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NCDIssueNote NationalHighwayAuthorityofIndia
Detailsoftheissue
NCD
Options
I
II
Tenor(inyears) 10 15
Put/Calloption None None
Interestpayment Annual Annual
MinimumApplication Rs50,000 Rs50,000
InMultiplesof Rs10,000 Rs10,000
FaceValueofNCDs(Rs/NCD) Rs1,000 Rs1,000
IndividualsandHUFwithapplicationuptoRs5lakhs(30%ofissuesize)Coupon(Annual) 8.2% 8.3%
IndividualsandHUFwithapplicationaboveRs5lakhs(30%ofissuesize)Coupon
(Annual)
8.2%
8.3%
InstitutionalInvestorsandCorporatebodies(40%ofissuesize)Coupon(Annual) 8.2% 8.3%
Companydata,NirmalBangResearch
SilkyJainResearchAnalyst
Ph(022)39268178
EMail: [email protected]
Issuer NationalHighwayAuthorityofIndia
Issue
Public
Issue
of
tax
free
NCDs
aggregating
to
Rs.5000
crs
with
an
option
to
retain
oversubscriptionuptoRs.5000crsforissuanceofadditionalNCDs.Recommendation SUBSCRIBE
Acceptance ONFIRSTCOMEFIRSTSERVEBASISforHNI,InstitutionalInvestorsandPRORATA
basisforRetailInvestors
IssueDate 28th
December201111th
January2012
BookRunningLeadManager SBICapitalMarketsLtd,AKcapitalServicesLtd,ICICISecurities,KotakInvestBanking
Listingdate Within30daysofclosureoftheissue
Registrar MCSLimited
Trustee
SBICAPTrustee
Company
Ltd
Stockexchangeproposedforlisting NSEandBSE
Tradinglot 1NCD
InstrumentForm InDemataswellasinphysicalform
Depositories NSDLandCDSL
Rating AAA/StablebyCRISIL,FitchAAA(Ind)byFitchandCAREAAAbyCARE
Sector Infrastructure
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NCDIssueNote NationalHighwayAuthorityofIndia
Background
NationalHighway
Authorities
of
India
(NHAI)
is
an
autonomous
authority
of
the
GoI.
It
got
operationalizedin1995andisgovernedbyNHAIActandRules.Itisanodalagencyfordevelopment
ofNationalHighway (NH)ProjectsunderNationalHighwayDevelopmentProject (NHDP)andallied
programmes approved by the GoI. NHAI is responsible for the development, maintenance and
management of the NH entrusted to it by the GoI. Its functions include survey, development,
maintenanceandmanagementoftheNHandtoconstructoffices,toestablishhotels,restaurantsand
restroomsatornearhighwaysvestedinorentrustedtoit,toregulateandcontrolplyingofvehicles,
to develop andprovide consultancy and construction services and to collect fees for services and
benefitsrenderedbythecompany.
Since its inception, themodeof implementationofprojectsunderNHDPhasundergone significant
change.
Initially
the
implementation
was
through
EPC
mode.
However,
since
2005
the
GoI
has
decided
to implement projects on Public Private Partnership (PPP)mode (BOT Toll/Annuity orOperation,
ManagementandTransfer(OMT).NHAIhasplayedasignificantroleindevelopingapproachesforPPP
andactual implementationona largenumberofprojects.Ason31stAug2011,NHAIhaveawarded
141BOTTollbasedcontractsvaluedatRs.104,984crsand49BOTAnnuitybasedcontractsvaluedat
Rs.29,081crthroughPPPmode.
Year Completion(kms) Award(kms)
FY200607 636 1,730
FY200708 1,684 1,234
FY200809 2,205 643
FY200910 2,693 3,359
FY201011 1,783 5,058
FY201112(uptoSept2011) 682 2,476
Source:NHAINHAI relies a lot on outsourcing a number of activities like design, construction, operation,
maintenanceetc.NHAIreceivesitsfundingfrom:
(i)Governmentsupport intheformofcapitalbase,cessfund,additionalbudgetarysupport,capital
grant,maintenancegrant,ploughingbackoftollrevenueandloanfromGoI:
(ii)loanfrommultilateralagenciesand
(iii)marketborrowings.
Duringthe
year
2010
11,
asum
of
Rs.
