Thursday, April 29, 2010


Jaypee Infratech Limited (JIL) is engaged in the development of the Yamuna expressway, and related real estate projects. It is a part of Jaypee group, incorporated on April, 2007 as a special purpose company for the development, operation and maintaince of the Yamuna Expressway in the state of Uttar Pradesh, connection Noida and Agra.

Objects of the Issue: Out of the issue proceeds, around Rs 1500 crores are to be used to partially finance the Yamuna expressway, and the remaining general corporate purposes.

Investment Highlights
JIL enjoys strong parentage of Jaypee Group which is a leading integrated infrastructure conglomerate in India.

The Yamuna expressway is a 165-kms access controlled six lane concrete pavement expressway along the Yamuna River, with the potential to be converted into an eight lane expressway. The travel time on this access controlled expressway is likely to take roughly 120-
130 minutes for 165 kms of distance.

The company holds the concession for developing, operating and maintaining the Yamuna Expressway from Noida to Agra for a period of 36 years.

They plan to use cement concrete for the pavements to cut their maintenance costs in future.

The company has a right to develop five parcels of land each of 1235 acres, totalling 6175 acres. The total area which could be developed is roughly 530 mn sq.ft. JIL has taken land parcels on lease agreements for 90 years therebby saving the upfront land costs.

Of the aforesaid saleable area, approx. 21.21 mn sq. ft. of residential area and 3.13 mn sq.ft. of commercial area has been launched for sale, which were approximately 88% sold on a square foot basis which amounts to Rs 4213 crores (residential) as of March 2010.

The entire expressway of 165 kms travels through a single state Uttar Pradesh, so no state toll needs to be paid by travellers, where as if they use the NH, they have to cross two states, hence pay toll. It would also reduce the traffic and the time taken to travel.

The company is eligible for income tax benefits under section 80 I(A) and the same is available for a continuous period of 10 consecutive years in a block of 15 years. The company has decided to claim this benefit beginning with Assessment year 2009-2010 (FY08-09).

The required construction deadline is April 2013, JIL plans to complete the construction by 2011, two years in advance due to contractors’ use of modern construction equipment which significantly reduces construction timeframes without sacrificing the quality of construction.

Key Challenges: The Company will face the tough task of selling the huge land bank of 530 mn sq.ft. at a place where there is already an oversupply.

Advise: The financials till now do not capture the future revenue potential from tolls once the expressway is complete and income from its real estate business (5 integrated townships covering 6175 acres i.e. ~530 mn sq.ft.). Thus valuing the Company based on past performance will not be prudent. The Noida-Agra project is the first of its kind where there will be such a
large real estate development included in the same. Investors with a long-term horizon can consider Subscribing to this issue to benefit from the huge opportunity that the project is likely to present.

To read the full report: JIL


Abhishek said...

I can think of 10 equivalent or better listed stocks in the Indian markets. Anyway investing on the basis of future revs looks like gambling.Plus who knows how the proect will turn out once BSP gets out of power