IVRCL Infra Ltd…. - Inventure Growth Coverage Report... · EPC & LSTK contract implementation in India. It has strong presence in Water, Transportation, Building & Industrial Structures

Initiating Coverage

Industry Infrastructure Mr Ramkumar CFO, IVRCL Infra Ltd Ph no: +91 40 3093 1111 Stock Metrics

BSE Group A

BSE Code 530773

Face Value ` 2

CMP ` 172

Target Price ` 232

Time Frame 12-15 months

Market Data

Market Cap (Rs mn) 45925

52 week High/Low 212.4/144.0

Sensex 17992

Nifty 5409

Average Volume 2110644

Shareholding Pattern

10%

55%

13%

22%

Promoters FIIs Institutions Public

Research Analyst Denil Savla [email protected]

Divya Kant [email protected]

022- 40751515 Ext 581,582

Date: July 30, 2010

IVRCL Infra Ltd…. IVRCL Infra Ltd has become leading infrastructure player in EPC & LSTK contract implementation in India. It has strong presence in Water, Transportation, Building & Industrial Structures and Power sector with hold over all parts of India due to its proven timely execution skills.

EBIDTA margins to remain constant: The company over the period has changed in product mix from low margins to high margins orders. So even though rise in raw material cost would nullify the effect on EBIDTA margins. The company is going to maintain margins in the range of 9.5% to 10.0% in the future.

Robust Order Book: The company stands at the order book of ` 233 bn including L1 orders of 20 bn which is 4.4 times of FY10 revenues showing huge revenue potential.

Valuation: Reasonable valuations make a strong case for investment, given the expected growth in revenues at the rate of 22% & 21% for the year FY11 & FY12 respectively. This comprises `177.4/sh for EPC business based on PE of 13x on FY12E EPS and `38.7/sh and Rs15.6/sh for stakes held in IVRAH and HDO respectively, based on their current market caps and adjusted for a holding company discount of 25%. On SOTP basis our target price comes to ` 232 with potential upside of ~35%. Key Financials: ` Mn Year Ended March FY09 FY10 FY11E FY12ENet Sales 48818.9 54922.8 67000.0 81100.0Growth (%) 33.4% 12.5% 22.0% 21.0%EBIDTA 4516.9 5467.8 6600.0 8050.0Growth (%) 16.7% 26.0% 21.4% 24.8%PAT 2259.7 2113.1 2758.3 3642.7Growth (%) 7.4% -6.5% 30.5% 32.1%Book Value 135.6 69.3 78.5 90.7Price/Book Value 2.6 2.5 2.2 1.9EBIDTA Margins (%) 8.6 9.7 9.6 9.9Net Profit Margins (%) 4.6 1.3 4.1 4.5EPS 16.9 7.9 10.3 13.6ROE (%) 12.5 11.4 13.2 15.0PE 20.7 21.7 16.6 12.6

Source: IGSL Research

Investment Rationale: Robust Order Book: Current order book of the company stands at ` 23900 Crs which is 4x times the FY10 revenues, having huge growth potential in top-line. Company is targeting to have order backlog of 3 to 3.25 times of FY11E earnings. Of the total order backlog `10800 Crs is from water segment, `7500 Crs from roads, `1400 Crs from power, `3500 Crs from buildings and rest from Oil & Gas. The company’s order backlog reached all time high.

Orderbook Position Mar 2010

44%

32%

6%

15%3%

water Roads Power Buildings Oil& Gas

Sustainable Growth in Earnings: Sustainable earning growth is expected on the back of robust order book and pick up in orders inflow. The company has grown at a CAGR of 30% for last 5 years. We expect the growth of 22% in FY11E and FY12E each driven by higher contribution from transportation and T&D segments. Mitigating risk of slower pace of project execution IVRCL Infrastructures & Projects (IVRCL) has mitigated the risk of slower pace of project execution in Andhra Pradesh through robust order intake in other segments such as roads. The pace of execution in Andhra Pradesh, a key contributor to revenues, suffered setbacks as a result of political problems within the State. To combat this, IVRCL diversified into other regions and business segments.

