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Institutional Equities
Exhibit 52: Revenue growth
(%)
80
70
60
50
40
30
20
10
0
Project execution uncertainty in near term, but FY13 to witness strong growth
Despite strong order book, the revenue growth was muted during the past one year due to project executionrelated
issues. The market believes the project execution issues would continue to impact the growth of the
sector. However, we believe the execution would improve because these issues were more technical (short
term) rather than structural in nature.
Reasons for slow execution during last four quarters and our view:
Companies received the projects, but delays in government-related processes such as formulation of
contract structures, environmental clearance and land acquisitions slowed down execution. The
government implemented a number of measures over the past one year like award of a project if 80% of
land acquisition is completed and one-time technical qualification. We believe these measures would
ease pre-execution delay and improve project execution.
During FY10, the ratio of new orders in the overall executable order backlog for the year (i.e. order
backlog at the beginning of the year plus order inflow during the year) increased. Higher the proportion of
new orders in the order backlog, lower will be the blended execution, as the new orders take time to reach
maturity in revenue recognition.
Other issues like payment issues in Andhra Pradesh, Dubai property crisis and state assembly elections
slowed down project execution. During the past one year, infrastructure companies have reduced the
exposure of their order book to the Andhra Pradesh region. The Dubai property crisis has shown signs of
improvement and state assembly elections are also over now, which will help realty companies.
Rising contribution of lower execution cycle projects to improve project execution
During the past two years, the order inflow was biased towards the road segment. This has changed the order
book composition of most companies and increased the weight of road segment projects in the order backlog.
Typically, the execution period for a road project is 24-30 months as against a hydro-power project which has
an execution period of 48-60 months. Shift in order book composition towards lower execution cycle projects
would improve the conversion ratio in 2HFY12 and FY13. Apart from that, we expect incremental order inflow
to be driven by road segment projects, which will keep the growth momentum intact.
FY09 FY10 FY11 FY12E FY13E
IRB infrastructure Reliance Infrastructure GMR Infrastructure HCC IVRCL
Exhibit 53: EBITDA growth
(%)
120
100
80
60
40
20
0
(20)
FY09 FY10 FY11 FY12E FY13E
IRB infra Reliance Infra GMR Infra HCC IVRCL
Source: Planning Commission, Nirmal Bang Institutional Equities Research
Source: Nirmal Bang Institutional Equities Research
Exhibit 54: EBITDA margin trend
(%)
50
45
40
35
30
25
20
15
10
5
0
FY09 FY10 FY11 FY12E FY13E
IRB infra Reliance Infra GMR Infra HCC IVRCL
Source: Nirmal Bang Institutional Equities Research
23 Infrastructure Sector