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October 14, 2013


Nitin Arora
nitin.arora@emkayglobal.com
+91-22-66242491
Ajit Motwani
ajit.motwani@emkayglobal.com
+91-22-66121255

Construction
Strengthening the Weak Links
Premium restructuring another bid to clear clog, may not be enough to
improve project viability
The Cabinet Committee on Economic Affairs (CCEA) has given the principal approval for
restructuring premium payments for certain projects with the aim to improve project
viability and ease cashflows of already strained developer balance sheets. The deferred
premium payments would help concessionaires to use cashflows from the initial few
years for equity commitments for the project. However, it may not be sufficient to improve
viability of projects due to aggressive bids. In our view, the cancellation and re-bidding of
projects would be a prudent option [recently the National Highway Authority of India
(NHAI) cancelled four BOT projects, which are set to come up for re-bidding] against
premium restructuring, which is likely to face challenges.

Re-bidding of stalled contracts likely to push awarding activity upwards in


2HFY14E; NHAI targets 4000km
In the last 6 months, the NHAI has made attempts to resolve issues pertaining to the
sector by: a) de-linking forest and environmental clearances for linear projects, b)
directing banks to lower land acquisition requirements for disbursal of loans, c) classifying
debts for BOT projects as secured loans, d) CCEAs exit offer for road developers
irrespective of the construction stage, and e) restructuring of projects via rescheduling of
premium. As a result, the NHAI is now aims to award more than 50% of the total target of
4000km in FY14E on an EPC basis. Given the prevailing financial and structural
challenges in the sector, we see scope of new orders to emerge from potential re-bidding
of stalled contracts and EPC projects (will not garner interest of large developers due to
the small project size). However, the window for resolving the major reform premium
restructuring is very short given the upcoming elections in 2014. In case the standoff
continues it is unlikely that NHAI will be able to bid out a sizeable number of BOT projects
this year/H1FY15.

Substitution of concessionaire not to address financial unviable projects


The government/NHAI-approved substitution of developers (to replace SPV in
consultation with lenders) allowed the latter to sell projects irrespective of the stage of
construction. The substitution policy entails the SPV to hold a 51% stake in the project
post the sale. We believe the policy will not make any significant impact to help revive the
sector sentiment, as it would not largely benefit financially unviable projects, as: a)
developers opting for substitution of stalled contracts, where delays occurred due to the
concessionaire default, the new SPV becomes liable to pay a penalty on delayed
completion, and b) only eight projects of the 47 projects tendered in FY12 have
commenced construction till June 2013. This implies that the majority of the projects were
not given the appointed date, since exit policy would be applicable for projects that have
achieved the appointed date. Also, the ambiguities related to whether tax benefits would
pass on to the new SPV would involve additional costs (stamp duty that itself is 2.5% of
the transaction value).

Authority aims to clear the clog: Maintain Buy on IRB, Ashoka Buildcon
In the last 2 years, the road sector did not witness any awarding or construction activity.
A large part of the construction work did not keep up with execution run rates, which led
to project delays, mainly due to EC FC clearances and the limited ability of prospective
bidders to mobilize additional equity and competitive bidding, making the project
cashflows unviable to support premium payments. Heightened risk perception about BOT
projects causes financial institutions to be reluctant to take additional exposure in
highway BOT projects.
In this scenario, we maintain a Buy rating on IRB infrastructure and Ashoka Buildcon
because of their strong road-asset portfolio and stable order-books. With a minimal
funding requirement, these companies remain well-funded for exploiting new
opportunities as and when the NHAI awarding activity picks up. We retain a hold rating on
ITNL, given its high parent leverage, along with decelerating high margin fee income
could mean rising interest cost pressures, thereby causing deterioration in profitability.

Emkay Global Financial Services Ltd.

Sector Update

Emkay

Construction

Sector Update

CCEA in-principle approval for rescheduling of premiums


With regard to Kishangarh-Udaipur-Ahmedabad, Cuttuck-Angul, and Shivpuri-Dewas
projects, which have asked for rescheduling of the premium on account of delays in
acquiring land and variations in traffic seen from the time of bidding (which would make the
projects financially unviable), CCEA has approved rescheduling of premiums for 23 road
projects wherein appointed dates were not given . The underlying principle of this
rescheduling process is to maintain the NPV of these premium payments while allowing
some relief in the initial years to compensate for delays in clearances and traffic slowdown.
CCEA stated that NHAI would now consider each project on a case-to-case basis to
determine its eligibility for the rescheduling of restructuring. However, details are still
awaited regarding broad principles agreed on rescheduling like the discounting rate (1012%), besides conditions such as bank guarantee and upfront penalty. Developers of
another 16 road projects have also approached the NHAI for restructuring of premiums, but
the roads ministry is not yet to consider their proposals
Exhibit 1: Projects considered for premium restructuring
Projects

Concessionaire

Rampur- Kathgodam
Lucknow - Sultanpur
Agra - Etawa by pass
Hospet-Chitradurga NH-13
Cuttack-Angul NH-42
Solapur - MH/KNT border NH-9
Shivpuri-Dewas
Raipur - Bilaspur
Vijaywada - Gundugolanu
Obdedullganj-Betul
Solapur - Bijapur
Aurangabad-Barwa Adda
Rajumundary - Gundugulanu
Jalgaon - Gujarat/MH Border
Amravati - Jalgaon
Jind-Punjab/Haryana Border
Kota - Jhalwar
Sangareddy to MH-KNT Border NH-9
Hospet-Bellary NH-63
Kishangarh-Udaipur-Ahmedabad
Anandpuram - Vishakhapatnam - Ankapalli
Coimbatore Mettupalayam
Barwa Adda Panagarh

ERA-Sibmost
Essar-Atlanta
Ramky Infrastructure
Ramky Infrastructure
Ashoka Buildcon
Coastal-SREI
GVK
IVRCL A&H
Gammon Infrastructure
Transstroy
Sadbhav
KMC
IVRCl A&H
L&T
L&T
Unity Infra
Keti Constructions
L&T
PNC
GMR Infrastructure
Transstroy
Transstroy-OJSC
IL&FS Transportation

Total

Length Km

Project cost Rsmn

Premium Quoted Rsmn

Bid date

93
123
125
120
112
100
332
126
104
123
111
222
121
209
275
69
88
145
95
555
58
53
123

8,500
10,790
13,460
10,450
11,240
9,230
28,150
12,160
17,430
9,120
10,025
24,190
17,510
19,730
25,259
4,388
5,300
12,660
9,101
53,870
8,630
5,920
1,665

340
96
1,281
630
611
280
1,809
455
576
330
756
1,350
721
1,451
1,310
102
35
800
180
6,360
820

23-Nov-11
13-Sep-11
24-Nov-11
18-Nov-11
18-Nov-11
12-Dec-11
1-Aug-11
18-Nov-11
24-Jan-12
17-Jan-12
26-Mar-12
30-Mar-12
30-Mar-12
30-Mar-12
30-Mar-12
30-Mar-12
15-Apr-11
30-Sep-11
29-Jul-11
29-Jul-11
30-Mar-12

420

10-Apr-13

328777

20712

Source:

Premium Restructuring: Attempt to resolve developers/project cashflow


issues for the short term
The government has made attempts to kick-start the projects worth over Rs300bn, which
also remains essential in terms of creating appetite for contracts lined up for the next round
of bidding. However, it remains to be seen whether the relief offered to developers under
this proposal would be sufficient and acceptable to developers. The underlying statement
of the NHAI that restructuring would be looked into on a case to case basis implies its
ambiguous applicability across all projects is likely to engender litigation issues. Our view
on this development is as follows:

Emkay Research

October 14, 2013

Loans provided by the NHAI, which will not reflect in developers books; however, it
would provide interim relief to concessionaire, as deferred premium payments would
help concessionaires to use cashflows from the initial few years for equity
commitments for the project, ultimately to improve project viability and ease cashflows
of already strained developer balance sheets. At the same time, the government also
wants to ensure adequate financial commitment from developers so as to ensure
timely completion of projects.
2

Construction

Sector Update

As the NHAI would be considering rescheduling on a case to case basis, smallpremium projects and premium projects, which have commenced work, are likely to
remain out of the mechanism. There is a risk that some of these developers may
litigate if they, too, are not given this premium restructuring option, causing further
delays.
The window for resolving this standoff is very short, given the upcoming elections in
early 2014. In case the standoff continues, it is unlikely that the NHAI would be able to
bid out a sizeable number of BOT projects in 2HFY14E/1HFY15E.
The prudent strategy, we believe, is to kick-start the projects that have been weighed
down due to financial closure and aggressive biddings, and re-invite them for rebidding, which would attract serious developers and discover a new premium or a grant
base.

In our view, the major persistent issue with regard to projects involves financial
restructuring, since other structural problems related to land acquisition, re-bidding for
those projects that have not achieved financial closure (though the intensity can be lower),
and asking financial Institutions to take additional exposure in highway BOT projects,
especially in those cases where the NHAI satisfies all precedent conditions, can still be
resolved.

Premium restructuring not enough, re-bid of projects the prudent option


The projects are broadly categorized into four segments: a) projects wherein developers
are prepared to make progress based on the original bidding parameters as long as the
NHAI fulfills its obligations, b) projects that need to be terminated with a penalty in cases
where the concessionaire has defaulted, c) projects that would be terminated and re-bid
but without a penalty in cases where the concessionaire has defaulted and the NHAI has
failed to meet its obligations, and d) projects wherein concessionaires may be willing to
make progress with some changes to bidding conditions (such as premium restructuring).
As per NHAI estimates, 28 projects (3042.60km) were awarded, but they have not
achieved financial closure, whose grace period of 120 days (over and above the 180 days
required to achieve financial closure) end in October 2013. Recently, the NHAI scrapped
four road projects without penalising the developer as wildlife clearance was still pending.

Kota-Jhalawar road project (80km, a 4-laning project won by Keti Construction)


Meerut Bulandshahr (60km, a 4-laning project won by C&C Construction)
Rampur-Kathgodam (93km, a 4-laning project won Era Infrastructure)
Agra-Etawah (125km, a 6-laning project, won by Ramky Infrastructure)

We have noticed that developers are weighed down by economically unviable road projects
as a result of aggressive biddings and due to a lack incentives to help them keep the
projects in their kitty (in some cases the performance guarantee was not submitted which
forms 1% of the project cost). We have highlighted a list of 21 stalled projects (Exhibit 10)
on account of land acquisition issues (delay caused due to EC/FC clearances ), with
majority of them considered for premium for restructuring, part of which is likely to come up
for re-bidding . We believe the solution to kick-start these projects that are weighed down
due to financial closure is to re-invite them for re-bidding, which would attract serious
developers and discover a new premium or a grant base.

Emkay Research

October 14, 2013

Construction

Sector Update

Exhibit 2: Projects delayed due to land acquisition


Road projects stuck due to land Acquisition

Contractor

(km)

Cost (bn)

Lane

1. Vijayawada-Eluru-Gundu Golanu

VG Road project

103.6

16.8

2. Rajahmundry-Gundu Golanu

IVRCL

121.0

16.2

3. Anandapuram-Vskp-Anakapalli

TRanstroytollway

4. Raipur-Bilaspur

IVRCLAssets

5. Jind-Punjab/Haryana border

UnityInfra

6. Aurangabad-Barwa Adda

KMCConstruction

7. Hospet-Bellary

PNCBetul

8. Sangareddyto Maha border

L&T DPL

9. Hospet-Chitradurga

RamkeyInfra

120.0

10.3

10. Shivpuri-Dewas

GVK

332.5

28.2

11. Obedullaganj-Betul

TRanstroyOJSC

121.0

9.1

12. Solapur-Karnataka border

Coartal Srei

100.0

9.2

13. Solapur-Bijapur

SadhbhavEngineering

110.0

9.9

14. Jalgaon-Gujaratborder

L&T Infra

208.0

19.7

15. Amravati-Jalgaon

L&T Infra

275.0

25.4

16. Agra-Etawah

RamalkyInfra

124.5

12.1

17. Cuttack-Angul

Ashoka Buildcon

112.0

11.2

18. Kota-Jhalawar

Keti Construction

88.1

5.3

19. Kishangarh-Ahmedabad

GMR Infra

555.5

53.9

20. Lucknow-Sultanpur

Essar Atlanta

125.9

10.4

21. Rampur-Kathgodam

ERA-Sibmost

93.2

7.9

59.0

8.6

126.5

12.2

69.4

4.4

220.0

24.2

95.4

9.1

145.0

12.7

Source: Emkay Research, NHAI

Emkay Research

October 14, 2013

Construction

Sector Update

Awarding activity to inch upwards in 2HFY14E; NHAI targets 4000km


In FY13, project award activity fell sharply and was at its lowest levels since FY05, with the
exception of FY09. Both BOT (build-operate-transfer) and EPC (engineering, procurement
and construction) project awards by the NHAI declined to 1128km in FY13 from 6380km in
FY12. We have seen a surge in ordering activity in BOT mode between FY09 and FY12,
while the contribution of projects awarded in EPC mode was negligible. However, in FY13,
we noticed the tapering off awarding activity, with 14 BOT projects worth Rs150bn/1822 km
failing to attract any bids. This led to awarding of only 1128kms of BOT projects as against
the original target of 8800km. As a result, the NHAI is now aims to award more than 50% of
the total target of 4000km in FY14E on an EPC basis. Till date, the NHAI has awarded
(YTD FY14E) 356km and 123km in EPC and BOT modes, respectively. Given the
prevailing financial and structural challenges in the sector, we see scope of new orders to
emerge through the EPC route and potential re-bidding of stalled contracts.
Exhibit 3: Ordering activity remains sedate

