IRB Infra Shares Plunge 10% Amid Block Deal: What's Happening?
IRB Infra Shares Plunge 10% Amid Block Deal: What's Happening?
Shares of IRB Infrastructure Developers Ltd faced a sharp decline, plunging over 10% during Tuesday's trading session. This drop comes amid reports that Cintra, a toll road subsidiary of the Dutch infrastructure giant Ferrovial, likely sold up to 5% of its stake in IRB Infra via a block deal. This marks a significant move in the stock market, affecting investor sentiment and raising questions about the future trajectory of the company’s stock.
The Details of the Block Deal
On June 11, 2024, a staggering 42 crore shares of IRB Infrastructure changed hands on the National Stock Exchange (NSE). This massive turnover is attributed to Cintra's decision to offload a portion of its holdings in the civil construction company. According to a term sheet reviewed by Economic Times, Cintra aimed to raise approximately Rs 1,900.29 crore (about $227.8 million) through this transaction. However, Business Today could not independently verify this report.
Cintra's Stake and Previous Transactions
As of March 31, Cintra held a 24.86% stake in IRB Infrastructure under the name CINTRA INR INVESTMENTS B V, according to BSE filings. This recent block deal isn't an isolated incident; it's the second one involving IRB Infra in the last 15 days. On May 30, 2024, IRB promoters had already sold 4% of their stake in the company through a block deal, as reported by ET.
Impact on Stock Performance
Following the block deal, IRB Infra shares plummeted by 10.20%, reaching a low of Rs 63 on the NSE. This decline extended the stock's two-day fall to 18%, having already dropped 9.05% to settle at Rs 70.15 on Monday. The sell-off by Cintra saw shares offered at a floor price ranging from Rs 63 to Rs 70.16 per share, representing a 10% discount from the previous closing price.
Jefferies and HSBC are reported to be the bankers managing this deal. Notably, Cintra initially acquired its 24.86% stake in December 2021 for €369 million, marking its significant investment in the Indian infrastructure sector.
Financial Outlook and Market Reactions
Despite the recent volatility, IRB Infra remains optimistic about its future. The company doesn't foresee any adverse impact from the recently proposed guidelines by the Reserve Bank of India (RBI), as banks are already charging higher interest rates for under-construction projects compared to operational ones.
IRB Infra anticipates securing considerable orders worth Rs 2 lakh crore over the next 12-18 months in Build-Operate-Transfer (BOT) toll projects, aiming to capture a market share of Rs 25,000-30,000 crore. HDFC Institutional Equities has recalibrated its earnings per share (EPS) estimates higher, reflecting better growth prospects and improved margins. The firm has set a target price of Rs 72 per share for IRB Infra, maintaining an "ADD" rating due to the limited upside on the current market price (CMP).
Conclusion
While the recent block deal and subsequent stock plunge may seem alarming, it's essential to view this development within the broader context of IRB Infra's strategic outlook and market position. The company's strong order book, expected growth in toll collections, and strategic measures to mitigate financial impacts position it for a potentially robust performance in the future.
Reference
- Block deal: IRB Infra shares plunge 10% amid high turnover; stock down 18% in 2 days - Business Today
- IRB Infra sees Rs 2,656 cr block deals as Cintra offloads 6.8% stake - Moneycontrol
- CCI approves Cintra's acquisition of 24% stake in IRB Infra Trust - NDTV Profit
- Dutch infrastructure major Ferrovial pruning stake in IRB Infrastructure via block deal - Economic Times
Check out the above links for more details