Institutional Equities - Online Share Trading

Institutional Equities
Exhibit 2: Project portfolio
SOTP-based target price of Rs235
We assign a Buy rating with a target price of Rs235 to IRB Infrastructure based on SOTP valuation. We have
valued the stock via the SOTP route using FCFE methodology for BOT assets and relative valuation (PE ratio)
for the EPC business. We believe the FCFE model is the best way to value road assets as BOT projects have
a definite concession period and long-term predictable cash flow with a definite capex and debt repayment
structure. Accordingly, we have arrived at a value of Rs235, comprising Rs151 (64% of SOTP) for BOT assets
and Rs85 (36% of SOTP) for the EPC business. We have not done any valuation for the company’s
investment in real estate and airport development, as these projects are still at the planning stage.
Exhibit 1: SOTP valuation
Rs./share
Operational DCF based at CoE of 14% 97
Under development DCF based at CoE of 16% 54
EPC businesst PE ratio (FY13, 8x) 84
Total - 235
Source: Company, Nirmal Bang Institutional Equities Research
BOT assets valued at Rs 151/share (64% of SOTP)
Our BOT projects model assumes 5-7% of traffic growth and toll rate increase of 5%. We have discounted the
FCFE at a COE of 14% for operational projects and 16% for under-development projects. The BOT business
of IRB Infrastructure has one of the most lucrative portfolios in the industry, with 11 projects currently earning
revenue (construction completed) and six others in the construction phase.
Project name Project name Stake Equity value (Rsmn) Rs/share
Mhaiskar Infrastructure Mumbai - Pune 100% 10,761 32.4
IDAA Infrastructure Bharuch- Surat 100% 5,158 15.5
Aryan Toll Road Pune -Solapur 100% 1,045 3.1
ATR Infrastructure Pune- Nashik 100% 1,955 5.9
IRB Infrastructure Patalganga( Kharpada River Bridge 100% 255 0.8
NKT Road & Toll Ahmednagar-Karmala-Temburni Road 100% 555 1.7
Thane Ghodbunder Toll Road Thane -Ghodbunder Road 100% 2,291 6.9
MMK Toll Road Mohol-Kurul-Kamti-Mandrup Road 100% 408 1.2
Ideal Road Builders Thane- Bhiwandi Bypass 100% 2,942 8.9
IRB Surat Dahisar Tollway Surat Dahisar 90% 4,045 12.2
IRDP Kolhapur IRDP Kolhapur 100% 2,674 8.0
Operational projects - total - 32,089 97
Projects under implementation
IRB Amritsar Pathankot Amritsar Pathankot 100% 3,534 10.6
IRB Jaipur Tonk Deoli Jaipur Tonk Deoli 100% 7,271 21.9
IRB Talegaon Amravati Talegaon Amravati 100% 3,293 9.9
IRB Tumkur Chitrudurga Tumkur Chitudurga 100% 3,829 11.5
Total Projects under implementation - 17,927 54.0
Total BOT asset portfolio - 50,016 151
Source: Company, Nirmal Bang Institutional Equities Research
Two operational projects (32% of BOT asset value and 48% of toll revenue)
The company has a portfolio of 17 BOT assets, of which 11 projects are operational and 6 are under
implementation. However, two operational projects - Mumbai-Pune and Bharuch-Surat - contribute around
48% of toll revenue and 32% of the value of BOT assets. Surat-Dahisar project has started tolling and
contributes around 34% of toll revenue, but the project would be commissioned in 2HFY12. During 1QFY12,
theTumkur-Chitradurga project started toll collection and the project would be completed by the end of FY14.
The remaining projects account for only 19% of toll revenue. The three new projects (Jaipur – Deoil, Amritsar
– Pathankot, Telegaon – Amravati) will start contributing to revenue from 2HFY13. We expect these projects
to account for around 22% of total toll revenue in FY14, which would be the first full year of operations of these
projects.
28 IRB