3000
2500
2000
1500

6380

1000
479
FY14
(Sep2013)

635

2205

2693
1784

2249

2848

637
FY13

FY12

FY11

FY10

FY09

Length completed (Km)

Source: Emkay Research , NHAI

FY14
(Sep2013)

Length aw arded (Km)

1682
753

FY08

FY12

FY11

FY10

FY09

643

500

1116
FY13

1145
FY08

FY07

1390

FY07

3360
1608

FY06

5058

FY06

7000
6000
5000
4000
3000
2000
1000
0

Exhibit 4: Construction work per km

Source: Emkay Research , NHAI

Exhibit 5: Awarding activity in BOT and EPC

7000
6000
5000
4000
3000
2000
1000
0

6380
5058
3360

3055
1608

1390

1145

345
FY06

89

FY07

FY08

Length aw arded (Km) BOT

1116

643

123 356

FY09

FY10

FY11

FY12

FY13

FY14
(Sep2013)

Length aw arded (Km) EPC

Source: Emkay Research, NHAI

Exhibit 6: Balance of work to be awarded


Total
Length (km)

Completed
4/6 lane(km)

Under
Length (km)

Implementation
No. of projects

NHDP Phase-I

7522

NHDP Phase-II

6647

7514

10

5647

610

52

385

NHDP Phase-III

12109

5611

4813

89

1685

NHDP Phase-IV
NHDP Phase-V

20000^

285

4130

33

10384

6500

1584

2496

28

2420

NHDP Phase-VI

1000

1000

NHDP Phase-VII

700*

21

20

659

Misc. Projects

656

363

293

NH-34

5.5

5.5

NHDP component

SARDP-NE
Total

Balance for award of


civil works (km)

388

69

43

276

55528

21094

12419

226

16808

Source: Company, Emkay Research

Emkay Research

October 14, 2013

Construction

Sector Update

Exhibit 7: BOT Projects to be tendered


Road Stretch

State

(kms)

Cost (Rs.mn)

Barwa Adda-Panagarh

West Bengal

122.9

16,650

Jabalpur-Lakhanadone

Madhya Pradesh

80.8

7,770

Bids invited

Bhavnagar-Verawal (4 lane)

Gujarat

260.0

32,400

Bids invited

Yadgiri-Warangal (4 lane)

Andhra Pradesh

99.0

9,570

Hospet-Hubli (4 lane)

Karnataka

143.3

12,930

Numaligarh-Jorhat (4 lane)

Assam

51.2

5,850

Ghoshpukur-Salsabari (4 lane)

West Bengal

154.9

22,120

Karaikudi-Ramanathapuram (2 lane)

Tamil Nadu

80.0

3,360

Bids to be re-invited

Demoh-Dibrugarh (4 lane)

Assam

46.0

4,730

No bids received, project to be restructured

Jorhat-Demoh (4 lane)

Assam

81.8

8,750

No bids received, project to be restructured

Chas-Ramgarh (2/4 lane)

Jharkhand

Aurangabad-Vedishi (4 lane)

Maharashtra

Chandikhole-Dubari-Bhuban (4 lane)

Odisha

62.2

6,520

Parwanoo-Shimla (4 lane)

Himachal Pradesh

89.6

22,930

Chhutmalpur-Saharapur-Yamunagarh-Haryana/UP border

Uttarakhand/ UP

104.8

10,240

EPS (6 lane)

Haryana/ UP

135.0

NA

Solapur-Vedishi (4 lane)

Maharashtra

98.7

9,700

Hissar-Dabwali (4 lane)

Haryana

145.8

13,320

2,023.30

208,530

Total

78.3

2,980

189.1

18,710

Status
Work Awarded to ITNL

NA
Bids to be re-invited
No bids received, project to be restructured
Bids to be invited

Bids invited

PPPAC proposal circulated

Source: Emkay Research, NHAI

Substitution/exit policy to bring back momentum?


In order to clear the clog in the sector, the government has made provisions to allow
developers to sell projects (replace the SPV in consultation with lenders) irrespective of the
stage of construction. The substitution policy entails the SPV to hold a 51% stake in the
project post the sale. However, according to the NHAI, there are no restrictions on second
sale. The decision would be applicable to following projects:

The on-going 2- and 4-laning NHAI projects, where financial closures have been
achieved by the concessionaire, but COD has not yet been declared by the authority.
The 6-laning NHAI projects, where financial closures have been achieved by the
concessionaire, but a project completion certificate has not yet been declared by the
authority.
Completed 2-, 4- and 6-laning NHAI projects awarded in BOT mode.
All new NHAI projects under PPP yet to be bid out in BOT mode in line with case a, b,
and c as the case may be.

The provision substitution has always been in-built in the model concession
agreement:

Concession agreement for 2000: 51% during the construction period for 3 years
following COD and to hold 26% for the remaining concession period.
Concession agreement post-November 2009 (B. K. Chaturvedi Committee): 51%
during the construction period till COD, and for a period up to 3 years, the bidder can
reduce the shareholding to 33%. Thereafter, the shareholding can be brought down to
26% for the remaining concession period.
The current concession agreement provides a 51% stake during the construction
period for 2 years following COD.

However, the current concession agreement contains provision for substitution of the
existing concessionaire to lenders, and such a substitution could have been involved in
case of: (a) financial default (delays of 3 months in servicing debt), (b) concessionaire
default (lender gets 270 days to substitute concessionaire), and (c) other cases of breach
of provisions of MCA.

Emkay Research

October 14, 2013

Construction

Sector Update

Substitution/exit policy to help financially viable projects


Arguably, the move would benefit only financially viable projects (presumably, the projects
will not have too many problems), the exit option may not garner interest for projects which
have been bid aggressively (buyers focus only on value generating projects, and it lacks
incentives to share upfront losses). But the real problem lies with economically unviable
projects. However, we do not rule out possibilities, where weaker developers could use this
exit option to sell their stakes in projects (both completed and under-construction can be
sold) and use the resulting equity in other projects or on fresh bids without being blacklisted
for not complying with concession agreement commitments. Besides, such provision can
also help lenders to exercise greater control over projects funded by them (creates
flexibility to substitute concessionaires, particularly the non-performing ones).

Exit policy for projects achieved appointed date


It is to be noted that the substitution of the SPV would be applicable for projects that have
achieved the appointed date (all clearances related to EC and FC and other pre-conditions
of the NHAI). However, we have observed that of the total 47 projects tendered in FY12,
only eight projects have commenced construction till June 2013. This implies that the
majority of the projects were not given the appointed date. This move, we believe, would
not benefit these projects. It also presents ambiguity about whether the tax holiday that the
first SPV is eligible for would be passed on to the new SPV, the additional cost of new
stamp duty for forming a new SPV, which is usually 2.5% of the value of the transaction,
and the imposition of penalty for exiting the projects.

83% of projects awarded in FY12 yet to commence construction


The NHAI awarded 15,894km of road projects over FY10-13, both in BOT and EPC mode,
with 98% of the projects on a BOT basis. However, the strong tendering activity did not
corroborate the real progress on the execution front. We have observed that of the total 47
projects tendered during FY12, only eight projects commenced construction activity till
June 2013, increasing the average time to begin construction after a BOT project is
awarded to 18 months (the difference between the LOA date and till date). This is likely to
increase even further if the current clog is not cleared soon. Among the 11 projects
tendered in FY13, only one has started construction, which implies that the average time to
commence construction is 10-12 months, as 80% of the projects were tendered in 1HFY13.
This is expected to increase in the future. The NHAI targets to undertake 2500km of
construction activity in FY14E (the target was 2580km in FY13), with 637km of road
construction already completed till July 2013.

Emkay Research

October 14, 2013

Construction

Sector Update

Exhibit 8: Out 47 projects tendered during FY12, only eight projects commenced construction till date
Projects

Bidder

Award date

Nagpur-Wainganga bridge

JMC projects, Artefact projects

May-11

Km Type
45 BOT

Apr-12

Construction Start date


May-13

Panikholi-Rimoli

Gayatri projects

Aug-11

163 BOT

2 laning of Kisnagiri-Tindivanam

Transitory-OJSC corporation

May-11

176 Annuity Apr-12

Vijaywada-Machhlioatnam

Madhucon projects

Nov-11

64 BOT

Kota -Jhalwar

Keti construction

Apr-11

88 BOT

Rampur-Kathgodam

Era infra-OJSC-SIBMOST

Nov-11

93 BOT

MH/KNT Border Sangareddy

L&T IDPL

Nov-11

145 BOT

Hospet Chitradurga

Ramkey infra

Nov-11

120 BOT

4-laning Solapur-Bijapur

Sadbhav eng

Mar-12

110 BOT

4-laning of Cuttcuk-Aangul

Ashoka Buildcon

Nov-11

12 BOT

4-laning of UP Harayana border-Yamunagar-Saha-Barwala

Gammon Infra

Mar-12

107 BOT

4-laining of Solapur-Maharashtra/KTK section

Coastal-srie Consortium

Dec-11

100 BOT

4-laning of Rohtak-Jind

Vijai infra

Dec-11

48 BOT

4-laining of Mulbagal-Karnatka/AP Border

JSR Construction

Mar-12

22 BOT

4-laining of Kiratpur ner chowk

IL&FS transportation

Feb-12

84 BOT

Beawer-Pali-indwara

L&T IDPL

May-11

244 BOT

Dec-11

2-laining with PS Motihari-Raxaul

Tantia-Jiangsu

Jan-11

69 BOT

Oct-11

4-laning of Punjab-Harayana border-Jind

Unity Infra

Mar-12

68 BOT

2-laning of Jowai-Meghalaya/Assam border

Simplex infra

Mar-12

102 BOT

Patna Buxar

Gammon infra

Nov-11

124 BOT

4- laning of Obedullnganj-Betul

Transitory

Feb-12

125 BOT

4-laning of Khagaria-Bakhtiarpur

Navayuga Engineering

Mar-12

112

4-laning of Hoskote-Dobbaspet

Transitory-OJSC Consortium

Mar-12

80 BOT

4-laining of Jalgaon-Maharashtra/Gujarat

L&T IDPL

Mar-12

208 BOT

4-laining of Amravati-Jalgoan

L&T IDPL

Mar-12

275 BOT

Jabalpur to Lakhanadone

Gannon Dunkerley

Jul-11

80 BOT

4-laning of Gwalior-Shivpuri

Essel infraprojects

Sep-11

125 BOT

4-laning of Shivpuri-Dewas

GVK Transportation

Sep-11

330 BOT

4-laning of Raipur-Bilaspur

IVRCL Asset holding

Nov-11

126 BOT

Rehabitation & upgradation to Birmitrapur to barkote

Gammon infrastructure

Mar-12

125 BOT

4-laning to Hospet-Bellary-Karnataka/AP

PNC Infratech-BF utility

Oct-11

95 BOT

4-laning of Mahulia to Behgora to Kharagpur

Simplex infrastructure

Dec-11

127 BOT
79.3 BOT

4-laning of Gomti-Chauraha-udaipur

Sadbhav Engg, Arvee

Mar-12

4-laning of Meerut-Bulandshahar

C&C construction

Sep-11

66 BOT

4-laning of Lucknow-Sultanpur

Essar-Atlanta(JV)

Oct-11

125 BOT

2-laning of Muzaffarpur-Barauni

KNR, frischmann prabhu

Oct-11

107 BOT

Lucknow-Raibareli

Essel infratructure

Nov-11

4-laning of Angul, Sambalpur

Abhijit Roads

Nov-11

153 BOT

4-laining of Jabalpur-Katni-Rewa

Soma Tollways

Aug-11

225 BOT

6-laning of Gundugolanu-Rajamundry

IVRCL asset & holding

Mar-12

120 BOT

6-laning of Anandapuram-visakapatnam-Anakapalli

Transtroy-OJSC corporation

Mar-12

58 BOT

Jul-12

70 Annuity

Ahmedabad to Vadodra

IRB infrastructure

Apr-11

102 BOT

6-lanining of Aurangabad-Barwa Adda

KMC construction

Mar-12

221 BOT

Vijaywada-Gundugolanu

Gammon Infra

Feb-12

103 BOT

Eatawah-Chakeri (Kanpur)

Oriental structural

Nov-11

160 BOT

Agra-Etawah Bypass

Ramky Infra

Nov-11

124 BOT

6-laning of Kishangarh-Udaipur-Ahmedabad

GMR Infra

Sep-11

555 BOT

Jan-13

Mar-13

Source: Emkay Research, NHAI

Emkay Research

October 14, 2013

Construction

Sector Update

EPC to propel momentum?


