Value investors have always had a magical fascination for Noida Toll Bridge. This fascination stems from the fact that Warren Buffett once described an ideal investment as a “toll bridge”, i.e. an investment where the costs are one-time but the revenues are recurring and ever-increasing with the traffic.
The late Parag Parikh, one of the foremost practitioners of value investing, was a strong believer in the prospects of Noida Toll Bridge. His PPFAS Mutual Fund holds a massive chunk of 86,58,488 shares of Noida Toll Bridge, comprising 4.65% of the equity capital. This stock was the crown jewel of the Fund till it was dethroned by Google and other foreign stocks.
There are several other ace stock pickers who are strong believers in the stock. Ashish Chugh of Hidden Gems called the stock “an excellent annuity business which is available at very attractive valuations”. Prof Neeraj Marathe, another authority on value investing, also recommended a look at the stock on the basis that “interesting things are now happening” and that “looking at the other side of the story would be an excellent idea”.
Prof. Sanjay Bakshi was also a strong proponent of the stock in the past though it is not known whether he has changed his stance in recent times.
On 16th June 2015 Fidelity Investment Intl A/C Fidelity Asian Values PLC bought 11,21,999 shares of Noida Toll Bridge Company at Rs. 32 per share.
The surprising aspect is that none of the value investors appear to have paid heed to the fact that there is a strong “anti-toll” sentiment brewing across the Country. The citizens are upset over the fact that after paying through their noses for all sorts of taxes such as income-tax, sales-tax, excise duty, VAT etc, they have to pay a separate toll for going from one place to the other.
In Maharashtra, for instance, the Maharashtra Navnirman Sena (MNS), a political party led by firebrand leader, Raj Thackeray, has been holding violent protests since a long time in support of the anti-toll agitation.
Similarly, in Kerala, the Democratic Youth Federation of India (DYFI) is opposed to the concept of paying toll to use public property. They have been regularly conducting protests.
Even the BJP, which is now the ruling party in most States and the Centre, has promised in its Manifesto to consider scrapping toll taxes.
Interestingly, the anti-toll sentiment is not confined to India. It is common in several countries including the USA.
Noida Toll Bridge is itself not a stranger to protests from activists demanding toll free access. In November 2012, for instance, there was a free-for-all between the Federation of Noida Residents Welfare Association and the authorities of the Toll Bridge over the latter’s proposal to hike the toll. Similarly, in April 2015, BJP workers blocked the Delhi-Noida Direct (DND) Flyway demanding scrapping of the toll plaza.
Matters reached a crescendo today morning when farmers owing allegiance to the Bharatiya Kisan Union (BKU) laid siege over the DND Flyway and broke open the gates. The farmers claim that Noida Toll Bridge has recovered its entire cost with profit as far back as in 2007 and that the continued charging of toll is “illegal”.
In the wake of this fiasco, investors today rushed to dump the stock and it slumped like a ton of bricks. When I last checked the stock was down a whopping 14%.
Now, the all important question that we have to ask is how super-savvy investors pumped in such large sums of money into Noida Toll Bridge by overlooking such a serious threat to its survival.