8,440
crs
was
received
from
GoI
as
Cess
Funds.
In
addition
Rs.
843crwerereceivedtowardsdevelopmentofNationalHighways.
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NCDIssueNote NationalHighwayAuthorityofIndia
ObjectsoftheIssueThe funds raisedwillbeused for financingofvariousprojectsbeing implementedby theNHAI
underthe
NHDP
and
other
National
Highways
as
approved
by
the
Government
of
India.
CreditRatingTheproposedNCD issueshavebeenratedAAA/StablebyCRISILwhich indicateshighsafetyfor
timelypaymentofinterestandprincipalontheNCDs.CAREhasgivenratingofAAAandFitchhas
assigned Fitch AAA (Ind) rating which indicates high safety for timely servicing of debt
obligations.
DebttoequityratioThedebtequityratiopriortothisIssue is0.11timesbasedonatotaloutstandingconsolidated
debtofRs6,636crsandconsolidatedshareholderfundsamountingtoRs5,817crsasonJune30,
2011.The
debt
equity
ratio
post
the
Issue,
(assuming
subscription
of
NCDs
aggregating
to
Rs
10,000crs)wouldbe0.29times.
QuasigovernmentbodyAsNHAI isaquasi governmentbody, it getsbudgetary support from the central government
whichisanadditionalfactorindicatingsafetyfortheinvestors.
Taxfree TheincomebywayofinterestontheseBondsisfullyexemptfromIncomeTaxandshallnotformpartofTotalIncomeundersection10(15)(iv)(h)ofIncomeTaxAct1961.
Therewillbenodeductionof taxat source (TDS) from the interest,whichaccrues to thebondholders
in
these
bonds
irrespective
of
the
amount
of
interest
or
the
status
of
the
investors.
Wealthtaxwillnotbeapplicableonthesebondsundersection2(ea)ofWealthtaxAct1957. InterestonApplicationmoney
Outoftotalapplicationamount,applicantswillget interestatcouponrateforamountallotted
and4% foramountrefunded for theperiodbetween3daysafterthereceiptofapplicationor
realization of cheque/demand draft whichever is later upto 1 day prior to deemed date of
allotment.
PriorityofallotmentIf there is any under subscription in any Portion, priority in allotments will be given in the
followingorder:
CategoryIII Retail
CategoryII HNI
CategoryI QIBs
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NCDIssueNote NationalHighwayAuthorityofIndia
ClosingofIssueIssue can get closed if the aggregate amount of collection exceeds the prescribed issue size
withoutconsidering
individual
category
subscription.
For
example
if
retail
portion
has
got
collectionofRs2,000crsandinaggregatecollectionshaveexceededRs10,000crthenNHAIcan
closetheissue.
Recommendation:
Webelieve that theNCD fromNHAI is a good investmentopportunity for investors for long term.As
interestratesareexpectedtocomedowngraduallywebelievethatitistherighttimefortheinvestorsto
lock intheircapitalatahigher interestrate.Highercreditratingandgovernmentbackedsecurityalong
withthecreditworthinessoftheissueandliquidityprovidedaresomeoftheadvantageswhichcomewith
theissue.
Posttax
yields
TaxRate 10years 15years
8.2%coupon 8.3%coupon10.3% 9.14% 9.25%
20.6% 10.33% 10.45%
30.9% 11.87% 12.01%Companydata,NirmalBangResearch
KeyConcerns
ChangeininterestratesIncreasingratesofinterest,resultingfromhigherinflationarelikelytohaveanegativeeffect
onthepriceoftheNCDs.
LackofliquidityThoughNCDsarelistedonthestockexchange,thereisaproblemofliquidityinthemarkets.
