Institutional Equities - Online Share Trading

Q1FY10
Q2FY10
Q3FY10
Q4FY10
FY10
1QFY11
2QFY11
3QFY11
4QFY11
FY11
1QFY12
Institutional Equities
Partially hedged against sharp rise in interest rate
During the past one year, Reserve Bank of India raised its key policy rate 12 times to 8.25%. This has
increased the interest outflow for construction and infrastructure companies. However, IRB Infrastructure is
hedged to some extent from the rise in interest rates. As many as 6 out of its 11 operational projects are debt
free and 21% of total debt (Mumbai-Pune Expressway) is fixed at 10.6% for the remaining tenure of the loan.
Other projects which are in the construction phase like Surat-Dahisar project (around 10% of total debt) and
three new projects, namely Talegaon-Amravati, Amritsar-Pathankot and Panaji-Goa, are fixed at 10.5% for the
construction period of 30 months, or the end of construction, whichever is earlier.
Exhibit 20: Interest outflow vs average interest rate trend
(Rsmn) (%)
6,000
5,000
4,000
3,000
2,000
1,000
-
FY08 FY09 FY10 FY11 FY12E FY13E
10
9
8
7
6
5
Interest outflow
Average interest rate
Source: Company, Nirmal Bang Institutional Equities Research
Robust EPC order book of Rs117bn to drive revenue growth
The company has order book of Rs117bn (EPC order book of Rs96.5bn and O&M order book (operation and
maintenance of operational toll based projects) of Rs 20.8bn) to be executed over the next 3-4 years. EPC
division’s order backlog stayed flat during 2QFY10-3QFY11, as it managed to win only one project in FY11
(Tumkur-Chitradurga). Ahmedabad-Vadodara project increases the company’s backlog from Rs90bn at the
end of 3QFY11 to around Rs119bn, improving revenue visibility. The company registers higher EBITDA
margin for the EPC division, in the range of 18-25%, as compared to industry average of 8-12%. This is
primarily driven by lower sub-contracting, large fleet of equipment, and stone aggregates from its own mines
(40-42% of raw material costs for constructing roads).
Exhibit 21: Order book trend –segment wise
(Rsmn)
140
120
100
80
60
40
20
0
EPC Ongoing BOT Project BOT Projects in O&M Phase BOT projects-LOA received (Const yet to commence)
Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 22: EPC segment financial trend
(Rsbn) (%)
35
30
30
33
25
25
20
21
15
17
20
10
12
5
6
-
15
FY09 FY10 FY11 FY12E FY13E
Net sales (LHS)
EBIDTAM % (RHS)
Source: Bloomberg, Nirmal Bang Institutional Equities Research
34 IRB