Sector Opportunity Company’s Strength

& Strategy

Roads -30000 Km to be awarded in the next 2 Yrs -Developer friendly concession agreements

-Established player -Prudent bidding in a competitive environment

Water -Supply, Treatment, desalination -$30bn opportunity in plan XII

Early mover BOT track record + EPC capabilities

Ports Formulation of new RFQ, RFP & MCA Focus on increasing pace of PPP awards

Pre-qualified to bid for 2 berths at Vizag porton BOT basis

Power Transmission

-4 UMTPs awarded -PPP in nascent stage -2x increase in capacity, 1.5x increase in ckm

Execution capabilitiesup to 400 KV D/C line & 765 KV S/S In house tower manufacturing

Gas Pipelines $ 15 Bn opportunity in gas transportation by 2012

Proposed bid for 1,585 km cross-country pipeline

Source: Company & IGSL Research

Source: Planning Commission, * IGSL Research

Conversion of FCCBs The company has due FCCBs in December 2010 wherein they may be issuing fresh equity to the bond holders. They had issued US$65 mn FCCBs in Dec 2005 for period of 5 years. The conversion price is around `1170 at a face value of Rs 10. 88% of which is already converted and for remaining company need to issue fresh equity to get rid of the debt which will dilute the share but on the other hand company’s debt would be reduced and reserves would increase further improving debt-equity ratio. Sustainable Pick up in order inflow Rising fiscal deficit has restrained government planned infrastructure investments and slowdown in private sector spending due to slowdown in global economy in FY09 but due to the recovery in macro environment, order inflow for construction has improved. Despite considering the slippage of 20% over targeted infrastructure investment for FY11-12; we believe order inflow would grow at CAGR of 32% during FY11 and FY12 driven by increasing thrust of government on infrastructure and clearance of some of the deferred orders in last two years. Apart from that the government wants to continue the focus on infrastructure investment further during the 12th five-year plan (FY13-17) with an investment target of $1tn, 95% higher than the 11th Plan. Hence we believe the pickup in order inflows from sectors like roads, power, urban infrastructure, ports, Irrigation, would remain strong in short and long term.

Infrastructure Investment ` (bn) FY08 FY09 FY10 FY11 FY12

GDP (Market Price) 45189 48217 51592 56235 61297 Growth Rate (%) 9 6.7 7 9 9 GCF for Infra (% of GDP)* 5.75 6.5 6.5 8.5 9.5 GCF for Infra 2599 3134 3353 4780 5823 Growth rate (%) 14% 12% 7% 43% 22% Contrbution to GDP Growth - 1.18 0.45 2.77 1.85

Andhra orders forms just 16% of order book…. Pre Merger

Post Merger

Reduction in the contribution from Andhara Pradesh Outstanding orders from Andhra Pradesh stand at `38bn. Even in this, only `11bn is on IVRCL’s own books and the remaining `27bn have back-to-back contracts with sub-contractors. Receivable from AP has been reduced to `0.8bn on IVRCL’s own books. Remaining receivables of `1.4bn from AP appear both as receivables (from AP government) and payables (to subcontractors), thus, having no impact on IVRCL’s balance sheet. It ramped up significantly its presence in road projects through its subsidiary IVRCL Assets & Holdings. Parent IVRCL executes road contracts for the subsidiary. This reduced its order backlog in Andhra Pradesh to 16 % of the total ` 245 bn of orders to be executed. This figure stood at 24 % in the December quarter. Leaner structure; focus back on cash contracts Post the asset re-structuring process within the IVR group in Q2FY10, the entire BOT/BOOT project portfolio of the company - including the newly bagged projects and Alkor Petro have been transferred to IVR Prime. Subsequent to this, IVRCL’s equity stake in IVR Prime has risen from 62.4% to 80.5%. For IVRCL, the event appears a positive development considering its net debt to equity ratio which is close to 1:1. Further, the promoter group holding in the company is at a meager 9.7%, restricting any further dilution needed to leverage books for expanding the BOT portfolio. We believe that this move will benefit both the companies, viz. 1) IVR Prime to have consistent Revenue stream, leverage excess Net Worth for winning more BOT projects and raise money via Equity route to fund its growth. 2) IVR Prime is the focused asset play of the Group with Real Estate and Infrastructure Assets 3) IVRCL to focus on EPC work and experience traction in inflow on the back of enhanced Asset portfolio of IVR Prime.

