900% Returns: Multibagger Stock VA Tech Wabag Tanks 20% On Rs 2,700 Cr Order Cancellation; What's Next?

The shares of VA Tech Wabag, a technology company in the water treatment sector, nosedived by over 19% in early trade on Wednesday, December 18, after the company announced the cancellation of a Rs 2,700 crore ($317 million) desalination project from Saudi Water Authority.

Saudi Desalination Project
VA Tech Wabag had originally announced the order on September 6, 2024, for a 300 MLD (million litres per day) Mega Sea Water Desalination Plant in Saudi Arabia. However, in a filing with the stock exchanges on December 17, 2024, the company stated, "With reference to our above intimation dated September 06, 2024, relating to the 300 MLD Mega Sea Water Desalination Plant Order in the Kingdom of Saudi Arabia, we hereby inform that the Customer has notified all tender participants on December 16, 2024, that the said tender stands cancelled pursuant to their internal administrative procedures."

The company also highlighted that it is engaging with the Saudi Water Authority to gain further clarity on the reasons for the cancellation.

Market Reaction
The announcement triggered a sharp sell-off in VA Tech Wabag's stock. On the BSE, the stock tumbled 19.17% to hit a low of Rs 1,523.75 in early trading hours. By around 10 AM, the shares were trading at Rs 1,585.10, down over 15%.

Despite today's fall, VA Tech Wabag has been a multibagger stock for investors. Over the past year, the stock has skyrocketed by 157%, and over a five-year period, it has delivered an extraordinary return of 825%.

Revised Tender on the Horizon?
Later in the day, CNBC-TV18 reported that the cancellation of the Saudi project was due to the local authority's decision to "recalibrate" the project's size and scope. A fresh tender is expected to be floated within the next few weeks. The report also stated that VA Tech Wabag intends to participate in the revised tender.

This news provided some relief to the stock, which recovered from its early lows. By mid-day, the shares had trimmed losses but were still down around 10-11% as of 12:05 pm.

H1 FY25 Performance
VA Tech Wabag has shown a strong performance in the first half of FY25. For H1 FY25, the company reported consolidated revenue of Rs 1,326.8 crore, with profit after tax (PAT) rising 31% year-on-year (YoY) to Rs 125.6 crore.

The company's order book stood at Rs 14,600 crore at the end of H1 FY25, including framework contracts. The Saudi desalination project, valued at Rs 2,700 crore, was seen as a contributor toward the company's ambitious target of achieving an order book size of Rs 16,000 crore by the end of the fiscal year.

International Business Performance
VA Tech Wabag has a well-established international presence, contributing significantly to its growth. In H1 FY25, international projects accounted for 54% of the company's revenue, and these projects represent 39% of its order backlog. The company has been operating in Saudi Arabia for over four decades, working on various water treatment projects.