As awarding activity has stagnated in FY13 and 1HFY14E for various reasons discussed
above, the NHAI is trying to make progress to get the order momentum back on track via
awarding EPC projects. Till date, the NHAI has awarded six projects of 356km via the EPC
route. It is targeting to tender awards of 2000km in 2HFY14E.

Features of EPC Model concession agreement:


The agreement is stringent with regard to technical criteria, where EPC contracts have set
minimum criteria of 2.5x the estimated project cost for projects and construction business
(both highways and other core sectors combined) carried out by the bidder over the past 5
financial years. This compares with the BOT contract requirement of 1x the project costs
worth of project business (highways and other core sectors) accumulated over the past 5
years.

Leeway provided on financial net worth. The concession agreement currently provides
leeway in terms of minimum net-worth threshold, which is at 10% of the project cost as
against 25% of the project cost for BOT contracts.
DLP (defect liability period) of 2 years on completion of the project highway and
additional DLP for major bridges and structures of 3 years (total 5 years).
Defined maintenance period of 2 years after the completion of work; 1.5% and 2% of
the contract price to be paid to the contractor in the first and second year, respectively.
Incentive for the contractor for early completion in the form of a bonus.
Damages up to 1% of the project cost would be paid by the authority on account of any
delay from their side.
The contractor cannot sub-contract any work in more than 70% of the total project
length.
The EPC contract allows for a JV of maximum three players, with the lead member
responsible for satisfying 60% of technical and financial requirements (others have to
satisfy 30% of requirements). This is in addition to the weighted score exceeding the
technical and financial requirements.

Large players may deter to participate in EPC projects


Our discussions with the NHAI and road companies reveal aggressive biddings across
EPC projects in the past, since the EPC qualification document, as per our understanding,
encourages participation with no cap on the number of bidders (it is leant that some bidders
have quoted at a 30% discount to the NHAI benchmark cost) in small-size projects of
Rs3bn (20 bidders) and project size of Rs3-5bn (10 bidders). We consider this aggressive
bidding in EPC projects as generation of negative value for bidders, as: a) scalability of
margins is capped in EPC, b) project value is at risk due to delays in land acquisition (this
would increase overheads), and c) if any change in scope of work, which ultimately would
put project completion at risk. We also believe that small project size of Rs3-4bn (Rs3040mn/km) may dissuade large players such IRB Infrastructure and ITNL.

Emkay Research

October 14, 2013

Construction

Sector Update

Exhibit 9: Projects to tendered on EPC basis


Road Stretch
Bheem-Parsoli including Bheem & Parsoli Bypass

State
Rajasthan

(kms)
33.0

Cost (Rs.mn)
1,000

Status
Awarded

Parsoli-Gulabpura

Rajasthan

36.3

1,140

Awarded

Jhalawar-Rajasthan/ Madhya Pradesh Border

Rajasthan

62.2

1,770

Awarded

Merta City-Lambia-Jaitaran-Raipur

Rajasthan

52.8

1,580

Awarded

Raipur-Bheem (Jassa Khera)

Rajasthan

32.4

1,490

Awarded

Ambedkarnagar-Raebareilly (2 lane)

Uttar Pradesh

155.9

4,960

Bids invited

Raebareilly-Banda (2 lane)

Uttar Pradesh

133.3

3,510

Bids invited

Ladnu Nimbi Jodhan-Degna-Merta City (2 lane)

Rajasthan

139.0

3,680

Bids invited

Bhilwara-Ladpura (2 lane)

Rajasthan

67.8

2,370

Bids invited

Padhi-Dahod (2 lane)

Rajasthan

85.6

2,790

Proposal given

Unaira-Gulabpura (2 lane)

Rajasthan

214.0

5,710

RFP stage

Sitarganj-Tanakpur (2 lane)

Uttarakhand

Karauli-Dholpur (2 lane)

Rajasthan

Biharsharif-Barbigha-Mokama (2 lane)

52.2

2,200

100.9

2,890

Bihar

56.3

1,940

Chhapra-Rewaghat-Muzzaffarpur (2 lane)

Bihar

75.0

3,050

Patna-Gaya-Dhobi (4 lane)

Bihar

127.2

10,270

Jalandhar-Amritsar (6 lane)

Punjab

20.0

4,930

Thanjavur-Pudukkotai (2 lane)

Tamil Nadu

55.2

1,700

Tirumayam-Mannamadurai (2 lane)

Tamil Nadu

77.7

2,520

Bareilly-Sitarganj (2 lane)

UP

74.5

2,970

Uncha Nagar-Khanuawa-Roppas-Dholpur (4 lane)

Rajasthan

75.0

Bar-Bilara-Jodhupur (2 lane)

Rajasthan

125.0

Barmer-Sanchor-Gujarat Border (2 lane)

Rajasthan

154.0

2,005.10

62,470

Total
Source: NHAI

Emkay Research

October 14, 2013

10

Construction

Sector Update

To reduce competitive intensity further among new BOT projects


With the competitive intensity edging lower in FY13 across 11 projects, developers stayed
away for putting final bids across projects barring one project, where erratic bidding was
witnessed in the Walajahpet-Poonamallee road project, with 19 financial bids being placed.
We analysed 38 projects accounting for around 50% of the total length awarded by the
NHAI since FY11. In FY13, the final participation (final bids submitted as percentage of prequalified bidders) has fallen sharply, barring four projects, which witnessed double-digit
participation. The average participation from pre-qualified players in the final bidding for the
projects awarded between FY11-12 has declined from 36% to 13% for the projects
awarded in FY13. We also see an increase in the awarding activity of EPC road projects
will garner interest for core construction players, thereby further reducing competitive
intensity in the BOT space. Given that 2000km is ready to get awarded via the BOT route,
we believe, developers who have the financial muscle will benefit the most in the next
round of bidding.
Exhibit 10: Competitive intensity amongst developers

Date

Name of Project

Winners

Cost
(Rs
bn)

Apr-11
Apr-11
May-11
Jul-11
Sep-11
Sep-11
Oct-11
Nov-11
Nov-11
Nov-11
Nov-11
Nov-11
Nov-11
Dec-11
Dec-11
Jan-12
Jan-12
Mar-12
Mar-12
Mar-12
Mar-12
Mar-12
Mar-12
Mar-12
Mar-12
Mar-12
Mar-12
Apr-12
May-12
May-12
Jul-12
Jul-12
Aug-12
Nov-12
Nov-12
Nov-12
Mar-13
Mar-13

Ahmedabad Vadodara
Beawar-Pali-Pindwara
Barwa Panagarh
Kishangarh--Ahmedabad
Gwalior Shivpuri
Shivpuri Dewas
Lucknow Sultanpur
Cuttak Angul
Etawah and Chakeri (Kanpur)
Hospet Chitradurga
Mah/KNT- Sangareddy
Patna - Buxar
Raipur Bilaspur
Bikaner - Suratgarh
Chittorgarh Neemachah
Kiratpur - Ner chowk
Obdellagang - Betul
Amravati Jalgaon
Anadpuram- Visakhapatnam - Ankapalli
Gomti Chauraha - Udaipur
Hoskote - Dobaspet
Jalgaon - Guj/Mah Border
Jind - Punjab/Haryana Border
Kharagpur-Baleshwar
Rajahmundry - Gundugulunu
Sikar - Bikaner
Solapur - Bijapur
Bridge across Narmada (Vadodara - Surat section)
Walajahpet - Poonamallee
Goa karnataka - Kundapur
Raebareli-Jaunpur
Coimbatore-Mettupalayam
Walayar-Vadakkancherry
Kashipur-Sitarganj
Rajasthan border-Fatehpur-Salasar
Rajsamand-Gangapur-Bhilwara 87 6.8 Sadbhav Engg Ltd
Rohtak-Hissar
Khed-Sinnar

IRB Infrastructure
L&T
DSC
GMR Infra
Essel Infraprojects
GVK
Essar - Atlanta
Ashoka Buildcon
Oriental Structural
Ramky Infra
L&T
Gammon Infra
IVRCL
MBL Infra
Chetak Enterprises Ltd.
IL&FS Transportation
Transtroy
L&T
Transtroy - OJSC
Sadbhav Engineering
Transtroy - OJSC
L&T
Unity infrastructure
IL&FS Transportation
IVRCL Asset
IL&FS Transportation
Sadbhav engineering
HCC
Essel project
IRB Infra
PNC Infratech
Transstroy-OJSC Consortium
KNR Construction
Galfar Engg & Contracting SAOG
Galfar Engg & Contracting SAOG
Sadbhav Engg Ltd
Sadbhav Engg Ltd
IL&FS Transportation Networks

49.2
23.9
16.7
53.9
10.6
28.2
10.4
11.2
14.9
10.5
12.7
8.1
12.2
5.1
5.1
18.2
9.1
25.4
8.4
11.1
7.2
19.7
4.4
4.8
16.2
6.3
11.0
5.1
12.9
24.0
5.7
5.9
6.8
6.1
5.3
6.8
9.6
13.5

195
244
123
556
125
330
126
112
160
120
145
105
127
172
117
113
121
275
58
79
80
209
69
119
121
238
110
6
93
187
166
54
54
77
154
87
99
138

13
16
9
7
15
14
12
16
9
14
19
1
17
6
9
4
6
12
6
10
4
17
5
5
3
1
16
2
19
2
8
6
1
1
2
1
5
4

22
19
20
11
28
19
34
27
35
37
37
36
33
33
36
28
36
22
35
39
36
29
40
40
35
30
38
35
37
35
30
35
32
30
32
35
34
40

59%
84%
45%
64%
54%
74%
35%
59%
26%
38%
51%
3%
52%
18%
25%
14%
17%
55%
17%
26%
11%
59%
13%
13%
9%
9%
42%
6%
51%
6%
27%
17%
3%
3%
6%
3%
15%
10%

479.6

5,686

296

942

33%

Total

Players
% Final
Length
Final
prebids
(km) bidders qualified participation

Source:

Emkay Research

October 14, 2013

11

Construction

Sector Update

Traffic growth muted


Our analysis of traffic growth over a period of 17 quarters in 21 road projects owned by IRB
infrastructure, Ashoka Buildcon, ITNL, GMR Infrastructure and Sadbhav Engineering
shows a declining trend. The sectors flat traffic growth in the past 2-3 quarters can be
attributed largely to: a) lower port traffic witnessed across major ports, which has been
declining for seven consecutive quarters, b) early arrival of the monsoon, with the higherthan-expected rainfall during June-July 2013, and c) overall economic slowdown and the
resultant lower GDP growth.
Exhibit 11: Road Traffic growth Flattish

Traffic grow th

Source: Emkay Research , Companies

Q1FY14

Q4FY13

Q3FY13

Q1FY14

-4
Q4FY13

Q2FY13

Q1FY13

Q4FY12

Q3FY12

Q2FY12

Q1FY12

Q4FY11

Q3FY11

Q2FY11

Q1FY11

Q3FY13

(1.3)

-2

(0.8) (2.2)
(1.4) (1.4)

Q2FY13

0.0 (0.1)

Q1FY13

0.0

Q4FY12

1.2

Q3FY12

0.4

(4.8) (7.2) (5.4)


Q2FY12

1.8

2.0

(2.0)

0.8

3.1

4.0

5.8

Q1FY12

3.7

Q4FY11

6.0

5.8

4.9

Q3FY11

6.9

8.0

Q2FY11

9.7

10.0

Q1FY11

12.0

Exhibit 12: Port traffic edged lower

-6
-8

Port traffic

Source: Emkay Research , IPA

Exhibit 13: Container traffic declined

8.0
6.0

5.0

6.0

6.0

5.0

5.7
3.3

3.2

4.0

2.5

2.0

1.0

0.2

(0.3)

Q4FY12

Q1FY13

(2.0)

Q1FY11

Q2FY11

Q3FY11

Q4FY11

Q1FY12

Q2FY12

Q3FY12

(4.0)

Q2FY13

Q3FY13

Q4FY13

Q1FY14
(3.8)

(6.3)

(6.0)
(8.0)

Container traffic

Source: Emkay Research, IPA

Emkay Research

October 14, 2013

12

Construction

Major amendments
Agreement

Sector Update

discussed

under

Model

Concession

Proposed amendments in pre-qualification criteria of the RFQ document


The current RFQ document has been able to encourage a large number of bidders to
participate in the pre-qualification process. It has also been observed that many bidders,
who are not competent to undertake the project, are also getting pre-qualified. This is
leading to problems in the post-award scenario of the projects with such bidders. The
overcrowding and aggressive bidding by such bidders have also led to a situation, where
reputed and competent bidders stay away. Lately, a number of projects with such bidders
either have failed to achieve financial closure or are facing substantial delays in completion.
Such projects in distress are susceptible to defaulting on loan repayments and becoming
non-performing assets (NPAs). In the course of experience gained in evaluating the RFQ
applications for various projects, it has been felt that some provisions of the Model RFQ
required modifications and/or clarifications.

