This smallcap construction & engineering stock has zoomed 75% in 7 days

Shares of Patel Engineering were locked at the 20 per cent upper circuit at Rs 28.85, and in the process also hit a fresh 2.5 year high on the BSE on Tuesday amid heavy volumes

Shares of Patel Engineering, a civil construction company specializing in the hydropower sector, were locked at the 20 per cent upper circuit, and in the process also hit a fresh a 52-week high at Rs 28.85 on the BSE on Tuesday amid heavy volumes. The trading volumes at the counter jumped nearly four-fold, with a combined 33.74 million shares changing hands and pending buy orders for 2.54 million shares on the NSE and BSE at 01:44 pm. In comparison, the S&P BSE Sensex was up 0.44 per cent at 59,561.

In past seven trading days, the stock of construction & engineering company has zoomed 75 per cent from a level of Rs 16.50 on September 24, 2021. Currently, the stock trades at its highest level since March 2019.

Patel Engineering has a strong presence in tunnels and underground works for hydroelectric and dam projects. The company has a consistent track record in execution of projects in domestic and international arena. The company has completed over 85 dams, 40 hydroelectric projects and more than 300 km of tunneling for clients which are mostly central public sector undertakings (PSUs) or state government organizations.

On September 27, 2021, Patel Engineering announced that it had bagged a Rs 1,251 crore, Lot II Civil Work contract for 500 MW Teesta-VI Hydro Electric Project, Sikkim from Lanco Teesta Hydro Power Limited, a wholly-owned subsidiary of NHPC Ltd. The project is located at South Sikkim District in Sikkim, India.

The package includes balance civil works for underground power house & transformer cavern, part of HRT-I & HRT-II, surge shafts, pressure shafts & adits, TRT and other associated structures etc. of 500 MW Teesta-VI Hydro Electric Project located near village Subin Khore, South Sikkim, India, which is about 67Kms from Siliguri, the nearest major town, the company said in a press release.

Patel Engineering in the financial year 2020-21 (FY21) annual report said that, with implementation of one-time restructuring (OTR) by lenders where additional working capital limits have been made available, the company expects to improve its order book further going forward.  The company focuses on bidding for projects with reputed clients with well-funded projects which can be funded from Client Advances and hence results in efficient working capital management.

Meanwhile, the company has plans to merge 14 of its subsidiaries with itself, which will reduce various costs incurred for compliance for these subsidiaries and ensure that we get synergies of operations throughout with no duplication post-merger.

The company has continued to focus on monetization of non-core assets to reduce debt and further increase liquidity. It also continues to receive further funds against arbitration awards by submission of bank guarantees under NITI Aayog initiatives and expects to receive more funds going forward, which shall reduce the debt burden. Also, continuous monetization of real estate remains one of the top most priorities of the management, the company said.