Institutional Equities - Online Share Trading

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Institutional Equities Exhibit 6: Bharuch-Surat project details Rsmn (%) Project cost 14,040 COE 14 Debt 12,110 Interest rate 10.75 Equity 1,930 Equity IRR 32 Concession period 15 Years Traffic growth 7 Equity value 5,158.22 Toll rate hike WPI linked Source: Company, Nirmal Bang Institutional Equities Research Exhibit 7: Bharuch-Surat project financials (Rsmn) FY10 FY11 FY12E FY13E FY14-22E Toll revenue 1,396 1,586 1,796 2,017 28,898 YoY (%) 111 14 13 12 - EBITDA 1,191 1,384 1,581 1,449 23,023 PAT (385) 56 192 342 11,287 Source: Company, Nirmal Bang Institutional Equities Research EPC segment valued at 8x on PE ratio The company’s EPC business derives revenue from in-house projects and enjoys a higher margin. For most construction players, road project is a low-margin business where they typically have 8-12% EBITDA margin. However, IRB Infrastructure registers 20-25% margin due to efficiencies it has built up over the years, like mining licence for aggregates, minimal sub-contracting, and its own fleet of construction equipment. We have valued the E&C business of the company at a PE multiple of 8x FY13E earnings (lower end of five year historical range of 8x-16x for EPC players). Exhibit 8: EPC business performance (Rsmn) FY09 FY10 FY11 FY12E FY13E Net sales 5,672 12,124 16,704 20,906 33,322 YoY (%) 113.8 37.8 25 .2 59 .4 EBITDA 1,013 2,746 4,283 4,704 7,331 EBITDA margin (%) 17.9 22.6 25.6 22.5 22.0 PAT 490 1,542 2,243 2,341 3,615 Order book 58,978 89,592 117,412 - - Source: Company, Nirmal Bang Institutional Equities Research Multiples based on consolidated earnings Exhibit 9: P/BV valuation trend (x) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Sep-08 Jun-09 Mar-10 Dec-10 Sep-11 P/B value 4 year avg Source: Company, Nirmal Bang Institutional Equities Research Exhibit 10: P/E valuation trend (x) 30 25 20 15 10 5 0 Sep-08 Sep-09 Sep-10 Sep-11 P/E 4 year avg Source: Bloomberg, Nirmal Bang Institutional Equities Research 30 IRB
Institutional Equities Exhibit 11: BOT asset portfolio Investment Arguments Leading toll road operator with in-house execution facilities IRB infrastructure is a premier toll road developer and operator with in-house integrated project execution capabilities. The company has 17 road projects (11 are operational and 6 under implementation), or around 11% of the Golden Quadrilateral project. The company’s road portfolio, as per lane km, comprises 40% in Maharashtra, 31% in Gujarat, 10% in Karnataka, 9% in Rajasthan, 6% in Punjab and 4% in Goa. It has an inhouse construction business which undertakes the construction of road projects and O&M activities, including toll collection, pertaining to BOT projects. This not only captures the entire value chain in-house, but also reduces the company’s dependence on third-party contractors/sub-contractors. Further, this also enables a better control over costs, timelines and quality. Project name Toll Length(km) % holding Project cost Project IRR(%) Equity IRR (%) Mumbai - Pune T 206 100% 12,920 21% 68% Bharuch-Surat T 65 100% 14,040 8% 32% Pune -Solapur T 26 100% 630 21% 75% Pune-Nashik T 30 100% 740 30% 221% Patalganga (Kharpada) River Bridge T 1 100% 320 17% 108% Ahmednagar-Karmala Temburni Road T 60 100% 368 27% 61% Thane-Ghodbunder Road T 15 100% 2,485 12% 61% Mohol-Kurul-Kamti-Mandrup Road T 33 100% 180 35% 84% Surat-Dahisar T 240 90% 25,870 6% 30% IRDP Kolhapur T 50 100% 4,300 3% 20% Panaji, Goa T 65 100% - - - Amritsa-Pathankot T 102 100% 14,417 10% 13.0% Jaipur Tonk Deoli T 146 100% 17,057 11% 16.2% Talegaon Amravati T 102 100% 8,851 11% 18.8% Tumkur-Chitradurga T 114 100% 10,800 14% 18% Ahmedabad-Vadodara T 108 100% 49,200 - - Source: Company, Nirmal Bang Institutional Equities Research Exhibit 12: BOT project details Project Revenue share/Fee/Grant Concession Concession period(yrs) ending Toll rate hike Mumbai-Pune Upfront payment to MSRDC of Rs9.2bn 15 Aug-2019 18% every third year Bharuch-Surat Upfront fee to NHAI Rs5bn 15 Jan2022 WPI linked, reset every year(July) Thane Bhiwandi Bypass 18.5 May-2017 5-6% escalation Thane Ghodbunder Upfront fee to MSRDC of Rs1.4 bn 15 Dec-2020 5-6% escalation Pune-Solarpur 16 Mar-2019 5-6% escalation Pune Nashik 18 Sep-2021 5-6% escalation Karmala-Tembhurni 15 Dec-2015 5-6% escalation Kharpada Bridge 17.8 Aug-2015 5-6% escalation Mohol-Mandrup 16 May-2016 5-6% escalation Surat -Dahisar Revenue share of 38% 12 Feb-2021 WPI linked, reset every (September) IRDP Kohlapur Negative grant of Rs270mn 30 Jan-2039 5-6% escalation Tumkur Chitradurga 26 Jun-2037 3% +40% of WPI Under Construction Talegoan-Amravati Grant of Rs2.16bn 22 2031 3% +40% of WPI Jaipur Tonk Deoli Grant of Rs3.06bn 25 2034 3% +40% of WPI Amritsar Pathankot Grant of Rs3.06bn 20 2029 3% +40% of WPI Goa-Panaji 3% +40% of WPI Ahmedabad--Vadodara Premium of Rs 3.09bn 24 3% +40% of WPI Source: Company, Nirmal Bang Institutional Equities Research 31 IRB
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