A) Assessment of Available Capacity for execution of future projects


The technical capacity of the applicant is calculated on the basis of aggregate
project/construction execution experience under different categories of projects during the
last 5 financial years preceding the applications due date. However, the above
methodology of assessing technical capacity only takes into account the past experience of
the applicant and does not capture the available technical capacity of the firm at the time of
bidding with respect to present commitment on deployment of resources for other projects
undertaken by the firm for development/implementation. As a result, applicants with limited
or no capacity available for execution of additional projects are also pre-qualified, and in
the event of the project award are failing to either achieve financial closure or execute the
project in a timely manner. Therefore, it is pertinent to consider the applicants
committed resources/investments on the ongoing projects to arrive at the available
technical capacity. Thus, it is proposed that in addition to assessing the past
performance of project executions, the available bid capacity with respect to
resource commitment in projects under development/execution may also be
assessed while pre-qualifying the applicants.

B) Assessment of Financial Capacity


The applicants financial capacity is assessed on the basis of the net worth of the firm in the
preceding financial year. In order to qualify, the net worth of the applicant is required to be
minimum 25% of the total project cost for which the applications are invited, and the net
worth of the applicant is computed as the sum of subscribed and paid-up equity and
reserves from which the sum of revaluation reserve, miscellaneous expenditure not writtenoff and reserves not available for distribution to equity shareholders is deducted. However,
it has been observed in a number of cases that applicants qualifying in the net worth
criteria are failing to achieve financial closure or unable to infuse equity in the awarded
projects due to unavailability of adequate equity capital and/or a highly leverage balance
sheet of the applicant. It clearly demarcates that net worth as the only deciding factor
is not the sufficient parameter to assess the applicants ability to arrange financing
required for the project.
Therefore, it has proposed to introduce the following additional qualification criteria in the
RFQ document with respect to financial capacity of the applicants:
(i) Adjustment of Net Worth with respect to Debt-Equity ratio of the Applicant:
It is proposed that net worth of the applicants shall be suitably adjusted with a factor linked
to the debt-to-equity ratio of the applicant. This will reduce the applicable net worth of the
applicant in case of a highly leveraged entity, thus preventing it from qualifying for highvalue projects.

Emkay Research

October 14, 2013

13

Construction

Sector Update

Exhibit 14: Adjustment to net worth for debt-equity ratio


Debt-Equity Ratio

Applicable Factor

Less than or equal to 3:1

More than 3:1 & upto 6:1

0.85

More than 6:1 &upto 10:1

0.6

More than 10:1

0.2

Source: Emkay Research, NHAI

(ii) Submission of Equity Financing Plan by the Applicants:


It is proposed that applicants will have to furnish a detailed equity financing plan on the
equity requirement with regard to the total project cost for the project indicated in the RFQ
document. The proposed equity financing plan shall include submission of certificates with
regard to sources of equity to the applicant. Additionally, the applicants shall also require to
furnish their equity commitment for projects to be executed during the construction period
of the project, which will prevent bidders from participating in projects unrealistically without
ensuring availability of equity required for the project.
Exhibit 15: TPC of the project that bidder has applied (Rsbn)
Debt-Equity

Project cost

0-2.5

30% of TPC

Above 2.5-upto-6.5

25% of TPC

Above 6.5

205 of TPC

Source: Emkay Research, NHAI

(iii) Restriction on the Applicants on account of pending financial closure and nonperforming assets
It is proposed that applicants shall be restricted from participating in the project in case
financial closure of three or more awarded projects is pending on the date of the RFQ
submission for reasons attributable solely to the applicant. Currently, this provision is
provided in the RFP document.

Payment of Premium by the Concessionaire


With a view to mitigating the initial cash-flow constraints, it is proposed that the payment of
premium may start 3 years after COD for 4-laning projects, and from the scheduled project
completion date for 6-laning projects. Further, keeping in view the likely increase in the
cashflows of the projects and the reduction in debt service requirements, it is proposed that
after the 10th anniversary of COD for 4-laning projects/project completion date for 6-laning
projects, the percentage/absolute increase in premium would be higher compared with the
initial period.

The following options are being proposed:


Option 1 Revenue Sharing Principle
To ensure that there is no revenue sharing during the initial years of the project, it is
proposed to modify the concession agreement provision as per the following:

For 4-laning projects: Percentage revenue sharing would start from the fourth year of
COD or thereafter (depending on the bid), and would increase by 1% every year till the
tenth anniversary of COD. Thereafter, the increase would be 2% per year for the rest of
the phase of the concession period.
For 6-laning projects: Percentage revenue sharing would start from the scheduled
project completion date or thereafter (depending on the bid), and would increase by 1%
every year till the tenth anniversary of project completion date. Thereafter, the increase
would be 2% per year for the rest of the phase of the concession period.

Option 2 Fixed Monetary Value Principle

Emkay Research

October 14, 2013

For 4-laning projects: Bidders should quote a specific monetary amount that is payable
to the authority from the fourth year of COD, and this amount should increase by 5%
per year till the tenth anniversary of COD. Thereafter, the increase would be 8% per
year for the rest of the phase of the concession period.
14

Construction

Emkay Research

October 14, 2013

Sector Update

For 6-laning projects: Bidders should quote a specific monetary amount that is payable
to the authority from the scheduled project completion date, and this amount should
increase by 5% per year till the tenth anniversary of completion of construction.
Thereafter, the increase would be 8% per year for the rest of the phase of the
concession period.

15

IRB Infrastructure
Separating Fundamentals from the Noise

Your success is our success

October 14, 2013

Rating

Buy

CMP

Target Price

Rs78

Rs158

EPS Chg FY14E/FY15E (%)

NA/NA

Target Price change (%)

Earnings to remain flat over FY13-15E. But we expect a


CAGR of 10% in cash profits, providing the ability to fund
equity in new projects

Biggest beneficiary of new road projects to be tendered out


in 2HFY14E. 4 projects scheduled to commence toll
collections over the next.

Attractive valuations at 0.8x P/BV & 5.9x PE near the end


2008 troughs IRB remains our preferred road BoT asset play.
Maintain buy with the revised target price of Rs158/share

-7

Nifty

6,096

Sensex

20,529

Price Performance
(%)

1M

Absolute
Rel. to Nifty

3M

6M 12M

-22

-31

-50

-1

-25

-38

-54

Source: Bloomberg

Relative price chart


Rs

% 0

150

-14

125

-28

100

-42

75

-56

50
Oct-12

Strong cashflows from a healthy mix of operating and underconstruction assets, and moderate gearing the key
competitive differentiators in a capital-intensive business

Previous Reco

Buy

175

Dec-12

Feb-13

Apr-13

IRB Infrastructure (LHS)

Jun-13

Aug-13

-70
Oct-13

Rel to Nifty (RHS)

Source: Bloomberg

Stock Details
Sector

Construction
IRB IB

Bloomberg

Equity requirement of Rs3-4bn in FY14E, Rs17-18bn over 2-3 years


IRB Infrastructure Developers (IRB) has 15 road projects under it portfolio, of which 10
are currently operational and the rest are under construction. The companys total equity
requirements over the next 2-3 years have been estimated at Rs17bn. On account of
commissioning of 4 road projects i.e. Jaipur-Deoli, Amravati-Talegaon, AmritsarPathankot, & Ahmedabad-Vadodra along with EPC arm will garner cumulative operating
cash flow Rs19.6 bn from FY13-15E. These, coupled with current cash of Rs14.7bn,
would be sufficient to meet equity requirements of the company for the next 2 years.

Peak D:E of 2.33x still manageable


IRB Infrastructures consolidated debt (adjusted for loans and advances) stands at
Rs79bn, including its standalone debt of Rs11.4bn, with cash balance of Rs14.7bn as of
March 31, 2013. Debt worth Rs71.3bn, accounted for individual road projects, is fairly
positive for the company compared to other road developers like ITNL, which has debt
worth Rs37bn on its standalone balance sheet as of March 2013, with no certainty of
recurring income to offset the surge in the interest cost. We estimate peak debt (for
current projects in its kitty) of Rs116bn, which would imply debt equity of 2.33x.

3,324

Equity Capital (Rs mn)

10

Face Value(Rs)

332

No of shares o/s (mn)

158/ 52

52 Week H/L
Market Cap (Rs bn/USD mn)

26/ 427

Daily Avg Volume (No of sh)

3,061,331

Daily Avg Turnover (US$mn)

3.7

Shareholding Pattern (%)


Sep'13 Mar'13 Dec'12
Promoters

62.9

62.9

62.7

FII/NRI

22.3

22.3

22.7

Institutions

4.0

4.0

4.0

Private Corp

3.9

3.9

4.3

Public

6.9

6.9

6.3

Source: Bloomberg

Nitin Arora
nitin.arora@emkayglobal.com
+91-22-66242491
Ajit Motwani
ajit.motwani@emkayglobal.com
+91-22-66121255

Emkay Global Financial Services Ltd.

Current price implies less than 1x book value adjusted for Mumbai-Pune
The stock has corrected 34% over the last 3 months. The current market price of Rs79
(market capitalization of Rs26.2bn) implies value of 0.4x the invested book (historically
seen at 1x) adjusted for the Mumbai-Pune Expressway Project (MIPL). IRB has invested
Rs33bn in FY13 as equity investments, and loans and advances in BOT road projects.
We have adjusted the value for MIPL of Rs13.6bn (FY13 revenue is Rs4.16bn; likely to
report revenue of Rs4.39bn and Rs5.43bn in FY14E and15E, respectively), with
relatively low debt of Rs8.76 bn. MIPL (Mumbai - pune ) accounts for 24% of our SOTP
and 40% of value derived for the total BOT road assets. This is one the non-disputable
road assets, which has certainty of cashflows, with a revenue CAGR of 14% over FY1315E as against 13% during FY11-13. We understand that there have been concerns
over the recent project (Ahmedabad-Vadodara), with relatively aggressive bid & traffic
disappointment. However, we believe, Amritsar-Pathankot, Jaipur-Deoli and AmravatiTalegaon projects have potential value, as these were won in a low-competitive
environment and at high grant levels (close to 40%).
Financial Snapshot (Consolidated)
YE-

Net

EBITDA

Mar

Sales

(Core)

(%)

FY12A

31,307

13,735

FY13A

36,872

16,333

FY14E

41,433

FY15E

44,109

(Rsmn)
EPS

EPS

RoE

EV/

APAT

(Rs) % chg

(%)

P/E

EBITDA

P/BV

43.9

4,960

14.9

9.6

18.8

5.3

5.6

0.9

44.3

5,567

16.7

12.2

20.4

4.7

5.5

1.0

18,705

45.1

4,471

13.5

-19.7

16.1

5.8

5.7

0.9

21,184

48.0

5,636

17.0

26.1

17.8

4.6

5.9

0.8

16

Company Update

Emkay

IRB Infrastructure

Company Update

Despite strong execution E&C order-book at Rs56bn provide reasonable


visibility; however, growth could remain subdued
IRB Infrastructures order-book at the end of March 2013 stood at Rs 76.6bn. Out of this,
Rs56bn worth of orders would be executed over the next 3 years. The backlog includes
Rs23bn worth of Goa-Kundapur project, which the company added in Q2FY13.
The companys construction revenue is likely to moderate, due to completion or nearing
completion of its key projects. Recently, the Talegaon-Amravati project was completed,
while Jaipur-Deoli, Amritsar-Pathankot and Tumkur are complete 95%, 90% and 85%,
respectively. Irrespective of the completion of its four key projects, the company would able
to maintain construction revenue for FY14E at the similar level of what it had garnered in
FY13, due to increase in contributions from Ahmedabad-Vadodara and Goa-Kundapur
(which is expected to be executed in 2HFY14E; it is waiting for financial closure) .
IRB Infrastructure expects the bidding activity to regain momentum during Q3/Q4FY14
(expects 1,000-2,000km of fresh projects to come up from the NHAI, while 3,000-4,000km
to be bid out during 3Q/4QFY14E), and expects new orders to come from potential re-bids
(projects stalled on account of non-achievement of financial closure and fresh biddings).
Exhibit 16: Revenue CAGR of 9.4% over FY13-15E

