Rudra Shares recommend Hindustan Construction Company as a dark horse

Rudra Shares And Stock Brokers | Jan. 27, 2017, midnight

Investment Rationale:

The revival package for the construction sector by the government will translate into a huge liquidity boost for the system. Under the new arrangement approved by the CCEA, government agencies would pay 75 % of the arbitral award amount to an escrow account against margin free bank guarantee. These initiatives are expected to help in improving the liquidity in the short run and reform the contracting regime in the long run.

Following the proposal from N ITI Ayog, the company will get 75 % of arbitration award amount of approximately Rs. 2,000 crore from NHAI and NHPC within 4-6 weeks. This will help the company to bridge the gap of “Cash flow Timing Mismatch” between claims realization (including its interest) and debt servicing.

HCC continued with its emphasis on sustained improvements in project execution efficiencies by setting norms and adopting a strict monitoring mechanism for key operational parameters across projects. These have resulted in notable gains in terms of inventory turnover, operating margins as well as cash collections.

Company is in lined with the arbitral awards within next 1 year resulting in cash accretive & would help in debt reduction to almost half in coming years ahead, perhaps boost profitability & enhance the share price of the company. Hence, we suggest to accumulate in small quantity for 2-3 years.

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