>RELIANCE INFRASTRUCTURE LIMITED (MERRILL LYNCH)

■ Catalysts:
Pick-up in execution with 2 toll roads already commissioned in 2Q, cash-rich balance sheet (>Rs78bn), consol. P/BV of 1.6x FY09 and transformation of RELI into an Infra developer with project wins across domains.

■ Key takeaways were:
Rs190bn order book in EPC - gives visibility for 35% CAGR till 2012 in revenues.

Roads:
RELI has 9 road projects, 2 of which are currently operational, 4 will be operational in next 12 months. Have received LOA for 2 projects in January 2010. Currently Rs73bn road portfolio is set to rise to Rs200bn by 2012. The company uses 20% as an internal hurdle rate for project evaluation. The biggest constraint in road development was land acquisition which has now been substantially taken care of with the new government policy. The new policy ensures at least 80% land acquisition before the project is awarded.

Metro rail:
Return from Metro projects lower than that in road projects but added benefits could come from real estate development. E.g: IRR of delhi metro substantially improved with over doubling of FSI at land-bank recently.

Entry into cement:
Planning to enter cement business in 3 years. The company can use ash and power from Reliance Power's power plants in the limestone-rich belt of Madhya Pradesh. The combination of abundance of cheap ash, power, and limestone will mean company may be the cheapest cement producer.

To read the full report: RELIANCE CAPITAL