Exhibit 17: EBITDA CAGR of 14% over FY13-15E

50

25

40

20

30

15

20
10

17

24

37

31

41

44

10
5

10

14

19

21

FY10

FY11

FY12

FY13

FY14E

FY10

FY15E

Source: Company, Emkay Research

18
16
14
12
10
8
6
4
2

5.0
4.0
3.0
4.0

FY10

FY11

FY12

FY13

FY14E

FY15E

Exhibit 19: EPS

6.0

4.5

FY11

Source: Company, Emkay Research

Exhibit 18: PAT growth to remain Flat

2.0

16

5.6

5.0

5.6
4.5

1.0
-

15

13

12

FY10

FY11

17

17
13

FY12

FY13

Source: Company, Emkay Research

Emkay Research

October 14, 2013

FY14E

FY15E

FY12

FY13

FY14E

FY15E

Source: Company, Emkay Research

17

IRB Infrastructure
Exhibit 20: Flat EPC revenue growth

Company Update
Exhibit 21: BOT revenue to surge higher

30

25

25

20

20

15

15

26

10
5

21

17

26

24

10

20
15

10

11

FY10

FY11

FY12

FY13

FY10

FY11

FY12

FY13

FY14E

FY15E

Source: Company, Emkay Research

FY14E

FY15E

Source: Company, Emkay Research

Exhibit 22: Current market price implies less than 1x invested book value
CMP
No of shares

79
332

Market cap Rsmn

26260

Value for Mumbai Pune Rsmn

13,411

Market cap adj. for Mumbai Pune project

12,849

Investments (equity + L&A) in road projects at end-FY2013

33,075

Investments in MIPL at end-FY2013


Investments adjusted for MIPL
Implied P/B (x)

1,073
32,002
0.40

Source: Company, Emkay Research

Emkay Research

October 14, 2013

18

IRB Infrastructure

Company Update

Exhibit 23: Total Investments (Equity, Loans & advances )


Project Rsmn
Investments in road projects

FY11

FY12

FY13

Loans & advances

Loans & advances

Loans & advances

Equity

Short Long
term term

Thane-Bhiwandi bypass

611

Mumbai-Pune Expressway

778

Pune-Sholapur

451

Pune-Nashik

519

12

Ahmednagar-Karmala-Tembhurni

80

Bridge over Patalganga River-Kharpada

80

200

Total Equity
611

611

978

778

451

451

531

519

80
80

Short Long
term term
18

Total Equity

Short
term

Long
term

Total

629

611

1212

778

451

451

451

534

519

519

80

80

80

80

80

80

80

722

222

228

5,472

6344

872

2680

3,552

434
15

1,073

80

Thane-Ghodbunder

222

707

929

222

Bharuch-Surat

872 2,297

3169

872

855

855

1,336

227

1563

1,336

566

1,902

2,611

2611

4,653

1,117

5770

4,653

847.8

5,501

Integrated Road Development in Kolhapur


Surat-Dahisar

500

611
295

Pathankot-Amritsar

355 1,180

257

1792

355

162 1,145

1662

774

7.9

2326.3

3,109

Talegaon-Amravati

322

57

381

322

151

828

1301

364

352

1093.4

1,810

Jaipur-Deoli

390

264

272

480.62

2924.9

4,380

Panji-Goa

311

929

1173.1

1,485

1110 315.727

1110.7

2,537

1000

33.61

2950.0

3,984

801

972.92
6,558 11578.2

33,075

Tumkur-Chitradurg

0 1,181

156

926

780

200 1,837

2817

975

1240

311.4

1,173

1484

311

1337

476

476

952

1,000

69 2,950

4019

Ahmedabad-Vadodara Expressway
MVR Infra
Subtotal - Investment in road projects

8,457 6,772

742 15971 12,846

7,832 8,942 29620.4 14,939

1,775

Investments in other subsidiaries


Construction subsidiary

312 1,588

1900

312

1353.2

1665.2

312

957

1,269

Real estate subsidiary

586

587

586

587

586

587

26

26

119.4

119.5

0.09

182

182

182

182

10.1

10.2

0.09

211

211

898 1,796

2694

898 1483.81

2381.81

898

1351

2,249

32002 15,837

7,909

Hospitality subsidiary
Sindhudurg Airport
Subtotal - Investment in other subsidiaries
Total investments in subsidiaries

9,354 8,570

742 18666 13,744

9,316 8,942

11,578

35,324

Source: Company, Emkay Research

Emkay Research

October 14, 2013

19

IRB Infrastructure

Company Update

Maintain Buy with a Revised Target price of Rs 158


With significant slow down in NHAI awarding activity (only 1300 km awarded in FY13
Annual target ~9K kms) and possibly impact on NHAI funding plan on account of recent
termination of road project we do not foresee meaningful increase in awarding activity by
NHAI. Hence we have build in just Rs20bn of new project wins for IRB in FY14 similar to
levels the company has achieved till FY13.
With minimal funding requirement IRB remains well funded for exploiting new opportunities
as and when NHAI awarding activity pick up. However in the mean time company is
focusing on reducing its interest cost and has managed to lower the interest rates at
Bharuch Surat by 150bps to 10.65% and is evaluating the prospect of refinancing debt of
Surat Dahisar from IIFCL which will again lead to similar correction in interest rates at the
project debt level.
We have revised our target price lower by 6% as we lowered E&C multiple for construction
business from 4x to 5x at Rs42/share (Earlier Rs53/share) on account lower carry forward
order backlog as order offtake slows down.
With 4 projects schedule to commence toll collection over the next year, minimal funding
requirement and benefits of lower interest rate, we believe IRB remains the Road BoT
asset to play. We maintain our BUY rating and revised our TP to Rs 158 as compared to
Rs169 earlier.
Exhibit 24: SoTP Fair value at Rs 158
Holding

Valuation
Measure

Disc rate

Value
(Rs mn)

Value
/Share

EPC Business

100%

PV of O&M Contracts

100%

PER

14128

42.5

NPV

13.5%

3,178

9.6

17,306

52

100%

FCFE

12.5%

13,411

40.3

Surat Dahisar

90%

FCFE

13.5%

2,590

7.8

Bharuch Surat

100%

FCFE

13.5%

3,442

10.4

Mohol-Mandrup Road

100%

FCFE

13.5%

-37

-0.1

Kharpada-Patalganga Bridge

100%

FCFE

13.5%

226

0.7

Ahmednagar Tembhurni Road

100%

FCFE

13.5%

244

0.7

Thane Ghodbunder

100%

FCFE

13.5%

1,109

3.3

Pune Nashik

100%

FCFE

13.5%

306

0.9

Pune Sholapur

100%

FCFE

13.5%

522

1.6

Thane Bhiwandi Bypass

100%

FCFE

13.5%

1,462

4.4

Kolhapur City Roads

100%

FCFE

14.5%

3,268

9.8

Namakkal - Omallur - NH-7

100%

FCFE

13.0%

656

2.0

Amritsar Pathankot

100%

FCFE

14.5%

6,531

19.7

Jaipur - Deoli

100%

FCFE

14.5%

6,952

20.9

Amravati Talegaon

100%

FCFE

14.5%

2,970

8.9

Tumkur Chitradurga

100%

FCFE

14.5%

200

0.6

Ahmedabad Vadodara

100%

FCFE

14.5%

-3,731

-11.2

Goa - Kundapur

100%

FCFE

15.5%

-610

-1.8

39,513

119

Asset Operated

Value of Construction segment - (a)


Mumbai Pune Expressway & NH4

Gross value of BOT


Add: PV of Loans to SPV
Less : Net Debt at Parent Level
Value of BOT - Net of debt - (b)
Aryan Infra Investment - (C)
Total Value - (a+b+c)

66% Book value

2,411

7.3

-8,275

-24.9

33648.7

101.2

1,650

5.0

56,137

158

Source: Emkay Research

Emkay Research

October 14, 2013

20

IRB Infrastructure

Company Update

Key Financials (Consolidated)


Income Statement

Balance Sheet

Y/E Mar (Rsmn)

FY12A

FY13A

FY14E

FY15E

Y/E Mar (Rsmn)

FY12A

FY13A

FY14E

Net Sales

31,307

36,872

41,433

44,109

Equity share capital

3,324

3,324

3,324

3,324

28.4

17.8

12.4

6.5

Reserves & surplus

25,243

29,232

32,630

37,139

17,572

20,540

22,728

22,925

Net worth

28,566

32,556

35,954

40,463

1,376

1,557

1,731

1,722

1,123

1,092

1,030

927

Secured Loans

50,455

66,349

72,259

90,491

Unsecured Loans

17,913

12,712

12,712

12,712

Loan Funds

68,367

79,060

84,970 103,203

259

259

Growth (%)
Expenditure
Employee Cost
Other Exp
SG&A

Minority Interest

FY15E

970

1,223

1,330

1,330

13,735

16,333

18,705

21,184

Growth (%)

25.6

18.9

14.5

13.3

Net deferred tax liability

EBITDA margin (%)

43.9

44.3

45.1

48.0

Total Liabilities

98,315 112,967 122,213 144,851

Gross Block

57,817

57,918

91,005

2,283

2,830

3,368

3,917

Net block

55,534

55,088

87,636

92,113

24,452

49,160

36,024

48,548

186

620

620

620

28,399

27,205

17,714

16,802

1,624

2,488

2,171

1,003

EBITDA

Depreciation

2,970

4,415

5,581

6,538

10,765

11,918

13,124

14,646

34.4

32.3

31.7

33.2

Other Income

1,252

1,301

1,236

1,193

Capital work in progress

Interest expenses

5,505

6,153

7,730

7,917

Investment

PBT

6,512

7,066

6,630

7,923

Current Assets

Tax

1,552

1,530

2,221

2,390

Inventories

EBIT
EBIT margin (%)

Effective tax rate (%)

Less: Depreciation

23.8

21.7

33.5

30.2

4,960

5,536

4,409

5,533

6.9

11.6

-20.4

25.5

Loans & advances

15.8

15.0

10.6

12.5

Other current assets

(Profit)/loss from JVs/Ass/MI

-31

-62

-103

Adj. PAT After JVs/Ass/MI

4,960

5,567

4,471

5,636

Reported PAT

4,960

5,567

4,471

5,636

Net current assets

PAT after MI

4,960

5,567

4,471

5,636

Misc. exp

9.6

12.2

-19.7

26.1

FY12A

FY13A

FY14E

FY15E

PBT (Ex-Other income)

5,260

5,765

5,394

6,730

Profitability (%)

Depreciation

2,970

4,415

5,581

6,538

Interest Provided

5,505

6,153

7,730

7,917

-779

476

442

Tax paid

-1,587

-2,422

Operating Cashflow

11,369

Capital expenditure
Free Cash Flow

Adjusted PAT
Growth (%)
Net Margin (%)

E/O items

Growth (%)

Cash Flow

Sundry debtors

259

259
96,030

141

310

1,033

1,046

18,208

14,710

4,813

5,057

8,427

9,696

9,696

9,696

Current lia & Prov

10,265

19,106

19,954

13,403

Current liabilities

10,017

15,996

16,844

10,293

248

3,110

3,110

3,110

18,134

8,099

-2,240

3,399

Cash & bank balance

Provisions

Total Assets

98,315 112,967 122,041 144,680

Key Ratios

Y/E Mar (Rsmn)

Other Non-Cash items


Chg in working cap

Other income
Investments
Investing Cashflow
Equity Capital Raised

FY12A

FY13A

FY14E

FY15E

EBITDA Margin

43.9

44.3

45.1

48.0

Net Margin

15.8

15.0

10.6

12.5

ROCE

14.1

12.9

12.9

12.5

-5,395

ROE

18.8

20.4

16.1

17.8

-2,221

-2,390

RoIC

24.0

22.9

20.3

17.1

14,387

16,925

13,400

Per Share Data (Rs)

-24,201

-25,456

-24,994

-23,538

EPS

14.9

16.7

13.5

17.0

-12,832

-11,069

-8,068

-10,138

CEPS

23.9

30.0

30.2

36.6

1,252

1,301

1,236

1,193

BVPS

85.9

78.4

88.7

102.2

1.8

4.0

3.2

0.0

-3,702

1,680

-25,484

-21,167

-23,758

-22,344

Y/E Mar

DPS
Valuations (x)

PER

5.3

4.7

5.8

4.6

Loans Taken / (Repaid)

24,457

14,815

5,910

18,232

P/CEPS

3.3

2.6

2.6

2.1

Interest Paid

-5,505

-6,153

-7,730

-7,917

P/BV

0.9

1.0

0.9

0.8

Dividend paid (incl tax)

-1,319

-1,191

-1,245

-1,127

EV / Sales

2.4

2.5

2.6

2.8

EV / EBITDA

5.6

5.5

5.7

5.9

2.3

5.1

4.1

0.0
2.9

Income from investments


Others
Financing Cashflow
Net chg in cash

Dividend Yield (%)

17,633

7,471

-3,064

9,188

Gearing Ratio (x)

3,518

691

-9,897

244

Net Debt/ Equity

1.8

2.5

2.7

Opening cash position

12,000

18,208

14,710

4,813

Net Debt/EBIDTA

3.7

3.9

4.3

4.6

Closing cash position

15,518

18,899

4,813

5,057

Working Cap Cycle (days)