Difference in gap pre and post COD

In Million Litres per day Year Demand Prod. Gap Pre 900 660 240 Post 900 760 140

Revenue to IVRCL

In Kilolitres Capacity Production `/KL Revenue 100000 100000 48 4800000

IVRCL Assets set to start Chennai desalination unit After a delay of almost a year, IVRCL Assets, a subsidiary of infrastructure major IVRCL Infrastructures & Projects Ltd, is set to commence commercial operations at its desalination plant in Chennai. Company is waiting for COD. The company has invested about ` 600 Crs on the project and would supply about 100 mn lts per day (MLD) of water to the Chennai metro water board. With the price of ` 48 per kilo litre, the project will rake in revenues of about ` 48 lacs per day or ` 115Crs in the first year of operations. It estimated that the demand in Chennai for water is at about 900 million litres per day and the supply is at about 660 mld through the conventional channels. This project is expected to reduce the demand-supply gap. Believed to be the first ever commercial desalination in the country, the project is raising hopes for IVRCL in terms of creating a benchmark for other cities keen on replicating such projects. IVRCL Assets to raise `1,000 Crs The equity dilution would also help IVRCL Assets meet the new norms on a minimum public shareholding of 25% in listed companies. Public holding in the company now is about 18%. IVRCL Assets and Holdings Ltd, a unit of IVRCL Infrastructures and Projects Ltd, is set to dilute 12-15% of its equity in 2-3 months to raise `1000 Crs to fund some of its new projects through QIPs and PE funds. These funds would be used fund their recently bagged orders worth ` 5000 Crs through SPVs Huge Land Bank with IVRCL Assets IVRCL Assets has a land bank of about 3,300 acres across the country which would be used to raise funds if required. The company would be doing construction activities on the same in various phases which is the company’s core business. By developing the land company can earn huge revenues. This is an added advantage to IVRCL which holding 80% of the stake.

91% of IVRCL’s present order book comprises full cost pass-through contracts

Order book shielded from escalations Most of IVRCL’s order book (~91%) comprises contracts with full “pass through” costs: 21% WPI/RBI-linked, 70% at a Star rate and the balance 9% on a fixed-price basis. IVRCL’s order book, in terms of the mix of escalation costs, is one of the best in the industry. Others in the industry have most of their order book linked to the broader WPI (wholesale price index). This does not fully capture volatility in prices of individual components, i.e., raw materials such as steel, cement, etc. Risks & Concerns Low promoters holding: Promoters holds approximately 10% stake in IVRCL which leaves little scope for further dilution in the parent company. Execution risk: Any slowdown in awarding of the projects by government, private players would impact the future order inflow and hence the business prospects. IVRCL also runs execution risk as its book to bill is 4.4x FY10 revenues, executing this in a time bound manner would be a challenge. Financial risk: Given the nature of the industry, IVRCL would need to take on additional debt to fund Capex or working capital. A spike in interest rates could hit its bottom line. There is also the risk of default – on loans given to subsidiaries, in particular IVR Prime. Slowdown in government spending Most of the infrastructure projects are planned and funded by government and its agencies. Any slowdown in government spending provides risk to our revenue estimates.

A brief of the newly bagged BOT projects

Operational BOT projects:

BOT Project Update: Currently, 5 BOT projects are operational of which 4 are road projects and 1 is of water desalination. Company is generating total average revenue of ` 77 – 78 lakhs per day which would be growing further. Recently, the company has bagged 6 BOT projects of which 5 are road projects and 1 is an oil & gas project.

