>ITD CEMENTATION LTD (ITD) (GEPL)

OVERVIEW
Infrastructure is a fundamental enabler for a modern economy and infrastructure development will be the key focus area for the next five years. Public investment in infrastructure is of paramount importance. Bottlenecks and delays in implementation of infrastructure projects because of policies and procedures especially in railways, power highways, ports airports and rural telecom will be
systematically removed. Public–Private Partnership (PPP) projects are a key element of the strategy. A large number of PPP projects in different areas currently awaiting government approval would be cleared expeditiously. The regulatory and legal framework for PPP would be made more investment friendly - These words were part of President Pratibha Patil’s welcome address to Houses of Parliament after the Indian elections in May 2009. The focus on infrastructure has been taken forward by the Finance Minister in the latest budget. Keeping in line with this theme we have chosen ITD Cementation India Ltd as the Pick of the Week this time. The company is under the Italian–Thai Development Public Company. ITDs business functions include projects for specialist engineering, projects for marine and projects for bridges and industrial developments.

INVESTMENT RATIONALE
It is expected that there exists an investment need of $500 billion in building the infrastructure needs covered over the eleventh plan and more so for the country to sustain its forecast growth rate of 9 percent. Out of this ambitious target almost 30% is expected to come from the private sector. Thus the emphasis laid on PPP both in the Rail and Union budget. With more than half of the country's population under the age of 30, backed with increased purchasing power means the
emergence of new and demanding middle class, which is expected to put more pressure on the infrastructure needs as they shall demand high quality of living and improved facilities. Thus the resultant demand for infrastructure and subsequent spend itself will act as a cause for and a consequence of economic growth. Therefore, if this biggest impediment in the country's growth is not addressed efficiently and timely, it shall stall its recovery and make loose its competitive strength in global markets.

Italian–Thai Development Company the largest civil engineering & construction company in Thailand, expertises in activities like airports, expressways, railways, bridges, industrial plants, mining, ports, jetties, marine works, dams, hydroelectric power projects, mass rapid transit systems to mention a few. ITD India is now capitalizing on this and in joint venture with the parent company is undertaking projects like construction of Kol Dam National Highway route NH -
31c in West Bengal, Delhi MRTS project, Kolkatta Airport passenger terminal building (Rs 16000 Mn) and the Tallah–Palta water pipeline installation in Kolkatta (Rs 1873 Mn). In continuation of projects under execution for DMRC the company has been awarded a project for construction of Sushant Lok station with property development valued at Rs 920 Mn. These projects afford the company to build a strategic business base in India and develop it competitive strengths.

During the calendar year 2008 the company secured contracts worth Rs 12.9 bn which included projects like construction of wet basin for Mazagaon Dock Mumbai, civil work for iron ore port terminal at Ennore Chennai, civil and piling work for alumina refinery project at Langigarh, Orissa, driven piling, pile caps and associated civil and structural works at Mundra, Gujarat to mention a few. Thus we can see that the ITD’s presence in marine segment is further strengthened by st these orders. The order back log as of 31 December was Rs 23.4 bn which includes share in joint ventures.. In Addition to these, the company has in the first quarter of the current year received orders to the tune of Rs 1000 crs covering the marine and irrigation sectors.

INVESTMENT CONCERNS
Tight liquidity conditions, Delay in execution of orders and Sharp increase in input costs.

VALUATION
At the CMP of Rs.153, ITD trades 0.5x its CY08’s book value of Rs. 304 per share. Long term investors can add more ITD to their portfolio.

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