-0.9

-65.4

-62.1

-13.7

Emkay Research

October 14, 2013

21

IL&FS Transportation
Higher Leverage to Suppress Earnings

Your success is our success

October 14, 2013

Rating

Robust order backlog (3x FY13 E&C rev) to help construction


income CAGR of 24% over FY13-15E, but high margin fee
income to stagnate, implying a muted EBITDA CAGR of 4%

Standalone leverage to surge higher to 2.2x, as ITNL pumps


in equity (Rs24bn) to complete the projects

High leverage in the absence of meaningful rate cuts to


exert pressure on standalone profitability

Dilution imminent in and post-FY15E, as standalone leverage


unsustainable. Earnings highly leveraged to new orders.
Retain hold with the revised target price of Rs134

Previous Reco

Hold

Buy

CMP

Target Price

Rs111

Rs134

EPS Chg FY14E/FY15E (%)

NA/NA

Target Price change (%)

Nifty

6,096

Sensex

20,529

Price Performance
(%)

1M

3M

6M 12M

Absolute

-7

-25

-39

-40

Rel. to Nifty

-9

-28

-45

-45

Source: Bloomberg

Relative price chart


225

Rs

% 20

200

175

-12

150

-28

125

-44

100
Oct-12

Dec-12

Feb-13

Apr-13

Jun-13

IL&FS Transportation (LHS)

Aug-13

-60
Oct-13

Rel to Nifty (RHS)

Source: Bloomberg

Construction revenue growth intact, but fee income to stagnate


Supported by back-ended FY13 order wins (Rs38bn), ITNLs order-book currently
stands at healthy Rs146bn. With robust revenue visibility (3.1x FY13E construction
revenues), we expect the standalone construction revenues to surge at a CAGR of 24%
over FY14-15E. In Q1FY14, the company witnessed execution delays in projects such
as Chennai Nashri (due to regional violence and unrest) and Moradabad Bareilly (delays
in land acquisition), besides delays in other projects caused by early monsoons.
However, with majority of the fee income on new order wins has already been booked in
FY13, we see fee income stagnating over FY13-15E (50% of the booked FY14E fee
income in Q1 to edge lower from Q2 onwards). With only Rs3-3.5bn of residual fee
income to be booked on the current backlog (driven largely by projects such as KhedSinnar and Barwa-Adda), arguably the company will have to significantly depend on new
order wins for fee income growth. Hence, we see ITNLs fee income stagnating at
Rs5.5bn, as we model an order inflow of Rs90bn over FY14-15E (Rs45bn each year).

Muted EBIDTA a CAGR of 4%

Stock Details
Sector

Construction
ILFT IB

Bloomberg

1,943

Equity Capital (Rs mn)

10

Face Value(Rs)

194

No of shares o/s (mn)

Since fee income is a high-margin stream of revenue for ITNL and the contribution of fee
income to total revenues is expected to tumble from 17% in FY13E to 10.9% in FY15E
as per our calculations, we estimate standalone EBIDTA growth to remain muted at a
CAGR of 4% over FY13-15E, with the EBITDA margin likely to contract by 200bps and
260bps in FY14E and FY15E, respectively.

52 Week H/L

229/ 97

Leverage to surge higher putting pressure on standalone profitability


Due to lower contribution of fee income to overall revenue, we see ITNL resorting to
taking further debt on the standalone book to infuse equity requirements towards funding
its new projects. The company plans to raise Rs15.5 bn via preferential issue (already
raised Rs4 bn) and rights issue to address the equity requirement (Rs24 bn over FY1315E) for future projects. We believe that even after raising funds at upper end 40% of
the equity requirements will be funded by taking debt on standalone books (Q1FY14
debt at Rs40 bn) and will increase further on account of new orders. Hence, we see a
surge in debt on the standalone balance-sheet from Rs37bn in FY13 to Rs53 bn by
FY15E, which would lead to further deterioration in its leverage ratios, which would
increase the interest burden on ITNL. However, in case leverage increases further, it
would become essential for the company to maintain its EBITDA at Rs6.5bn and Rs7bn
in FY14E and FY15E, respectively, to service interest costs on standalone level.

Market Cap (Rs bn/USD mn)

22/ 353

Daily Avg Volume (No of sh)

88,829

Daily Avg Turnover (US$mn)

0.2

Shareholding Pattern (%)


Jun10 May10 Dec10
Promoters

46.3

46.5

46.5

FII/NRI

43.3

43.6

42.6

Institutions

6.5

7.0

7.0

Private Corp

1.8

1.0

1.2

Public

2.2

2.1

2.6

Source: Bloomberg

Financial Snapshot (Consolidated)


Nitin Arora
nitin.arora@emkayglobal.com
+91-22-66242491
Ajit Motwani
ajit.motwani@emkayglobal.com
+91-22-66121255

Emkay Global Financial Services Ltd.

YE-

Net

EBITDA

Mar

Sales

(Core)

(%)

FY12A

56,056

14,656

FY13A

66,449

18,396

FY14E

64,185

FY15E

77,908

(Rsmn)
EPS

EPS

RoE

EV/

APAT

(Rs) % chg

(%)

P/E

EBITDA

P/BV

26.1

4,970

25.6

14.8

20.2

4.3

8.3

0.8

27.7

5,194

26.7

4.5

16.4

4.2

8.8

0.6

19,171

29.9

4,368

22.5

-15.9

11.4

4.9

8.8

0.5

24,430

31.4

4,711

24.2

7.8

11.2

4.6

7.7

0.5

22

Company Update

Emkay

IL&FS Transportation

Company Update

Earnings highly leveraged to order inflows, high debt still remain a concern:
Maintain Hold
With robust order inflow in till FY13, ITNL has been able to deliver 17% earnings growth
over FY10-13 led by its high margin fee income. However as ITNLs earning & cash flows
are highly leverage to new order inflows, we believe sustaining such high growth rate in fee
income is unlikely. Given this backdrop of decelerating high margin fee income growth, the
high parent leverage (standalone debt at Rs53 bn with D:E at 2.2x in FY15E) could mean
increasing interest cost pressures for ITNL. High leverage in absence on meaningful rate
cuts to put pressure on standalone profitability and could mean increasing interest cost
pressures for ITNL. Dilution eminent in/post FY15E as standalone leverage unsustainable.
We have cut our target price to Rs134 (Earlier TP 150) as we have adjusted traffic for some
of the projects like kiratpur ner chowk (implied P/BV0.45x) as well as for projects like sikar
Bikaner & khed sinnar and reduced our E&C multiple to EV EBITDA of 3x from 3.5x as
construction earnings will edge lower in FY14E and construction earnings trajectory
remains uncertain as some projects faces structural issues.

8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-

Exhibit 26: Fee income as a % of total revenue

6.9
5.7

5.6

5.7

5.7

5.2
(Rs bn)

(Rs bn)

Exhibit 25: Fee income to stagnate

FY10

FY11

FY12

FY13

FY14E

40%
35%
30%
25%
20%
15%
10%
5%
0%

FY15E

34%

21%

FY11

Fee income

3.6

3.3

3.5

3.4

4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-

169

2.1

148

144

1.6
102

50

55

33
FY10

FY11

FY12

FY13

Consolidated Debt

FY14E

2.5
1.8

1.5
0.9

50
40

1.1

30

53.5

1.0
0.5

41.5

37.4
15.3

18.9

FY10

FY11

20

27.3

10

0
FY12

FY13

Standalone Debt

FY14E

FY15E

Debt/equity

Source: Company, Emkay Research

Exhibit 30: Consolidated EBITDA

100.0

30
77.9

80.0

66.4

(Rs bn)

40.5
24.1

20.0

24

25

64.2

56.1

60.0

60

1.8

1.4

Net Debt/equity

Exhibit 29: Consolidated revenue

40.0

FY15E

2.2

2.0

FY15E

Source: Company, Emkay Research

(Rs bn)

FY14E

Exhibit 28: Standalone debt to surge higher

(Rs bn)

(Rs bn)

100

FY13

10.9%

Source: Company, Emkay Research

Exhibit 27: Consolidated debt to inch higher

150

FY12

15%

Fee income as a % total revenue

Source: Company, Emkay Research

200

17%

18

20
15
10

19

15
12
8

0.0

0
FY10

FY11

FY12

FY13

FY14E

FY15E

FY10

FY11

Revenue
Source: Company, Emkay Research

Emkay Research

October 14, 2013

FY12

FY13

FY14E

FY15E

EBITDA
Source: Company, Emkay Research

23

IL&FS Transportation
Exhibit 31: Consolidated PAT

Exhibit 32: Consolidated ROE

6.0

4.4

4.3

4.7

27.0
22.2

25.0

3.0

16.4

15.0

2.0

10.0

1.0

5.0

11.4

11.1

FY13

FY14E

FY15E

6.46

6.49

FY10

FY11

FY12

FY13

FY14E

FY10

FY15E

FY11

PAT
Source: Company, Emkay Research

Exhibit 33: Standalone revenue

Exhibit 34: Standalone EBITDA

60

47.9

50

37.7
27.7

30
16.2

20
10

33.7

(Rs bn)

40

8.5

0
FY10

FY11

FY12

FY13

FY14E

FY15E

8
7
6
5
4
3
2
1
0

5.48

5.32

5.52

FY10

FY11

FY12

Revenue
Source: Company, Emkay Research

Emkay Research

October 14, 2013

FY12
ROE

Source: Company, Emkay Research

(Rs bn)

20.2

20.0

3.4
(%)

(Rs bn)

4.0

30.0

5.2

5.0

5.0

Company Update

FY13

FY14E

6.98

FY15E

EBITDA
Source: Company, Emkay Research

24

IL&FS Transportation

Company Update

Exhibit 35: SOTP fair value at Rs134hare

SPV

Holding

Valuation
Measure

Disc

Equity
Value

Stake
Value

rate

(Rs mn)

(Rs mn)

Value/
Share

BOT
Gujarat Road and Infrastructure company ltd
WGEL
Delhi - Noida
Gomti - Beawar
RIDCOR
RIDCORII

83.6%

Operational

FCFE

13%

7,525.5

6,292.1

32.4

100.0%

Operational

FCFE

14%

1,613.9

1,613.9

8.3

25.4%

Operational

FCFE

14%

6,268.8

1,589.1

8.2

100.0%

Operational

FCFE

14%

350.4

350.4

1.8

50.0%

Operational

FCFE

14%

8,130.2

4,065.1

20.9

50.0%

Under development

FCFE

15%

3,783.6

1,891.8

9.7

100.0%

Under Construction

FCFE

15%

2,846.3

2,846.3

14.7

Chadrapur Warora Road Project

35.0%

Under development

FCFE

15%

1,683.5

589.2

3.0

Narkatapally to Addanki Road Project

50.0%

Under development

FCFE

15%

3,288.7

1,644.3

8.5

Moradabad Bareili Road Project

100.0%

Under development

FCFE

15%

7,088.7

7,088.7

36.5

Kharagpur - Baleshwar

100.0%

Under development

FCFE

15%

-258.3

-258.3

-1.3

Kiratpur Ner Chowk

100%

Under development

FCFE

15%

2923

2923

15

Sikar Bikaner

100%

Under development

FCFE

15%

829.8

829.8

4.3

Khed Sinnar

100%

Under development

FCFE

15%

816.5

816.5

4.2

Barwa Adda Panagarh

100%

Under development

FCFE

15%

623.5

623.5

3.2

47,514

32,905.4

169

94%

Operational

FCFE

13%

1,145.6

1,071.2

5.5

Pune Sholapur NH-9 Road Project

Toll Projects - (A)


North Karnataka expressway ltd Road Project
Thiruvananthpuram Road Development Company Ltd Road Project

50%

Operational

FCFE

13%

-468.7

-234.0

-1.2

Andhra Pradesh expressway ltd Road Project

100%

Operational

FCFE

13%

-494.9

-494.9

-2.5

East Hyderabad expressway ltd Road Project

74%

Under Construction

FCFE

13%

537.2

397.5

2.0

Hyderabad Ring Road

26%

Under Construction

FCFE

13%

-54.9

-14.3

-0.1

Hazaribaug Ranchi expressway ltd Road Project

74%

Under Construction

FCFE

14%

185.0

136.9

0.7

Jharkhand - Ph - I Road Project

100%

Under Construction

FCFE

14%

157.2

157.2

0.8

Jharkhand Ph - II Road Project

100%

Under development

FCFE

14%

544.9

544.9

2.8

Shillong Jorbat Road Project

50%

Under development

FCFE

14%

1121.2

560.6

2.8

Chenani Nashri Road Project

100%

Under development

FCFE

14%

1,791.0

1,791.0

9.2

4,463.6

3,915.9

20.2

14%

301.6

301.5

1.6

Annuity Projects - (B)