Baramati – Phaltan

Sion – Panvel Indore-GujratChengapalli-Coimbatore

Goa-Karnataka

IOCL Tankages

Length / Capacity 77.9 Kms 25 Kms 155 Kms 42 Kms 122 kms 1.4 mn tankagesProject Cost (` Mn) 3820 18400 15500 11250 31000 30000 Stake (%) 75% 51% 100% 100% 100% 37.5% Concession Period 25 yrs 18.75 yrs 25 Yrs 27 Yrs 23 Yrs 15 Yrs Type Toll Toll Toll Toll Toll Annuity Govt grants / Revenue

Share (` Mn) ` 1.2bn ` 3.9bn ` 230mn

Rev share ` 360mn Rev Share ` 6.65bn Nil

Description

Widening of existing 2 lane

into 4 lane roads

Expressway

Widening of existing 2 lane highway into 4

lane roads

6 laning of roads

4&6 laning of existing 2&4 lane roads

Installation, maintenance &

operation of 1.4mn tankage through crude tankage project of 12 fuel farms

Salem

Tollway Jallandhar-Amritsar

Komorapalayam Chennai Befasa

First STP

Length / Capacity 53.5 Kms 49.0 Kms 48.5 Kms

Project Cost (` Mn) 5500 3806 4400 5680 30 Stake (%) 100% 100% 100% 75% 95% Concession Period 20 Yrs 20 Yrs 20 Yrs 25 Yrs 14 Yrs Type Toll Toll Toll Monthly invoicing Based on flow

Govt grants / Revenue Share (` Mn) 1290 395 175 - - Equity 1280 1011 835 1760 30 Debt 2930 2400 3390 3950 0

Revenue (` in mn per day) 1.25 1.1 1.2 4.5 - Toll Indexation WPI WPI WPI - -

Land Reserves Location Land in Acres Tamil Nadu 1541 Karnataka 266 Noida 101 Hyderabad 60 Maharashtra 1205 Visakhapatnam 220 Total 3393

Company Background IVRCL Infrastructures & Projects Ltd (IVRCL) is one of the major civil construction players in India with presence in water, irrigation, roads, highways, power transmission, buildings, industrial etc. About 69% of its orders are from irrigation and water projects. IVRCL’s majority of orders are from Andhra Pradesh (22%) and Maharashtra (27%) followed by 6-8% each from Gujarat, Rajasthan, Karnataka, Madhya Pradesh, Tamil Nadu, UP, etc. The company began its journey in 1990 as civil contractor and became infrastructure player in 2001 by foraying in the BOT projects. Currently it is operating/developing 5 BOT projects and singing LOI for two more projects. With the recent restructuring these BOT projects would be operated through its subsidiary, IVR Prime and IVRCL would focus on EPC contracts. In the past five years, IVRCL’s standalone net revenue grew at a CAGR of 44.9% to 5470 Crs. The management has given guidance of ` 70 bn of net revenue with 9.5% of EBITDA in FY11. Major Subsidiaries Hindustan Dorr Oliver Ltd Hindustan Dorr Oliver Ltd is 55% subsidiary of IVRCL and is focusing on high growth sectors of oil business, Manufacturing, Design & Engineering activities of Knowledge Process Outsourcing and large scale EPC projects in Mineral Beneficiation & Environment sectors. It has reported `8.7 bn of revenues with ` 577 mn of PAT in FY10. The company has an order book of ` 15 bn as on 31st March 2010. The management has given a FY11 revenue guidance of ` 11 bn, over 30% yoy growth. IVRCL Assets & Holdings Ltd The company is the real estate subsidiary of IVRCL with a land bank of 3393 acres and projects planned or developed in Chennai, Vizag, Bangalore, Pune, Nagpur and New Delhi, Hyderabad, etc. With the recent restructuring exercise resulting into transfer of BOT assets, the subsidiary would become infrastructure and real estate developer. In FY10, the company reported ` 1430 Mn of net revenues and net loss of ` 64 mn due to the slowdown in the economy and rise in interest cost.

Valuation: Attractively valued, Buy with a target price of ` 234 Reasonable valuations make a strong case for investment, given the expected growth in revenue & earnings at the rate of 22% & 21% for the year FY11 & FY12 respectively. This comprises a) ` 177.4/sh for EPC business based on PE of 13x on FY12E EPS and b) `38.7/sh and `15.6/sh for stakes held in IVRAH and HDO respectively, based on their current market caps and adjusted for a holding company discount of 25%. Our target price does not take into account any upside from stock appreciation in these two subsidiaries (which forms 23% of our SOTP).

