Mumbai: Shares of Va Tech Wabag dropped over 11% on Wednesday after the company revealed they lost a major ₹2,700 crore deal for a large seawater desalination plant in Saudi Arabia. The stock price even fell by 20% during the day, closing at ₹1,672.95 on the BSE.
However, some analysts believe this drop could be a good chance for investors to buy the stock. They point out that Va Tech Wabag still has a solid order book worth ₹11,900 crore and good prospects for growth in the future.
For companies like Va Tech Wabag, the first year of a desalination project usually brings in 10-12% of its expected annual earnings. The cancelled project would have had a net profit margin of 10-11%. Due to the cancellation, it’s estimated that the company’s profits for FY26 could decrease by 8.1%, according to analyst Dheeraj Ram from Ashika Institutional Equity Research.
Currently, the stock is valued at 35 times its predicted earnings for FY26, and this price drop makes it a potentially smart investment. In the last six months, Va Tech Wabag shares have risen by 49%, performing much better than the Nifty index, which only went up by 3%.
In their official announcement on Tuesday, the company mentioned that they were informed on December 16, 2024, that the desalination project has been cancelled due to the client’s internal processes. Va Tech Wabag is now talking to the client to understand why the deal was cancelled and expects a new tender to be issued soon. They plan to participate in the re-bidding process.
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