Rerating VA Tech Wabag

Given the favourable environment and the government's increasing focus on water, the company is all set to scale new highs

- DAKSESH PARIKH

May 2023 brought good tidings to investors of VA Tech Wabag, a pure-play technology-driven water treatment company with market capitalisation of ₹3,055 crore. On 24 May the share prices shot up to ₹456, a 5-year high, rising by nearly 10 per cent over the previous day's close of ₹415. Apart from one occasion in 2021, the company's share prices had struggled to cross the ₹400 mark over the last 5 years. What was noteworthy was that the rise, in May 2023, was accompanied by high volumes. The daily volumes on the BSE and NSE were ₹11.58 crore and ₹144 crore respectively - significantly higher than the usual daily turnover. The shares continued their upward trend and reached a 52-week, intraday high of ₹505 on 12 June.

One may infer that this sudden spurt in the share prices could potentially mark a turning point in the company's fortunes. Despite having a headstart in water projects, it has not been able to take its operating revenues above ₹3,000 crore. The highest recorded was around ₹3,500 crore in 2018. PBDIT was also around ₹200 crore, apart from 2018. The financial performance of FY23 which truly triggered the rally. While the operating income continued to languish below ₹3,000 crore, the operating profit shot up to ₹318 crore. The management decided to use these profits to write off some past dues which amounted to roughly ₹294 crore - pending dues from a project executed by the company as a part of a consortium in the Andhra Pradesh Power Generating Company (APGENCO) in FY15.