MULTIBAGGERS

Ahluwalia Contracts
Ahluwalia Contracts is a Delhi-based construction company. This company has got an order book position of close to Rs 4,200 crore. If you look at the financials of the company for FY08, the company achieved revenues of about Rs 880 crore, made a profit after tax of about Rs 52 crore, and paid a tax of close to Rs 29 crore. In the first half of the current financial year, revenue is up by about 50%, profit after tax is up by close to 30%, and the good part is that the tax payment is up by close to 40%.

There are few concerns as far as the company and the sector is concerned. First, the general negative sentiment which we are witnessing towards the construction stocks is taking its toll on the stock of Ahluwalia Contracts also. Second, is regarding one of the projects which is related to the Commonwealth Games village. This is about Rs 650-700 crore project which has been allotted to the company by Emaar MGF and the project is witnessing slow progress mainly on account of the liquidity crunch which Emaar MGF is facing. The Commonwealth Games village project has to be completed before end of 2010.

Emaar MGF has approached DDA (Delhi Development Authority) for a loan for doing this project and there is some uncertainty on that account. But I think the issue may get resolved in the next one month or so because they would need time for construction of the Commonwealth Games village also. I think that is one concern because of which the market is slightly sceptical about Ahluwalia, but once this concern is taken care of the stock can look up.

Against an order book of Rs 4,200 crore, the market cap of the company just about Rs 200 crore. Last year, they did a operating profit of Rs 110 crore. So at Rs 200 crore market-cap, this company available at less than two years of its operating profits.

If you look at the debt position of the company, it has got working capital loans of close to Rs 55 crore. If you do a peer group comparison for similar size companies and similar order book positions, the debt of Ahluwalia is much less compared to many other peer group companies. Promoters hold 74% stake in the company which gives a lot of confidence. Ahluwalia Contracts may have kept a low profile but the promoters are veterans in their industry, having been in the business for about more than 30 years.

Ahluwalia Contracts is probably down mainly because of concerns in the mind of investors regarding slow spending by the government for infrastructure projects. Out of Rs 4,200 crore of projects, about Rs 1,200-1,500 crore projects are the ones which are related to the Commonwealth Games which are scheduled to be held in Delhi at the end of 2010. These are projects which are time scheduled and they have to be completed before the commencement of the Commonwealth Games. Now with the new government in Delhi headed by Sheela Dixit, we may see faster execution of these projects. These projects till now has been going at their own pace but as the time for the Commonwealth Games approach closer, I think faster execution can happen in these projects.

As far as the concerns about the slowdown and its impact on Ahluwalia Contracts is concerned, these concerns maybe largely unfounded. The heartening fact is that inspite of the slowdown the company has seen an about 50% increase in revenues in the first half and 30% increase in profit after tax. In the worst case scenario, this year’s profit will be up by at least 10-15% compared to FY08 profits.

At the current valuation, this stock looks extremely cheap. The stock has fallen from a high of about Rs 393 to the current price of about Rs 31-32. As far as the downside is concerned, it looks to be stock with little downside from the current levels and has got a potential to give extremely good returns over maybe one-two years period.

Completed Projects:
The company’s experience of comprises execution of projects across a wide spectrum which includes Corporate Buildings, Residential Complexes, Hospitals, Hotels, Malls & Government Buildings and Government projects. Some of the projects executed by the company are given as under:-

Current Projects:
The company has an order book of Rs 3750 crores as on 31st October 2008.

Some of the current projects are :-
The company has bagged one of the largest housing construction contracts in the country - the Residential Complex for Commonwealth Games 2010. The value of the township project is Rs 688 crores. The project was awarded by Emaar MGF Construction. This is the largest project ACIL has received so far.

The company has bagged and order worth Rs 229 crores for upgradation and renovation of Dr. S P M Swimming pool complex in New Delhi for the Commonwealth Games.

Awarded Hotel Leela Venture, Chankyapuri, New Delhi project worth of Rs 83 crores.

Vedanta Aluminum, Orissa Project worth of Rs 118.55 crores.

NBCC, Kundli, residential Project worth of Rs 99.26 crores.

Elphinston Mills, Mumbai project worth of Rs 73.00 crores.

Henkel Switchgear, Mumbai project worth of Rs 130.78 crores.

Housing project at Gurgaon from Emaar MGF worth Rs197 crores.

Office Building for IDBI at BKC, Mumbai worth Rs 97 crores.

Office Building for PNB at BKC, Mumbai worth Rs 54 crores.

BOT Projects:
ACIL has ventured into the urban infra space with a maiden Rs 72 crores order on BOT basis from Rajasthan State Road Transport Corporation (RSRTC) for the construction of a model bus terminal with a commercial complex at Kota (Rajasthan). The total plot area is 26,343 sq meters, out of which 3,300 sq meters built up area for bus terminal is to be handed over to RSRTC and the remaining 23,000 sq meters commercial space will be licensed to the company for 40 years. The company will develop a total of 2, 50,000 sq ft at the existing site, where it proposes to develop a commercial complex, budget hotels, multiplex, etc. ACIL plans to bid for similar projects in Rajasthan, UP, Punjab, Uttaranchal, etc.