Institutional Equities - Online Share Trading

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Institutional Equities Stake sale in SPV and monetisation of real estate to meet equity commitment We expect BOT projects under construction and at planning stage to require cumulative equity contribution of around Rs10bn over the next 2-3years, of which around Rs1.8bn is required in FY12. The company is looking to raise funds on its own via monetisation of land assets, securitisation of receivables from operating projects and dilution at the project SPV level to meet this equity requirement. The management has given an indication that it is already in advanced stage of talks with investors for the same. Exhibit 13: BOT asset portfolio Project (Rsmn) Project cost Stake (%) Equity Equity cont CoD Concession period Chennai desalination 5,679 75% 1729.8 1,297 Operational 25 years Jalandhar-Amritsar 3,431 100% 671 671 Operational 20 yrs Kumarapalayam–Chengalpalli 4,215 100% 650 650 Operational 20 yrs Salem -Kumarapalayam 5,020 100% 800 800 Operational 20 yrs Baramati to Phaltan 3,820 75% 690 518 FY14 25 Years Indore-Gujarat border 15,237 100% 3,809 3,809 FY14 25 yrs Chengapalli-Wallayar 11,230 100% 3,260 3,260 FY14 27 yrs Goa-Karnataka 31,000 100% 7,200 7,200 FY15 23 yrs Sion-Panvel 14,500 51% 3,000 1,530 FY14 17.5 yrs IOC tank 30,000 38% 3,940 1,497 - 15 Years Karanji - Ghuggus -Chandrapur 7,500 100% 1,300.0 1,300 FY15 30Years Total 131,631 - 25,750 21,232 - - Source: Company, Nirmal Bang Institutional Equities Research 84 IVRCL
Institutional Equities Hindustan Dorr Oliver: Synergy improves scope of work Hindustan Dorr Oliver, a subsidiary of IVRCL Infrastructure (55% stake), is engaged in the business of providing EPC, manufacturing and engineering services, to various industry segments like mineral processing and beneficiation, pulp and paper processing, fertiliser and environmental management. In order to increase its product portfolio and to gain international presence, HDO, in 4QFY10, acquired Davy Markham, the Sheffield, UK-based heavy engineering company which designs, manufactures and assembles large equipment used for mining, nuclear, power generation, oil and gas exploration and tunnel boring. IVRCL Infrastructure was able to get synergies post acquisition of HDO due to its expertise in designing and installing equipment, which helped the company to improve margins and to bid for higher qualification engineering work. HDO stock corrected by 80% on bleak order book The company’s order book in 1QFY12 stood at Rs16bn (1.7x FY11 revenue.), dominated by the mineral division (50%) followed by water and manufacturing divisions. The company witnessed a fall in revenue in 1QFY12 by 41% and profit also took a hit, declining by 64%, due to delay in billing as it did not get the design and engineering clearances for projects of clients like GAIL (India) and Bharat Petroleum Corporation. During the quarter, a positive factor was that the company won a project worth Rs3.8bn from Konkola Copper Mines in Zambia and also bid for few other clients like Hutti Gold Mines and Uranium Corporation. Going forward, we believe the pace of order inflow and increase in execution of lumpy orders would be the main triggers, as in the last three-four quarters we have not seen any major pick-up in revenue and order book despite repeated assurances given by the management. Exhibit 14: Financial summary Y/E March (Rsmn) FY08 FY09 FY10 FY11 Net sales 3,042 5,153 8,631 9,445 EBITDA 331 511 1,009 904 EBITDA margin (%) 10.9 9.9 11.7 9.6 PAT 226 302 555 538 Source: Company, Nirmal Bang Institutional Equities Research Company background IVRCL Infrastructures & Projects is one of the leading civil construction companies in India having a strong presence in water, transportation and building projects business, industrial structures and also power transmission projects. The company has created a niche for itself in project execution skills across the segment and has a presence in most of the states in India. It has a well-diversified and de-risked business mix, with a presence across various sectors and regions. The company has shown a 39% CAGR in terms of revenue and 30% in terms of earnings over the past five years. Source: Company, Nirmal Bang Institutional Equities Research 85 IVRCL
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Institutional Equities - Online Share Trading

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