We have also valued 4 BOT projects which are completed/ operational. The value of the same comes to ` 21.2/ share. But we have not included the value of these projects as these are already factored in the price of IVRCL Assets Holdings Ltd. Based on SOTP valuation we arrive at a target price of ` 231.7. We recommend BUY ratings on the stock with potential upside of 30.9%.

Segment Basis Multiple & Discount Total value Value to

IVRCL Infra Value Per

Share

Standalone PE Multiple 13 x 47355.2 47355.2 177.4

IVRCLAH (80%) Market value 75% of the market value of investment (at CMP of Rs 127) 12919.6 10335.7 38.7

HDO (55%) Market value 75% of the market value of investment (at CMP of Rs 140) 7560.0 4158.0 15.6

Total 61848.9 231.7

Projects Basis of Valuation Value Rs mn Value per Share for IVRCL

Jalandhar Amritsar tollways NPV 647.5 2.4Salem Tollways NPV 918.6 3.4Kumarpalayam Tollways NPV 255.2 1.0Chennai water desalination NPV 3836.9 14.4

Total 5658.2 21.2

Source: NHAI Investment budgeted in Five Year Plan:

Source: NHAI

Industry Indian Road Sector India is the second largest in the world in terms of road network with 3.3 mn km of roads carrying about 61% of the freight and 85% of the passenger traffic. Out of the total network, National Highways constitutes only about 2% of the road network but carry about 40% of the total road traffic. The number of vehicles has been growing at an average pace of 10.16% per annum over the last five years. According to the Planning Commission, annual growth projected at 12-15% for passenger traffic, and 15-18% for cargo traffic. Besides this, 40% of India’s villages do not have access to All Weather roads. To improve road infrastructure, in the Recent budget FY10-11, government has announced allocation of ` 1750 bn for infrastructure development.

Length (In Km)

2%

4%

14%

80% 0%

Expressways National Highways State HighwaysMajor District Roads Rural & Other Roads

Road Type Length (in KM)

Expressways 400 National Highways 70548 State Highways 131699 Major District Roads 467763

Rural & Other Roads 2650000

Total Length 3320410

Particulars FY08 FY09 FY10 FY11 FY12 Total XI PlanCentral 303 323 354 414 478 1872 Public 183 194 207 226 263 1073 Private 120 129 147 188 215 799State 215 224 238 270 322 1270 Public 175 182 189 206 248 1000 Private 40 43 49 64 74 270

Total 518 548 592 684 800 3142 Public 359 376 396 432 511 2074 Private 160 172 196 251 289 1068

Proposed Investment

0500

100015002000250030003500

VI Plan(1980-85

VII Plan(1985-9)

VIII Plan(1992-97

IX Plan(1997-2002

X Plan(2002-07)

XI Plan(2007-12)

Rs

in B

n

Source: Planning Commission

11th Five Year Plan for Roads For the roads and bridges sector, the 11th Five Year Plan (FYP) envisages a total investment of approximately ` 3142 bn (US$ 78.5 bn). The targeted investment is 116.8% higher than the 10th FYP. The private sector participation in investment in the current FYP is expected to be 34% which is much higher than 4.8% in 10th FYP. 50% of the investment would go to the development of national highways which includes 25.4% from private players participating in NHDP projects. National Highway Development Programme (NHDP) The Government of India has launched National Highway Development Programme (NHDP) involving a total investment of US$ 54.1 billion up to 2012. NHDP is being implemented by National Highway Authority of India (NHAI) in seven different phases. As per planning commission total investment in NHDP in the current five year plan is estimated at `138.98 bn with `79.84 bn of private investment. NHDP Projects at a glance

PhasesInvestments

(` bn) Length (KM)

Objective

NHDP-I 300.0 7498 1) Golden Quadrilateral 5,846 km 2) NS-EW Corridor of 981 km 3) Port connectivity 356 km 4) Others 315 km

