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Infra stocks with ‘Maha’ exposure fall up to 10%

Mumbai: Shares of companies that are involved in infrastructure projects in Maharashtra, including J.Kumar Infra, Reliance Infra, Capacit’e Infraprojects, ITD Cementation and NCC, declined between 5 per cent and 10 per cent on Tuesday after Maharashtra chief minister Uddhav Thackeray ordered a review of all projects cleared by the previous state government in the last six months and asked departments to stop payment till the new government clears the projects.

Though stoppage of payment has posed a near-term uncertainty on big-ticket projects like Mumbai Metro and Mumbai-Nagpur expressway, it’s unlikely to go back to re-bidding process, said analysts.

“Though there is an uncertainty in some projects, there is less likelihood of projects getting into re-bidding as the companies have got 85 per cent land acquired and have achieved financial closure,” said Ronald Siyoni, research analyst at Sharekhan by BNP Paribas.

“Further, the companies have received mobilisation advances for the contracts. The said projects have contract values between of Rs 1,300 crore and Rs 2,800 crore for listed companies like L&T, Sadbhav Engineering, PNC Infratech, Gayatri Projects, JK Infra and Reliance Infra.”

About 93 per cent of the Capacit’e Infraprojects’ order book exposure is from Maharashtra; while J Kumar Infra’s exposure is 54 per cent in Maharashtra. Other companies which have large exposure to the state include Dilip Buildcon (24 per cent), INC Infra (18 per cent), ITD Cementation (17 per cent), Sadbhav Engineering (15 per cent) and NCC (11 per cent).

In June 2019, the Andhra Pradesh government ordered a similar ‘review’ of orders awarded and eventually cancelled all orders placed by the previous government for the development of Amravati as the state’s capital.

Analysts believe while mega projects like the Mumbai-Nagpur Expressway, Mumbai-Ahmedabad bullet train, Coastal Road and Bandra-Versova Sea Link might get hit – metro projects in Mumbai and Pune should not see much impact.

“The real extent of stoppage/delay and the projects to be impacted will however be clear only after the government releases the details of the projects being ‘reviewed’,” said Vibhor Singhal, research analyst at Phillip Capital (India).

Source: Economic Times