Prashant Jain buys a stake in this small-cap multibagger stock with an order book of Rs 16,920 crore; stock trades at a low PE!

Its segmental diversification, with a focus on roads (43 per cent), power (36 per cent), buildings (13 per cent), and railways (8 per cent), ensures that the company is not overly reliant on a single sector, spreading its risk effectively

In the realm of the Indian financial markets, a sea of red prevailed, with the Sensex and Nifty indices witnessing declines of 0.72 and 0.62 percent, respectively. Most sectors were engulfed in this crimson tide, save for the Nifty Pharma index. Notably, the sectoral performance was led by Nifty PSU Bank and Nifty Financial Service, both experiencing significant losses of 1.44 and 1.29 per cent, respectively.

The broader markets mirrored this downward trajectory, with Nifty Mid-Cap and Small-Cap indices displaying declines of 0.86 and 0.27 per cent, respectively. Consequently, the advance-decline ratio favored the decliners, with 1459 stocks trading in the red, while a mere 571 stocks managed to stay in the green.

One stock which commands investor attention is Ashoka Buildcon Ltd (ABL). Ashoka Buildcon Limited is the cornerstone of the renowned Ashoka Buildcon Group, based in Nashik, India, and is primarily dedicated to infrastructure construction in the domains of roads, buildings, and power. It proudly holds its position as one of India's leading highway developers, with a history dating back to its inception in 1993. Initially involved in constructing residential, commercial, industrial, and institutional buildings, ABL transitioned to its first Build-Operate-Transfer (BOT) project in 1997. Over the years, the company has been primarily engaged in the roads sector while expanding its reach to encompass power, buildings, and railways segments.

What sets ABL apart is its extensive geographic footprint, spanning across twenty states in India and branching out into international markets, including Maldives, Bangladesh, Guyana, and Benin. Presently, the company's operations encompass BOT and Engineering, Procurement, and Construction (EPC) road projects, EPC power transmission and distribution projects, and the sale of ready-mix concrete.

In 2016, Ashoka Buildcon ventured into the commercial gas distribution business by securing an order to develop and operate a gas distribution network in the Ratnagiri district of Maharashtra. Most recently, it signed an agreement with Mahanagar Gas Limited (MGL) to divest its commercial gas distribution business. ABL boasts a portfolio of 23 BOT projects, with 20 currently operational and 3 under construction, demonstrating its robust presence in the infrastructure sector.

What adds an intriguing twist to the narrative is the investment by the eminent star fund manager, Prashant Jain of 3P Investment Managers. His 3p India Equity Fund 1 is now a notable shareholder in ABL, holding a 1.14 percent stake in the company, equivalent to 3,210,000 shares. This endorsement from a seasoned investor speaks volumes about the company's potential.

Ashoka Buildcon also possesses a substantial order book valued at Rs. 16,920 crore as of June 30, 2023, which not only provides a strong medium-term revenue outlook but also underscores the company's reliability in securing projects.

Geographical diversity is one of ABL's strengths, with a presence in twenty Indian states and overseas markets. Furthermore, its segmental diversification, with a focus on roads (43 per cent), power (36 per cent), buildings (13 per cent), and railways (8 per cent), ensures that the company is not overly reliant on a single sector, spreading its risk effectively.

Investors have witnessed remarkable growth in this small-cap stock, with its value nearly doubling from its 52-week low of Rs 70.15. It has truly transformed into a multibagger stock, reflecting its outstanding performance.

With a price-to-earnings ratio (PE) of 12.2x, ABL is attractively valued, and its impressive Return on Equity (ROE) of 26.4 per cent underscores its profitability and efficiency.

Disclaimer: The article is for informational purposes only and not investment advice.