>IRB INFRA(Religare)

Leading private developer with a focus on road projects: IRB Infrastructure
has a portfolio of 14 BOT road projects, of which 11 are operational, 2 are
under construction and 1 is yet to achieve financial closure. The capitalised
cost of these projects is Rs 64.7bn, funded through equity of
Rs 13.3bn and the balance through debt. Despite the difficult market
conditions, the company has been able to achieve financial closure for its
Rs 27bn Surat-Dahisar project, albeit with a delay of three months.
Strong in-house construction order book of Rs 63bn: IRB’s order book of
Rs 63bn is bifurcated between EPC – Rs 35bn with an execution time frame
of three years – and O&M – Rs 28bn with an execution period of 10–12 years.
IRB’s construction arm reports margins of 20% vis-à-vis the industry average
of 10%. The strong margin outperformance can be attributed to lower
subcontracting expenses, a large fleet of equipment, ownership of aggregate
mines, and higher cost assumptions while pricing project bids. While we
expect construction margins to decline by 450bps over the next 2–3 years due
to increased competition, they would still be above the industry average.
Consolidated earnings to grow at 49% CAGR over FY08-FY11: We anticipate a
significant jump in revenues and earnings, at a CAGR of 59% and 49%
respectively over FY08-FY11, once the Bharuch-Surat and Surat-Dahisar road
projects start contributing to IRB’s toll income. Since financial closure on the
Surat-Dahisar contract has been achieved, revenues will kick in from February
’09 at the rate of Rs 10mn per day, post revenue-sharing with the National
Highway Authority of India (NHAI) (38% of toll revenue in the first year).
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