Ashoka Buildcon navigates Q3 FY25 with strategic divestments and major project wins

Ashoka Buildcon Limited, one of India‘s leading infrastructure development companies, has announced its unaudited financial results for the third quarter and nine months ending 31 December 2024. Despite facing a decline in revenue and profit, the company’s strategic divestments, acquisitions, and robust order book have positioned it for long-term growth in the infrastructure sector. As Ashoka Buildcon Limited continues to expand its footprint, its focus on enhancing operational efficiency and securing high-value projects highlights its resilience amid a challenging economic environment.

How did Ashoka Buildcon Limited perform financially in Q3 FY25?

In the third quarter of FY25, Ashoka Buildcon Limited reported a total income of ₹1,815.7 crore, representing a 16% decrease compared to ₹2,161.9 crore in the same period last year. This decline reflects headwinds in project execution timelines and revenue recognition challenges. However, the company managed to maintain operational efficiency, with EBITDA standing at ₹187.1 crore—a 9% year-on-year decline. Interestingly, the EBITDA margin improved by 80 basis points, reaching 10.3%, signalling cost optimisation measures and improved project profitability.

Profit before tax dropped sharply by 32% to ₹78.9 crore, while profit after tax (PAT) fell 30% to ₹60.6 crore compared to Q3 FY24. For the nine-month period, PAT stood at ₹137.6 crore, down 21% year-on-year. Despite the decline in earnings, the company’s ability to improve its EBITDA margin amidst revenue contraction indicates a focus on operational efficiencies and prudent cost management. This improvement in margins highlights how Ashoka Buildcon Limited has strategically adapted to shifting market conditions, even as it navigates economic pressures affecting the broader infrastructure sector.

On the balance sheet front, Ashoka Buildcon Limited reported standalone debt of ₹1,466 crore, comprising ₹107 crore in equipment and term loans, ₹1,059 crore in working capital loans, and ₹300 crore in non-convertible debentures (NCDs). The consolidated debt stood at ₹6,848 crore, reflecting its capital-intensive business model. While the debt levels appear significant, they are aligned with the company’s ongoing expansion in large-scale infrastructure development projects, which often require substantial capital investment.

What strategic moves has Ashoka Buildcon made to strengthen its portfolio?

A key highlight of Ashoka Buildcon Limited’s Q3 FY25 performance was its strategic divestment and acquisition activities, aimed at enhancing financial flexibility and streamlining its operations. In October 2024, the company completed the sale of stakes in several subsidiaries under Ashoka Concessions Limited (ACL) to Indian Highways Concessions Trust. This transaction, with an aggregate enterprise value of ₹5,718 crore, translates to an equity value of ₹2,539 crore after adjustments. The sale aligns with the company’s strategy to unlock value from mature assets and redeploy capital towards high-growth opportunities, allowing Ashoka Buildcon Limited to strengthen its financial position and focus on core operational areas.

Simultaneously, Ashoka Buildcon Limited acquired a 34% stake in ACL from Macquarie SBI Infrastructure Investments Pte. Limited and SBI Macquarie Infrastructure Trust for ₹1,526 crore. This acquisition resulted in ACL becoming a wholly-owned subsidiary, enabling the company to consolidate its control over key infrastructure development projects and streamline decision-making processes. By gaining full ownership of ACL, the company is better positioned to implement cohesive growth strategies, optimise resource allocation, and increase operational efficiencies across its portfolio.

Additionally, the company and its subsidiary ACL finalised agreements with Epic Concesiones 2 Private Limited and other investors for the sale of stakes in 11 subsidiaries. This deal, valued at ₹2,324 crore, is part of Ashoka’s broader strategy to optimise its asset portfolio and strengthen its balance sheet. The proceeds from these transactions are expected to support debt reduction and fund future growth initiatives. Industry experts view these strategic moves as critical in enhancing the company’s liquidity, reducing financial leverage, and improving overall shareholder value, especially in an environment where efficient capital management is crucial for infrastructure players.

Which major projects have contributed to Ashoka Buildcon’s robust order book?

Despite financial headwinds, Ashoka Buildcon Limited has demonstrated strong project execution capabilities, reflected in its robust order book of ₹16,457 crore as of 31 December 2024. The company’s order book is well-diversified, with road EPC projects accounting for the majority, followed by significant contributions from power transmission and distribution (T&D), road hybrid annuity model (HAM) projects, and projects in the railway and building EPC sectors. This diversification reduces dependency on any single segment and provides stability across different infrastructure verticals.

The company secured several high-value projects during the quarter, reflecting its competitive edge in bidding and execution. Among these, the ₹1,673.25 crore contract from City & Industrial Development Corporation of Maharashtra Limited (CIDCO) stands out, focused on integrated infrastructure development. Projects awarded by the Maharashtra State Road Development Corporation Limited (MSRDCL), with a total value of ₹2,309.99 crore, include the construction of major bridges across key creeks in Maharashtra, showcasing the company’s expertise in complex engineering projects. Additionally, the ₹1,055 crore EPC contract from Bangalore International Airport Limited highlights Ashoka Buildcon Limited’s growing presence in the aviation infrastructure space, with responsibilities spanning apron construction and associated infrastructure development.

The company also secured a ₹1,391 crore contract from the National Highways Authority of India (NHAI) for developing a four-lane economic corridor under the HAM model in West Bengal. This project not only adds to the company’s strong portfolio in road infrastructure but also aligns with the government’s focus on enhancing national connectivity through strategic highway development. These project wins underscore Ashoka Buildcon Limited’s ability to secure and deliver on large-scale projects, leveraging its extensive experience, technical expertise, and strong track record in the infrastructure sector.

What does the future hold for Ashoka Buildcon Limited?

Industry experts suggest that Ashoka Buildcon Limited’s strategic divestments and acquisitions will play a crucial role in enhancing its financial health and growth prospects. The company’s focus on reducing debt, improving operational efficiency, and securing large infrastructure development projects positions it for sustainable growth. Its strong order book, coupled with new project wins, indicates robust demand for its services, while its strategic acquisitions provide greater control over key assets, enabling more agile decision-making and operational flexibility.

While the short-term decline in profits reflects industry-wide challenges such as delayed project timelines and rising costs, the company’s robust order book and strategic project pipeline provide a strong foundation for future revenue growth. Moreover, its expanding footprint across key infrastructure sectors, including roads, power T&D, and urban development, is expected to drive long-term value creation for stakeholders. With the Indian government’s continued focus on infrastructure development, particularly in road construction, urban transit, and renewable energy, Ashoka Buildcon Limited is well-positioned to capitalise on emerging opportunities.

Its diversified project portfolio, coupled with strategic investments and disciplined financial management, will likely support its growth trajectory in the coming years. As infrastructure demand in India continues to rise, driven by urbanisation and economic expansion, Ashoka Buildcon Limited’s proactive approach to securing large-scale projects and optimising its operations ensures that it remains a key player in the sector. This strategic positioning, combined with its ability to adapt to market dynamics, reinforces confidence in the company’s long-term growth prospects.