NHDP-II 343.4 6647 1) NS-EW Corridor 6,161 km 2) Other National Highways of 486 km

NHDP-III 765.5 12109 Up gradation and 4 laning of National Highways

NHDP- IV 250.0 20000 Up gradation of highways into two-

lane highways

NHDP-V 412.1 6500 Six laning of existing 4 lane highways including 5,700 km of GQ and other stretches

NHDP-VI 166.8 1000 Development of expressways

NHDP-VII 166.8 700 Building of Ring Roads, Bypasses

and flyovers and selected stretches

Irrigation and water supply is expected to create Rs 372,582 Crs opportunities for EPC players Category-wise investments in Irrigation

Source: Planning Commission

Irrigation: Water supply segment has been viewed as a major sector in agrarian country like India. The need to provide adequate drinking water, water to the farmlands and treatment of waste water calls for the adequate reforms in the Irrigation segment. Investments in Irrigation sector for the 11th five year plan is projected at `2533 bn distributed across Major and Medium Irrigation, Minor Irrigation, Command Area Development (CAD), Flood Control and Watershed Development. Of the total irrigation potential of ~140 mn hectares (mn ha) in India, it is estimated that only ~103 mn ha has been created at the end of the Tenth Five Year Plan and only ~87 mn ha is utilized. With only 43% of net sown area being irrigated, clearly a lot needs to be done if we are to witness a second “Green Revolution”. With growing water demand due to population growth, increasing urbanization, changing lifestyles, and economic growth, the per capita availability of water in India has declined, making India water stressed. The increased emphasis on irrigation was evident from the plan outlay of ` 957.3 bn for irrigation in the Tenth Plan, over 50% increase over the previous plan. The investment in irrigation in the Eleventh Plan is projected to increase to ` 2533 bn. Among 28 states in India, around 10 states are expected to account for more than 85% of total outlays set aside for irrigation during the Eleventh Plan.

Investment in Irrigation in 11th Five Year Plan

Source: Planning Commission, IGSL Research

Year Major & Medium Irrigation

Minor Development

Command Area Development

Flood Control Watershed Development

Total YoY Growth

2007-08 19697 4646 1774 1484 4167 31768 2008-09 25644 5841 2148 1688 4490 39811 25.32% 2009-10 33394 7351 2632 1932 4839 50148 25.97% 2010-11 43497 9264 3270 2223 5213 63467 26.56% 2011-12 56674 8324 4125 2575 5618 77316 21.82% Total 178906 35426 13949 9902 24327 262510

11th Plan Anticipated Centre (` bn) 247.6State (` bn) 2285.4Total 2533.0

Power: India is a power deficit nation. To meet the rising demand the government has targeted to add 78700 MW and 82200 MW of generation capacity in 11th FYP and 12th FYP respectively. Thus the government targets to achieve 210907 MW of capacity by the end of 11th plan from 132330 MW at the end of 10th FYP. Proposed Power Generation capacity addition in 11th FYP

Particulars (MW) 2007-08 2008-09 2009-10 2010-11 2011-12

Thermal 6620 9304 14229 16655 12885

Hydro 2423 1097 1805 1741 8561

Nuclear 220 660 2000 500 0

Total 9263 11061 18034 18896 21446

Besides, we also need to develop our transmission and distribution infrastructure. The T&D losses in India are relatively higher at 26.9% than that of 10% - 15% in developed nations. The higher T&D losses is primarily on account of a weak T&D system, low voltage distribution lines, numerous transformation stages, overloads in transmission lines, higher pilferages, etc. To reduce these technical losses, huge capex is required. In the current FYP, investment of `3773.5 bn in power generation, `1404.2 bn in Transmission and `1487.5 bn in distribution has been planned. Hence there is huge opportunity for the EPC players in catering to these segments. Investment in 11th FYP in power sector