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NCDIssueNote NationalHighwayAuthorityofIndia
FinancialStatements
IncomeStatement
(Rs
in
crs) FY2007 FY2008 FY2009 FY2010 FY2011
INCOME
a)ValueofWorkdone
b)Otherincome 127 224 12 37 38
c)Interest(Gross) 0 1 0 1 0
d)GrantinaidformaintenanceofHighways
e)NetIncrease/Decreaseinworkinprogress
Total 127 225 13 38 38
EXPENDITURE
ConstructionStores/MaterialConsumed
Personnel
&
Administrative
Exp 65 65 101 111 144FinanceCharges 0 0 0 0 0
Depreciation 8 5 4 3 6
AssetsofSmallValueChargedOff 0 0 0 0 0
Total 73 71 105 115 150
Profit(+)/Loss()fortheyear 54 154 93 77 112
Add:PriorPeriodItemsnet(+/) 15 3 10 6 5
Less:NetEstablishmentExpenses 0 0 103 83 117
Less/Add:ProvisionforTaxation 0 0 0 0 0
NetProfit 69 151 0 0 0
Companydata,NirmalBangResearch
TheprofitandlossaccountofNHAIappearsdistortedmainlybecauseitincludesonlyincomefromsaleof
tenderdocuments.However,collection fromcesson fuels isnot included in theP&Lstatementand is
capitalizedinthebalancesheetundertheheadCapital.
Thehighercreditratingsfromtheratingagencyarebasedonthestrongfinancialpositionbecauseofthe
supportfromGoIintheformofcessonfuels,budgetaryallocationsandflexibilitytoraisefundsfromthe
capitalmarket.
GoI levies cessofRs2onevery litreofpetrolanddiesel sold in themarket.Aportionof this cess is
passedontheNHAI.ThesefundsarebeingusedbytheNHAIfortherepaymentofprincipalandinterest
againstmarketborrowings.
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NCDIssueNote NationalHighwayAuthorityofIndia
BalanceSheet
(Rs
in
crs) FY2007 FY2008 FY2009 FY2010 FY2011
SOURCESOFFUNDS
Shareholders'Funda)Capital 22,612 29,712 36,843 44,448 55,195
b)Reserves&Surplus 1,441 1,759 1,765 412 412
Grants 0 0 0 0 0
a)Capital 9,799 11,574 13,087 13,357 13,676
Borrowings 4,923 5,008 5,590 5,123 6,801
Total 38,774 48,053 57,286 63,340 76,084
APPLICATIONOFFUNDS
FixedAssetsa)
Gross
Block 71 71 73 76 85
b)Less:Depreciation 32 37 40 43 49
c)NetBlock 39 34 33 32 36
d)Less:AssetscreatedoutofGrants 8 6 6 6 6
e)(i)CapitalWork in Progress 15,131 21,852 28,774 34,025 37,848
(ii)Expenditureoncompletedprojec 17,642 21,082 25,158 31,520 41,316
TotalFixedAsset 32,804 42,962 53,959 65,571 79,194
Investment 835 873 919 1,049 1,076CurrentAssets,Loans&AdvancesDeposits,Loans&Advances 3,951 3,499 3,071 3,059 3,108
Interestaccruedondeposit 85 35 52 10 6
Cash&BankBalance 4,805 5,418 5,236 2,452 2,866
8,840 8,953 8,359 5,520 5,980
Less:CurrentLiabilitiesandProva)Liabilities 3,700 4,729 5,943 8,792 10,154
b)Provisions 4 5 8 9 12
3,704 4,734 5,951 8,801 10,166
NetCurrentAssets 5,136 4,218 2,408 3,281 4,186Total 38,774 48,053 57,286 63,340 76,084
Companydata,NirmalBangResearch
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NCDIssueNote NationalHighwayAuthorityofIndia
NOTE
Disclaimer
ThisDocumenthasbeenpreparedbyNirmalBangResearch (ADivisionofNirmalBangSecuritiesPVTLTD).The information,analysisandestimatescontainedhereinarebasedonNirmalBangResearchassessmentandhavebeenobtainedfromsourcesbelievedtobereliable.Thisdocument ismeantfortheuseofthe intendedrecipientonly.Thisdocument,atbest,representsNirmal Bang Research opinion and is meantfor general information only. Nirmal Bang Research, its directors, officers oremployeesshallnotinanywayberesponsibleforthecontentsstatedherein.NirmalBangResearchexpresslydisclaimsanyandallliabilitiesthatmayarisefrominformation,errorsoromissionsinthisconnection.Thisdocumentisnottobeconsideredasanoffertosellorasolicitationtobuyanysecurities.NirmalBangResearch,itsaffiliatesandtheiremployeesmayfromtimetotimeholdpositions in securities referred to herein.NirmalBang Research or its affiliatesmayfrom time to time solicitfrom orperforminvestmentbankingorotherservicesforanycompanymentionedinthisdocument