Simplex Infra: A Buyout Target

Share price of Simplex Infrastructure has been inaction off;late on talks of Adani Group is buying equity stake in the company.

Two private equity investors have also expressed interest in the company.
Adani Group, the front-runner among the potential investors, has begun discussions with Simplex Infrastructures’ promoters.

The proposed share sale is a part of the stressed assets resolution plan Simplex Infrastructure is preparing.

Recently, the Mumbai Metropolitan Region Development Authority (MMRDA) has terminated a civil contract worth Rs 348 crores awarded to Simplex Infrastructure citing poor performance in executing the project.

MMRDA had awarded a civil contract for construction of the Andheri – Goregaon section of the Metro Line 7 (Andheri East – Dahisar East) of Mumbai Metro Rail Project.

In November, received revision in its long-term and short-term rating on bank facilities and NCDs to BB+ from BBB by CARE Ratings. Outlook has been reaffirmed to Negative in all cases.

CARE said that the revision in the ratings assigned to Simplex Infrastructures Limited (Simplex) takes into account non infusion of equity of Rs 125 crs by promoters within the timelines as expected due to lapse of timelines for conversion of share warrants, moderation in profitability in Q2FY20 (refers to the period July 1 to September 30), continued elongation in already high collection period in Q2FY20 with increase in unbilled revenue leading to deterioration of working capital cycle further, stretched

liquidity as indicated in high utilization of working capital limits on continuous basis and higher than expected debt levels as on September 30,2019.

CARE had envisaged significant reduction in receivables which couldn’t materialize resulting into higher than expected debt levels.

Earlier one of the joint statutory auditors – M/s SR Batliboi & Co. LLP had given a qualified opinion on recover ability of certain portion of old debtors to the extent of Rs 1281.7 crs as of Q4FY19.

These auditors resigned as joint statutory auditors of SIL on August 2, 2019 citing the company’s unwillingness to consider an upward revision of its fees to compensate their incremental efforts required to carry out multi-location audit.

Following this, CARE Ratings revised the credit rating for NCDs (worth Rs 495 crs), long term bank facilities (worth Rs 2600 crs) and long/short term bank facilities (worth Rs 7900 crs) to BBB- from A- earlier

Net net we believe that execution has been a long problem for the company and which has bogged down the stock for a considerable time. Going ahead it will be interesting to see if a management chamfe does happen then how will the execution of projects get implemented faster ahead.

Disclaimer –
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.