Vansh Nimay infraprojects Ltd

100%

Operational

FCFE

ITNL ENSO Rail system limited

70%

Under Construction

FCFE

14%

1,159.2

811.5

4.2

MP Check post

51%

Under development

BV

0.75x

1,174.2

880.6

4.5

YuHe Project - Chonguin Road project

49%

Operational

BV

0.8x

Urban Infra Projects - '(C)


Investments in Elsamax

100%

BV

1.0x

Investments in other Companies


Pipavav rail corporation
Autovia Spain

48%

Net Debt at parent levels


Total Value (A+B+C+D+E)

16.3

14.0

2,722.2

14.0

1,109.3

1,109.3

5.7

1.0x

179.1

179.1

BV

1.0x

930.2

930.2

1,123.4

3,831.6

19.7

19,525

19,525

100.5

26,663.4

26,663.4

117

-37,329

-37,329

-192

37,931.7

26,018.2

134

EV/EBITDA

Construction business - (E)

6.1

3,169.6

BV

Other Subsidiaries - (D)


E&C business

1,176.0
2,635.0

3x

Source:

Emkay Research

October 14, 2013

25

IL&FS Transportation

Company Update

Key Financials (Consolidated)


Income Statement

Balance Sheet

Y/E Mar (Rsmn)

FY12A

FY13A

FY14E

FY15E

Y/E Mar (Rsmn)

FY12A

FY13A

FY14E

Net Sales

56,056

66,449

64,185

77,908

Equity share capital

1,943

1,943

1,943

1,943

38.5

18.5

-3.4

21.4

Reserves & surplus

24,834

34,456

38,028

41,943

Net worth

26,777

36,398

39,970

43,885

2,935

2,716

3,444

3,778

Growth (%)
Expenditure

41,401

48,053

45,014

53,478

Employee Cost

3,694

3,819

4,074

4,775

Minority Interest

Other Exp

1,704

2,016

2,016

2,016

Secured Loans
Unsecured Loans

SG&A

FY15E

81,124 135,931 104,735 113,801

3,210

4,483

4,957

5,816

14,656

18,396

19,171

24,430

Growth (%)

26.9

25.5

4.2

27.4

Net deferred tax liability

EBITDA margin (%)

26.1

27.7

29.9

31.4

Total Liabilities

134,878 185,992 195,098 220,039

Gross Block

122,174 174,991 176,703 198,337

EBITDA

Depreciation
EBIT
EBIT margin (%)

766

944

1,336

1,826

13,890

17,452

17,835

22,604

24.8

26.3

27.8

29.0

Loan Funds

Less: Depreciation
Net block

Other Income

1,238

1,414

1,591

1,769

Interest expenses

7,282

11,190

12,672

17,204

PBT

7,846

7,676

6,754

7,169

Current Assets

Tax

2,457

2,274

2,001

2,124

Inventories

Effective tax rate (%)


Adjusted PAT
Growth (%)

Capital work in progress

21,996

8,522

44,524

56,149

103,120 144,453 149,259 169,951


2,047

4,412

2,425

5,356

2,425

6,692

2,425

8,518

117,762 169,635 170,011 189,820


0

3,954

6,871

6,871

7,077

30,759

29,277

37,671

46,232

210

169

311

311

Sundry debtors

8,820

7,517

10,276

12,728

Cash & bank balance

2,838

4,544

1,679

4,273

17,143

14,170

19,629

22,024

Investment

31.3

29.6

29.6

29.6

5,389

5,402

4,753

5,045

19.8

0.2

-12.0

6.1

Loans & advances

Net Margin (%)

9.6

8.1

7.4

6.5

Other current assets

1,748

2,877

5,777

6,896

(Profit)/loss from JVs/Ass/MI

419

208

385

334

Current lia & Prov

17,602

19,911

19,574

23,209

Adj. PAT After JVs/Ass/MI

4,970

5,194

4,368

4,711

Current liabilities

15,455

17,297

17,458

21,093

2,146

2,614

2,116

2,116

Reported PAT

4,970

5,194

4,368

4,711

Net current assets

13,157

9,367

18,098

23,024

PAT after MI

4,970

5,194

4,368

4,711

Misc. exp

14.8

4.5

-15.9

7.8

FY12A

FY13A

FY14E

FY15E

7,846

7,676

6,754

7,169

Profitability (%)

766

944

1,336

1,826

EBITDA Margin

7,282

11,190

12,672

17,204

E/O items

Growth (%)

Cash Flow

Provisions

Total Assets

134,873 185,873 194,980 219,921

Key Ratios

Y/E Mar (Rsmn)


PBT (Ex-Other income)
Depreciation
Interest Provided
Other Non-Cash items
Chg in working cap

Y/E Mar

FY12A

FY13A

FY14E

FY15E

26.1

27.7

29.9

31.4

9.6

8.1

7.4

6.5

ROCE

14.0

11.8

10.2

11.7

Net Margin

3,212

5,497

-11,597

-2,332

ROE

20.2

16.4

11.4

11.2

Tax paid

-2,457

-2,274

-2,001

-2,124

RoIC

13.8

11.5

9.9

11.4

Operating Cashflow

16,648

23,033

7,164

21,744

Per Share Data (Rs)

Capital expenditure

-56,318

-47,495

-1,712

-21,634

25.6

26.7

22.5

24.2

Free Cash Flow

-39,670

-24,462

5,453

109

CEPS

29.5

31.6

29.4

33.6

BVPS

137.8

187.4

205.7

225.9

4.0

3.4

3.4

0.0

PER

4.3

4.2

4.9

4.6

P/CEPS

3.8

3.5

3.8

3.3

P/BV

0.8

0.6

0.5

0.5

EV / Sales

2.2

2.4

2.6

2.4

Other income
Investments
Investing Cashflow
Equity Capital Raised

-2,010

-2,917

-206

-58,328

-50,412

-1,712

-21,840

EPS

DPS
Valuations (x)

Loans Taken / (Repaid)

47,590

41,332

4,806

20,692

Interest Paid

-7,282

-11,190

-12,672

-17,204

-903

-786

-796

-796

EV / EBITDA

8.3

8.8

8.8

7.7

3.6

3.1

3.1

0.0
3.8

Dividend paid (incl tax)


Income from investments
Others

-162

-271

343

Dividend Yield (%)

Financing Cashflow

39,242

29,085

-8,318

2,691

Gearing Ratio (x)

Net chg in cash

-2,438

1,707

-2,866

2,594

Net Debt/ Equity

3.7

3.8

3.7

Opening cash position

5,275

2,838

4,544

1,679

Net Debt/EBIDTA

6.8

7.6

7.7

6.8

Closing cash position

2,838

4,544

1,679

4,273

Working Cap Cycle (days)

67.2

26.5

93.4

87.8

Emkay Research

October 14, 2013

26

Ashoka Buildcon
Scalable with assured growth

Your success is our success

October 14, 2013

Rating

Ramp in current orderbook attributed to newly won projects,


will help garner EPC earnings CAGR of 6.4% over FY13-15E,
Revenue from BOT (adj for stake) to register 13.4% CAGR

Scalability potential/capacity to bid enhances as secures


funding for current & future growth, qualified to bid for a
single project worth Rs31.8 bn

Well funded portfolio, sufficient internal cash flows to cater


current equity requirement. Minimal funding constraint with
moderate leverage (Cons. debt equity at 2.3x ,standalone
debt equity at 0.3x) provide growth opportunity

Scale up in the BOT portfolio (80% of BOT projects to get


operational by FY15E). Upgrade FY15E earnings by 12% on
higher order inflow. Maintain Buy with TP Rs91

Previous Reco

Buy

Buy

CMP

Target Price

Rs47

Rs86

EPS Chg FY14E/FY15E (%)

NA/NA

Target Price change (%)

-5

Nifty

6,096

Sensex

20,529

Price Performance
(%)

1M

3M

6M 12M

Absolute

-3

-13

-24

-40

Rel. to Nifty

-6

-16

-32

-45

Order Backlog provides reasonable EPC earnings visibility

Source: Bloomberg

Relative price chart


80

Rs

% 10

72

-2

64

-14

56

-26

48

-38

40
Oct-12

Dec-12

Feb-13

Apr-13

Ashoka Buildcon (LHS)

Jun-13

Aug-13

-50
Oct-13

Rel to Nifty (RHS)

Source: Bloomberg

Stock Details
Sector

Construction
ASBL IB

Bloomberg

790

Equity Capital (Rs mn)

Face Value(Rs)

158

No of shares o/s (mn)

83/ 41

52 Week H/L
Market Cap (Rs bn/USD mn)

7/ 122

Daily Avg Volume (No of sh)

11,528

Daily Avg Turnover (US$mn)

0.0

Shareholding Pattern (%)


Sep'13 Mar'13 Dec'12
Promoters

67.5

67.5

67.4

FII/NRI

N/A

N/A

0.0

Institutions

18.4

18.4

18.3

Private Corp

6.4

6.4

6.5

Public

7.7

7.7

7.8

Source: Bloomberg

Nitin Arora
nitin.arora@emkayglobal.com
+91-22-66242491
Ajit Motwani
ajit.motwani@emkayglobal.com
+91-22-66121255

Emkay Global Financial Services Ltd.

ABL enjoys a 1.5x (ex Cuttuck Angul, Chennai ORR, T&D orders of Rs11.5 bn ) visibility
on FY13 construction revenues with order backlog of Rs21.9bn however including
recently won road project Chennai ORR and two T&D orders , the order book provides
reasonable visibility of 2.7x on FY13E construction revenue. It also remains lower
bidder for road project Mudhol-Maharashtra border project (est project cost of Rs3.2 bn),
however have not received LOA for the project. On account of recently won projects
where major ramp in revenue to starts getting reflect in FY15E we expect construction
revenue CAGR of 6.4% over FY13-15E. We also believe that the that the exclusion of
Cuttuck Angul project (not included in the ACL portfolio) which had cost overruns of 67%, gives further scalability to bid for new projects to be given states like Andhra ,
Karnataka, & Maharashtra.

Funding secured for future growth, Equity requirement of Rs1.5 bn over


the next 2 years
The companys current equity requirement stands at Rs1.5 bn which needs to be infused
over the next two years towards the project like Belgaum project, the Dhankuni project
and Sambalpur whereas balance Rs3.5 bn will be invested by SBI Macquarie. ABLs
business ramp up is ideally complemented by its lucrative cash generating portfolio &
strong execution skills, which will ensure that ABLs transition to a full scale national
level player is smooth with limited dilution. We expect ABL to generate operating cash
flows in BOT /EPC segment of ~Rs 1.9bn/Rs2.5 bn over FY13- 15E which largely take
care of the equity required for existing projects , newly won Chennai road project as well
as debt repayment and working capital requirement over FY14-15E. The current funding
structure leaves a shortfall of Rs1.37 bn which we believe a strong parent balance sheet
at 0.3x Debt: Equity also offers ample room for increasing leverage to fund the equity of
several SPVs.

Financial Snapshot (Consolidated)

(Rsmn)

YE-

Net

EBITDA

EPS

EPS

RoE

Mar

Sales

(Core)

(%)

APAT

FY12A

15,000

3,250

21.7

1,248

7.9

FY13A

18,527

3,719

20.1

999

6.3

FY14E

18,406

4,001

21.7

1,046

6.6

FY15E

21,947

5,257

24.0

1,017

6.4

EV/

(Rs) % chg

(%)

P/E

EBITDA

P/BV

23.8

12.9

6.0

7.4

0.7

-19.9

9.6

7.4

8.2

0.7

4.7

9.5

7.1

10.5

0.6

-2.7

8.4

7.3

9.7

0.6

27

Company Update

Emkay

Ashoka Buildcon
Exhibit 36: EPC Revenue to propel higher
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
-

Company Update
Exhibit 37: Toll revenue CAGR 13.4% over FY13-15E
5.0
4.0
3.0

14.8
10.3

14.7

16.8

1.0

5.5

2.6

2.9

3.0

FY12

FY13

FY14E

3.7

4.0

FY12

FY13

FY14E

19.4

21.7

20.1

21.7

FY11

FY12

FY13

FY14E

1.7

1.9

FY10

FY11

FY10

FY11

FY12

FY13

FY14E

FY15E

Source: Company, Emkay research

FY15E

Source: Company, Emkay research

Exhibit 38: Revenue CAGR 8.8% over FY13-15E

Exhibit 39: EBITDA to inch higher

25.0

6.0

20.0

5.0
4.0

15.0
10.0
5.0

4.3

2.0

11.4

13.0

15.0

18.5

18.4

3.0

21.9

5.3

2.0
1.0

8.0

2.1

2.5

FY10

FY11

3.3

0.0
FY10

FY11

FY12

FY13

FY14E

FY15E

Source: Company, Emkay research

FY15E

Source: Company, Emkay research

Exhibit 40: EPS

Exhibit 41: EBITDA Margin

8.0

30.0

7.0

25.0

6.0
20.0

5.0
4.0
3.0

5.4

6.5

15.0

7.3
5.7

2.0

3.9

26.9

10.0

4.9

24.0

5.0

1.0
-

FY10

FY11

FY12

FY13

FY14E

Source: Company, Emkay research

FY15E

FY10

FY15E

Source: Company, Emkay research

Exhibit 42: Incremental Equity requirement over FY14-15E


Project

Rsmn

Source of funds

Dhankuni , Belguam, Sambalpur(adj for stake)

1,500

FY13 Cash

Chennai orr(adj for stake)

1,000

BoT CFO over FY13-15E

1,919

Working capital Requirement

1,000

E&C CFO Over FY13-15E

2549

Debt repayment

2,695

Total

6,195

Surplus/(Shortfall)

Rsmn
338

4,806
(1,389)

Source: Emkay research

Emkay Research

October 14, 2013

28

Ashoka Buildcon

Company Update

New projects to drive Toll revenue growth


Revenue from BOT business adjusted for stake to surge higher 13.4% CAGR over FY1315E whereas total revenue from BOT to post CAGR of 23% over FY13-15E. Majority of the
ramp in revenue will come from projects like Durg Chattisgarh and Chattisgarh Bhandara in
FY14E followed by commissioning of Sambalpur Baragarh & Belgaum Dharwad. The
Belgaum-Dharwad (have scalability for high traffic growth due to traffic running from
Mumbai to Bangalore on GQ) and Dhankuni-Kharagpur projects (Goods to Eastern belts ,
Traffic from Haldia post to Northern & Southern region , handles minerals as well ) being 6laning projects, impart high visibility and comfort over future revenue ramp-up.