Particulars Generation Transmission Distribution Total

Centre 1439.8 616.4 497.0 2553.2

States 915.3 448.3 893.5 2257.0

Private 1418.5 339.6 97.0 1855.1

Total 3773.5 1404.2 1487.5 6665.3Source: Planning Commission, IGSL Research

Profit & Loss A/C ` mn Ratios

Turnover Ratios FY09 FY10 FY11E FY12E

Net sales to total assets 1.5 1.6 1.7 1.8Net sales to Fixed assets 9.4 9.4 11.4 13.2Net sales to working capital 2.1 2.8 2.7 2.9Net Working Capital Days 171.3 132.2 134.3 125.2Net sales to inventory 23.3 22.0 21.5 21.5Net sales to debtors 4.3 3.1 3.3 3.7Valuation Ratios (x) Market Price (Rs.) 350.6 172.0 172.0 172.0PE ( x) 20.7 21.7 16.6 12.6EPS (x) 16.9 7.9 10.3 13.6Book Value Per Share 135.6 69.3 78.5 90.7P/BV (x) 2.6 2.5 2.2 1.9EV/EBIDTA (x) 13.4 11.1 9.2 7.4Return Ratios (%) ROCE (%) 24.0 39.1 40.1 44.4ROE (%) 12.5 11.4 13.2 15.0Margins (%) EBIDTA 9.3 10.0 9.9 10.1EBT 5.6 6.0 6.1 6.7PAT 4.6 1.3 4.1 4.5Other Ratios(%) Operating Margin 8.6 9.7 9.6 9.9Gross Margins 9.3 10.0 9.9 10.1Net Profit Margin 4.6 1.3 4.1 4.5Payout Ratio 8.3 10.1 9.7 8.8Interest Cover ( X) 3.1 3.0 3.3 3.7

Particulars FY09 FY10 FY11E FY12E

Net Sales 48818.9 54922.8 67000.0 81100.0Growth (%) 33.4% 12.5% 22.0% 21.0%

Total Expenditure 44601.0 49610.1 60550.0 73050.0O & M Expenses 30966.8 47584.5 58100.0 70100.0% of Sales 63.4 86.6 86.7 86.4Employee Cost 13634.2 2025.56 2450 2850% of Sales 27.9 3.7 3.7 3.6PBIDT (Excl OI) 4217.8 5312.7 6350.0 7750.0

% of Sales 8.6 9.7 9.6 9.9Other Income 299.12 155.06 150.0 150.0Operating Profit 4516.9 5467.76 6600.0 8200.0% of Sales 9.3 10.0 9.9 10.1Interest 1306.13 1636.56 1800 2000% of Avg Debt 10.6 10.9 10.2 10.1PBDT 3210.8 3831.2 4800.0 6200.0Depreciation 473.05 542.84 683.12 739.12% of Fixed Asset 7.1 7.0 8.0 8.0PBT 2737.7 3288.4 4116.9 5436.9

Tax 478.1 2586.2 1538.6 1794.2Profit After Tax 2259.7 702.1 2758.3 3642.7Extraordinary Items 0 1411 0.0 0.0Net Profit After Tax 2259.7 2113.1 2758.3 3642.7

Balance Sheet ` mn

Particulars FY09 FY10E FY11E FY12E

Share Capital 267 534 534 534

Total Reserves 17839 17970 20418 23689

Shareholder's Funds 18106 18504 20952 24223

Total Debts 13980 16000 19300 20500

Total Liabilities 32086 34504 40252 44723

Net Block 5207 5850 5897 6133Capital Work in Progress 196 254 270 350

Investments 3892 8500 9500 10500

Total Current Assets 38135 44000 50150 55799

Total Current Liabilities 15226 21900 254955 27973

Net Current Assets 22909 19900 24655 27826

Net Deferred Tax -117 0 -69 -87

Total Assets 32086 34504 40252 44723

Cash Flow ` mn

FY09 FY10E FY11E FY12E

Profit Before Tax 2737.8 3288.4 4116.9 5436.9

Add: Depreciation 473.1 542.8 683.1 763.1Add: Interest Expenses 1907.4 1636.6 1800.0 2000.0Add: Others -753.2 -500.0 -500.0 -500.0Changes WC -2878.4 -1473.5 -5376.8 -6720.6

