is in the business of building and operating roads and bridges in India on a built – operate – transfer mode. The company has been organized in four divisions which are the BOT Division, the engineering, procurement and construction division (EPC) which does the designing, procurement of raw materials and construction of roads, bridges, commercial, industrial and institutional buildings. The other two divisions of the company are the RMC division which sells ready to mix concrete (RMC) and bitumen and then the toll collection contract division which collects tolls on roads owned and constructed by third parties.

Ashoka Buildcon was awarded its first BOT contract in 1997 which was the Dhule Bypass in Maharashtra and the company has been in the construction business since 1976. The company right now has operations in MP, Maharashtra, Chhattisgarh, Rajasthan, Gujarat, Goa, Tamil Nadu, NCR, Dadra and Nagar Haveli and Daman and Diu. Ashoka Buildcon is operating or has interests through joint ventures, subsidiaries and associate companies in 21 roads and bridges as of date.

Financials of Ashoka BuildCon

The company has steadily grown in revenues and from total revenues of Rs. 1568.34 million in fiscal 2003 it has grown to Rs.3711.61 million for the year ended March 2007 at a CAGR of 24%. However this figure must be looked at keeping in mind that the company grew its revenues by 106% in just the last year from Rs.1797.01 million to Rs.3711.61 million.

The profit after tax have also grown steadily at a CAGR of 55% from Rs.25.57 million in the year 2003 to Rs.147.38 million in the year 2007 and it has only declined once in that period when it came down to Rs.85.88 million in the year 2006 from Rs.113.46 million in the year 2005.

The P/E multiple for the years ended 2005, 06 and 07 were Rs.3.11, Rs.1.41 and Rs.6.24 respectively.

Objects of the Issue

Ashoka Buildcon intends to raise funds from the IPO in order to contribute a part of funds required by Ashoka Highways (Bhandara) Limited which is Ashoka’s subsidiary and has been formed in order to construct, operate and maintain 320 km 4 lane section of NH 6. Ashoka Buildcon estimates to spend Rs. 1250 million on this.

The other key area where the proceeds from the IPO would be spent are funding subsidiaries for repayment of debt for which funds Rs.731.14 million are earmarked and then investing in capital equipment for which Rs.300.15 million is earmarked.

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