PSP Projects Signs Share Purchase Agreement With Adani Group: HDFC Securities

HDFC Securities Institutional Equities

PSP Projects Ltd. has entered into a SPA with Adani Infra (India) Ltd. wherein the promoter of PSP Mr. Prahaladbhai S. Patel, will be selling 30.07% equity share capital of PSP, triggering an open offer for public shareholders.

As informed by the management, the shareholding of the promoters PSP and Adani will continue to remain the same for the next five years, post the closure of transaction, and the management will be continued to be led by Mr. Patel.

The acquisition by Adani group and the partnership between the promoter groups is expected to complement each other’s capabilities, with PSP lending its expertise in the buildings construction segment and Adani group providing it with group orders in the building segment only.

We believe PSP is well-poised to benefit from this partnership with captive related-party near-term order pipeline of Rs 35 billion (PSP expects these to be on cost + basis with 10-11% Ebitda margins in line with current guidance).

Adani benefits from captive execution capabilities and timely project completion from this strategic investment. We await further clarity (post completion of transaction) on how orders will be split between ITD and PSP and strategic direction for both these companies. To this effect, we continue with our Add rating and target price at Rs 665/share (13 times 1-year forward earnings per share).

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