Cash Flow after WC 1486.6 3494.3 723.6 979.4

Tax Paid -1018.3 -2586.2 -1358.6 -1794.2Cash From Operations 468.3 6080.5 2081.8 2773.6

Cash Flow from Invst. -2363.7 -5793.5 -2130.0 -2200

Cash from Finance 1132.8 135.2 -110.0 -1172.0

Net Cash Flow -762.7 422.3 -158.2 -598.4Op Cash & Equivalents 1771.4 1008.7 1431.0 1272.8Cl Cash & Equivalent 1008.7 1431.0 1272.8 674.4

Peer Group Analysis: IVRCL Patel IRB Nagarjun HCC Share Price 178 414 261 181 135

Market Cap (` bn) 47.47 28.91 86.76 46.44 40.952 Week H/L 212.4/144.0 526.0/340.0 299.9/171.6 197.0/119.2 162.2/99.6Revenues (Rs mn) FY10 54922.8 24250 17049 47778 36442FY11E 67000.0 33500 27720 58300 43730FY12E 81100.0 40070 41000 71100 52500EPS (`/Share) FY10 7.9 18.8 11.6 8.8 3.2FY11E 10.3 32.8 14 10.7 3.8FY12E 13.6 38.4 14.2 12.7 4.5EBIDTA (` mn) FY10 5467.8 5292 8480 4834 4622FY11E 6600.0 5952 11160 5920 5360FY12E 8200.0 7080 13880 7280 6420Book Value FY10 69.3 181.3 61.7 87.6 52FY11E 78.5 199.2 74.8 94.6 52.7FY12E 90.7 224.9 89.8 103.2 56P/E (x) FY10 21.7 22.1 23.4 19.9 40.3FY11E 16.6 12.7 19.4 16.4 33.9FY12E 12.6 10.8 19.2 13.8 28.7P/BV (x) FY10 2.7 2.28 4.23 2.07 2.60FY11E 2.4 2.08 3.49 1.91 2.56FY12E 2.1 1.84 2.91 1.75 2.41EV/EBIDTA (x) FY10 11.1 7.4 14.6 6.8 15.8FY11E 9.2 6.6 12.5 5.8 13FY12E 7.4 5.7 11.2 4.9 11.2ROE (%) FY10 11.4 15 20.4 14 8.9FY11E 13.2 11.9 20.6 15.1 10FY12E 15.0 12.3 17.7 16.5 11.5Order Book FY10 239000 85000 102000 154000 169000Order Book/ Bill (x) FY10 4.4 3.5 6.0 3.2 4.6FY11E 4.0 2.5 3.7 2.6 3.9FY12E 3.7 2.1 2.5 2.2 3.2

For any queries please feel free to contact our Institutional Research Team

Names Designation E-Mail Id. Contact Number Nagji Rita CMD - - SALES Ravinder Kasliwal Head Institutional Sales [email protected] 40751565/66 Dealing Shiv Damani Institutional Dealer [email protected] 22723797 Vinit Rita Institutional Dealer [email protected] 40751565/66 Rashda Ainapore Institutional Dealer [email protected] 40751565/66 Research Denil Savla Research Analyst [email protected] 40751515 * 581 Sheetal Nirmal Research Analyst [email protected] 40751515 * 628 Pankti Shah Research Analyst [email protected] 40751515 * 583 Divya Kant Research Analyst [email protected] 40751515 * 582 Anshuman Jain Research Analyst [email protected] 40751515 * 579 Sanjeev Haria Research Analyst [email protected] 40751515 Sibayan Banerjee Technical Analyst [email protected] 22723797 Ashok Patel Technical Analyst [email protected]

Disclaimer

22723797 Madhu Patel Technical Analyst [email protected] 22723797

This Document has been prepared by Inventure Growth & Securities Ltd. The information, analysis and estimates contained herein are based on Inventure’s assessment and have been obtained from sources believed to be reliable. Neither Inventure Growth & Securities Ltd nor any of its employees or associates accepts any liability whatsoever direct or indirect that may arise from the use of information herein and shall not be responsible for its completeness and accuracy. It is not an offer to sell or a solicitation to buy securities. This document is for circulation only

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