Sadbhav Engineering hits record low on weak earnings; tanks 52% in 1 month

India Ratings and Research expects the execution to remain sluggish in FY23, in view of the stretched liquidity position of the company

Shares of Sadbhav Engineering hit a record low of Rs 13.05, down 6 per cent on the BSE in Tuesday's intra-day trade, in an otherwise strong market. In comparison, the S&P BSE Sensex was up 1.7 per cent at 52,471 points at 12:41 PM.

While the stock has fallen 35 per cent in one week on weak earnings, it has tanked 52 per cent in one month, as against 3.4 per cent decline in the benchmark index. With the past one month's decline, the stock of the engineering, designing & construction company has corrected 86 per cent from its 52-week high level of Rs 96.30 touched on June 30, 2021.

For the financial year 2021-22 (FY22), Sadbhav Engineering's consolidated net loss widened to Rs 728 crore from Rs 237 crore in FY21. The company's consolidated revenue from operations also declined 15 per cent to Rs 1,908 crore from Rs 2,243 crore in the previous fiscal.

The company said the Group's operations were impacted due to inflationary pressure and resources constraint during FY22. Besides, it was also due to slow order execution, which have been accentuated by high working capital lock-up and unavailability of additional banking limits.

Rating agency India Ratings and Research Private Limited recently revised the credit rating of the Company to 'IND BB+' from 'IND BBB+'. Ind-Ra also expects the execution to remain sluggish in FY23, in view of the stretched liquidity position of the company.

"The downgrade reflects a continuous decline in the consolidated revenue in FY22, leading to deterioration in the credit metrics. It also reflects further delays in the implementation of asset monetisation plans, resulting in deterioration in the liquidity position and further elongation in the working capital cycle, all on a consolidated basis," the company said in an exchange filing. READ MORE

The group has entered into definitive agreements with Gawar Constructions Limited, either as a sponsor or as a contractor, to ramp-up the execution of the three hybrid annuity model (HAM) assets. Ind-Ra believes that this would result in better pace of execution of these HAM assets, which would ultimately lead to timely project completion, thus preventing the need for any incremental working capital at the group level and significantly reducing the possibility of cost overruns. However, the execution pace of HAM projects will be a key monitorable, Ind-Ra said in statement on June 16.