Partnership with SBI-Macquarie gives scalability


SBI Macquarie (SBI-M) has committed to invest Rs7bn (Already invested till sate of Rs3.8
bn in ACL), the holding company for ABLs new road concessions (ABL is required to invest
its share of equity of Rs8.5bn, already invested Rs7 bn). According to the agreement SBI
will have 34% stake in ACL which implies pre-money valuation of 1.6x P/B for ACL. These
valuations appear attractive considering the IRR profile of the underlying projects, and also
lend considerable credibility to ACLs project portfolio. The terms of the agreement assure
SBI-M a guaranteed 12% IRR on its initial investment of Rs7bn in ACL which entails outgo
of Rs14.6 bn by FY20E.
According to the agreement there are three ways that the private investor can exit:

IPO of ACL
Sale to others or swap into the individual asset SPVs. In case of a shortfall in realizing
the guaranteed returns even after swapping into the SPVs, SBI-M can increase its
stake in ACL to a maximum of 49% however; no provision to swap into the parent
company, ABL which we believe is a key positive for the shareholders of ABL.

We believe that investment is a value creating proposition considering the interest rates are
currently holding up for road project financing at 12-13% and availability of equity capital
ensures timely project completion and faster cash generation from the BOT assets. We
dont believe that 12% capital protection rate a concern considering the IRR of ACL
projects under ranges between 13-20%.
Exhibit 43: NPV of ACL portfolio
NPV

ACL Stake FY14E FY15E FY16E FY17E FY18E FY19E FY20E

Dhankuni - Kharagpur

100%

3732

6241

8332 10175 12174 13820 15435

Sambhalpur - Baragarh

100%

1216

2228

2562

2937

3360

3861

4438

Belgaum - Dharwad

100%

860

972

1484

2008

2563

3145

3981

Pimpalgaon - Nasik

26%

1008

1242

1408

1612

1789

2090

2340

Jaora - Naigaon

38%

2615

3001

3385

3877

4392

4908

5402

Durg - Chhattisgarh

51%

99

362

580

738

922

1183

1468

Chhattisgarh - Bhandara

51%

56

65

81

100

129

192

260

Under construction projects

Total

9585 14111 17832 21448 25328 29199 33324

Source: Emkay research

Emkay Research

October 14, 2013

29

Ashoka Buildcon

Company Update

Upgrade earnings estimates FY15E as order intake surpassed expectation


The company has bagged orders worth Rs12 bn in FY14E against our expectation of Rs5
bn and also surpassed our order intake expectation for FY14-15E (our assumption of Rs10
bn). We have increased our EPC revenue by 14% to Rs16.8 bn due to which the total
revenue increases by 10% to Rs21.94 bn. We have revised our EBITDA/PAT estimate by
5%/12% for FY15E.
Exhibit 44: Earnings revision table
FY14E
Rs Mn

FY15E

Earlier

Revised

change

Earlier

Revised

change

Sales

19,875.0

21,947

10%

EBIDTA

5,008.0

5,257

5%

EBIDTA (%)

25.2%

24.0%

-5%

APAT

689.0

771

12%

EPS

4.4

4.9

12%

Source: Company, Emkay Research

Maintain Buy, Revised Target price to 86


Project execution on Dhankuni Kharagpur remains on track and toll rates escalation at
Dhankuni Kharagpur project ahead of schedule will provide additional boost. We have
valued the BOT arm at Rs58/ share valuing the ACL portfolio at 66% stake (from earlier
61%). We have revised Equity value downwards for Jaora Naigaon to Rs10/share from
Rs16/share due to lower traffic. We have valued the BOT projects at 13.5%/14.5%/15.5% cost
of equity for operational/ under construction / under development portfolio. While the E&C
arm is valued at Rs 24 at 4x FY14 earnings. Due to change in our BOT valuation we have
revised our target downwards by 5% to Rs86/share based on FY14 numbers.
Exhibit 45: Fair value of SOTP Rs91/share
Description
Ashoka Concessions Ltd.
Dhankuni - Kharagpur
Sambhalpur - Baragarh
Belgaum - Dharwad
Pimpalgaon - Nasik
Value for Under construction projects (a)
Jaora Naigaon
Durg Chhattisgarh
Chhattisgarh Bhandara
Value of ACL at 66% stake (b)
Indore - Edalabad
Waiganga river Bridge
Pune - Shirur
Dewas Bypass
Katni Bypass
A'nagar - Karmala
A'nagar - Aurangabad
Nasirabad Road ROB
Sherinallah Bridge
Dhule Bypass
Anwali Kasegaon
FOBs - Eastern Exp H'way - 6
Value for operating projects (c)
Total BOT Fair value (a + b + c)
Add: Net holding company cash/debt
Net Value of BOT
Add: EPC valuation
Fair value per share

Cost of Equity

Eq value

Stake

ABL value

ABL per share/value

14.8%
15%
15%
15%

3,417.2
1,215.7
859.8
3,875.5
9,368.20
4,103.1
372.1
110.4
13,953.8
1,533.6
594.1
328.0
841.4
432.8
88.1
97.5
-

100.0%
100.0%
100.0%
26.0%
0.0%
37.5%
51.0%
51.0%

3,417.2
1,215.7
859.8
1,007.6
6,500.3
1,538.7
189.8
56.3
5,468.2
1,533.6
297.0
328.0
841.4
432.3
88.1
97.5
-

21.6
7.7
5.4
6.4
41.2
9.7
1.2
0.4
38.8
9.7
1.9
2.1
5.3
2.7
0.6
0.6
-

17.4
3,635.3

0.1
23.0

17,886.7

9,103.5

58

17,887
3,861

344
9,447.5
3,861

2
60
24

21,747.9

13,308.0

86

15%
14%
15%
14%
14%
14%
14%
14%
14%
14%
14%
14%
14%
14%

17.4
3,932.8

100.0%
50.0%
100.0%
100.0%
99.9%
100.0%
100.0%
100.0%
100.0%
100.0%
5.0%
100.0%

Source:

Emkay Research

October 14, 2013

30

Ashoka Buildcon

Company Update

Key Financials (Consolidated)


Income Statement

Balance Sheet

Y/E Mar (Rsmn)

FY12A

FY13A

FY14E

FY15E

Y/E Mar (Rsmn)

FY12A

FY13A

FY14E

Net Sales

15,000

18,527

18,406

21,947

Equity share capital

701

675

675

675

15.2

23.5

-0.7

19.2

Reserves & surplus

9,640

9,832

10,877

11,894

11,750

14,808

14,405

16,690

10,341

10,507

11,553

12,570

431

502

594

723

630

2,787

2,681

2,483

17,069

23,469

34,684

43,700

Growth (%)
Expenditure
Employee Cost
Other Exp
SG&A

Net worth
Minority Interest
Secured Loans

FY15E

310

482

678

1,031

Unsecured Loans

3,250

3,719

4,001

5,257

Loan Funds

Growth (%)

28.9

14.4

7.6

31.4

Net deferred tax liability

10

EBITDA margin (%)

21.7

20.1

21.7

24.0

Total Liabilities

28,050

36,763

48,918

58,753

20,761

20,275

20,275

56,883

4,503

5,275

6,626

8,216

EBITDA

Depreciation
EBIT
EBIT margin (%)
Other Income

17,069

23,469

34,684

43,700

850

1,324

1,351

1,590

Gross Block

2,401

2,395

2,651

3,667

Less: Depreciation

16.0

12.9

14.4

16.7

Net block

16,258

15,000

13,649

48,667

Capital work in progress

26,780

96,100 106,756

80,636

354

294

269

323

Interest expenses

1,144

1,395

1,428

2,558

Investment

2,052

2,824

3,584

4,401

PBT

1,610

1,295

1,492

1,433

Current Assets

7,362

9,672

8,843

10,103

Tax

451

685

591

662

Inventories

2,770

5,399

4,629

4,984

1,467

862

1,089

1,425

500

518

251

266

2,624

2,893

2,875

3,428

Effective tax rate (%)


Adjusted PAT
Growth (%)

28.0

52.9

39.6

46.2

Sundry debtors

1,159

610

901

771

Cash & bank balance

12.4

-47.4

47.7

-14.4

Loans & advances

Net Margin (%)

7.7

3.3

4.9

3.5

Other current assets

(Profit)/loss from JVs/Ass/MI

89

389

145

246

Current lia & Prov

25,689

87,624

84,706

85,846

Adj. PAT After JVs/Ass/MI

1,248

999

1,046

1,017

Current liabilities

25,689

87,624

84,706

85,846

157

Reported PAT

1,248

1,156

1,046

1,017

Net current assets

-18,327

-77,953

-75,863

-75,744

PAT after MI

1,248

999

1,046

1,017

Misc. exp

23.8

-19.9

4.7

-2.7

26,763

35,971

48,125

57,960

FY12A

FY13A

FY14E

FY15E

FY12A

FY13A

FY14E

FY15E

1,610

1,451

1,492

1,433

Profitability (%)

850

1,324

1,351

1,590

EBITDA Margin

21.7

20.1

21.7

24.0

1,144

1,395

1,428

2,558

Net Margin

7.7

3.3

4.9

3.5

46

-85

ROCE

10.8

8.3

6.8

7.4

21,595

61,230

-2,356

-104

ROE

12.9

9.6

9.5

8.4

-456

-702

-591

-662

RoIC

41.8

-7.3

-4.2

-8.2

7.9

6.3

6.6

6.4

E/O items

Growth (%)

Cash Flow

Provisions

Total Assets

Key Ratios

Y/E Mar (Rsmn)


PBT (Ex-Other income)
Depreciation
Interest Provided
Other Non-Cash items
Chg in working cap
Tax paid
Operating Cashflow
Capital expenditure
Free Cash Flow
Other income
Investments
Investing Cashflow
Equity Capital Raised

Y/E Mar

24,874

64,999

1,323

4,815

-27,632

-69,694

-10,656

-10,488

Per Share Data (Rs)

-2,758

-4,695

-9,333

-5,674

CEPS

13.3

14.7

15.2

16.5

-274

BVPS

65.5

66.5

73.2

79.6

-586

-772

-760

-817

0.0

0.0

0.0

0.0

-28,218

-70,740

-11,416

-11,305

PER

6.0

7.4

7.1

7.3

P/CEPS

3.5

3.2

3.1

2.9

P/BV

0.7

0.7

0.6

0.6

EPS

DPS
Valuations (x)

148

11,798

4,238

-4,395

11,215

9,016

-1,144

-1,395

-1,428

-2,558

Dividend paid (incl tax)

EV / Sales

1.6

1.6

2.3

2.3

Income from investments

EV / EBITDA

7.4

8.2

10.5

9.7

0.0

0.0

0.0

0.0

Loans Taken / (Repaid)


Interest Paid

Others
Financing Cashflow
Net chg in cash

39

47

Dividend Yield (%)

3,242

6,008

9,826

6,506

Gearing Ratio (x)

-102

267

-267

15

Net Debt/ Equity

1.6

2.2

3.0

3.5

Opening cash position

602

500

518

251

Net Debt/EBIDTA

5.1

6.2

8.6

8.3

Closing cash position

500

767

251

266

Working Cap Cycle (days)

Emkay Research

October 14, 2013

-458.1 -1,546.0 -1,509.4 -1,264.1

31

Construction

Sector Update

Emkay Global Financial Services Ltd.


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Emkay Research

October 14, 2013

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32