Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
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<strong>Institutional</strong> <strong>Equities</strong><br />
Exhibit 31: Return ratio trend<br />
(%)<br />
20<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
FY09 FY10 FY11 FY12E FY13E<br />
RoE (%) RoCE (%)<br />
Exhibit 32: Project details<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
Appendix<br />
Ultra-mega Ahmedabad-Vadodara project – Call on traffic diversion<br />
IRB Infrastructure recently won NHAI’s Ahmedabad-Vadodara project worth Rs49bn. The project comprises<br />
six-laning of the two-lane Ahmedabad-Vadodara section of NH-8 (102km) and improvement of existing<br />
Ahmedabad-Vadodara Expressway (93km). The project would be based on the Design-Build-Finance-<br />
Operate-Transfer toll (DBFOT) basis with a concession period of 25 years. The total construction cost of the<br />
project is estimated at Rs36bn over a three-year period, starting from 1QFY13. The company’s bid to pay an<br />
annual premium of Rs3.1bn (annual increase of 5%) for tolling rights seems to be aggressive when compared<br />
with the L2 bidder.<br />
Category<br />
Scope of the project<br />
Project cost<br />
Concession period<br />
Toll collection rights<br />
Traffic<br />
Revenue<br />
Premium payable to NHAI<br />
Details<br />
Six-laning of Ahmedabad-Vadodara section on NH-8 (102km) and improvement of existing Ahmedabad-Vadodara expressway (93 km)<br />
Total project cost Rs49.2 bn (includes construction cost of Rs35bn)<br />
25 years ( including construction period of three years)<br />
Toll collection of expressway from April 2012 and from NH-8 on completion of construction.<br />
Management expects 47kPCUs on NH-8 and 37k PCUs on expressway in FY11.<br />
Management expects Rs1.4bn revenue in FY13 (from expressway) and toll collection on the NH-8 of Rs5.5bn in FY16.<br />
Rs3.1bn in FY13, going up by 5% every year.<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
IRR of 14% with 30% traffic diversion<br />
NH-8 and the Expressway are competing roads. On completion of NH-8 in FY16, projected toll rate will be<br />
50% higher than the Expressway. This could lead to a traffic diversion to the Expressway and could potentially<br />
reduce returns due to lower utilisation of NH-8. The company has factored in 20% diversion while bidding and<br />
had targeted an IRR of 16%. However, we have factored in 30% of diversion and an IRR of 14%, at Rs<br />
14/share, which we have not included in our valuation. We expect the project to incur losses in the first nine<br />
years of its operations.<br />
Exhibit 33: Project specifications<br />
Parameter<br />
Details<br />
Total length of road (km) 195<br />
Six laning of Ahmedabad-Vadodara section of NH-8 102<br />
Improvement of existing Ahmedabad-Vadodara expressway 93<br />
Total project cost (Rsbn) 49.2<br />
Debt(Rsbn) 36.4<br />
Equity (Rsbn) 12.8<br />
Rs/share (based on DCF) 14<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
38 IRB
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