Back on the Road: Roads & Highways Sector Outlook

Institutional
Equity
Research
Infrastructure & Construction | India
Roads & Highways
July 8, 2014
Viral Shah
+91 22 4227 3388
viral.shah@sbicapsec.com
Pranjal Sanghvi
+91 22 4227 3428
pranjal.sanghvi@sbicapsec.com
SBICAP
Research on Bloomberg SBICAP <GO>, www.securities.com
SBICAP Securities Ltd (SSL)

Mafatlal Chambers, A-Wing
2nd Floor, N.M. Joshi Marg
Lower Parel, Mumbai - 400013
+ 91-22-4227 3300/01
sbicapresearch@sbicapsec.com
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Roads & Highways Sector

Roads & Highways | India
SBICAP Securities Ltd
Back on the road
Sadbhav Engineering Ltd

Y/E March (Rs mn)
Sales
EBITDA
PAT
EPS (Rs)
P/BV
EV/EBITDA
Dividend Yield (%)
ROE (%)
Recommendation
Rating
CMP (Rs)
Target price (Rs)
Upside (%)
F15e
28,542
3,083
1,119
7.4
2.9
12.7
0.3
11.1
F16e
31,171
3,366
1,261
8.3
2.6
11.7
0.3
11.3
Over the past couple of years, the infrastructure sector has been plagued by
various headwinds such as deteriorating investment sentiment, depleting order
book, delayed decision making, high leverage and difficult macro environment
scenario leading to a slowdown in investment in the sector. Despite all the
challenges, we believe that with a new and decisive government in place, the
road sector would be getting a much needed impetus. The new government is
expected to resolve issues related to stalled road projects before resuming
meaningful awarding activity. Further, new positive policy announcement along
with improvement in GDP growth and lowering of interest rate would benefit the
companies in the road sector going forward.
BUY
203
251
23
The road journey so far : Post the euphoria of robust awarding activity of road
projects in F11 and F12, the road sector has seen significant slowdown in awarding of
projects. In F13 & F14e only ~1,933 kms & ~1,600 kms of road projects were awarded
mainly due to tepid response from developers and also due to various issues such as
delay in decision making, land acquisition and environment clearance problems.
IRB Infrastructure Developers Ltd

Y/E March (Rs mn)
Sales
EBITDA
PAT
EPS (Rs)
P/BV
EV/EBITDA
Dividend Yield (%)
ROE (%)
Recommendation
Rating
CMP (Rs)
Target price (Rs)
Upside (%)
F15e
43,757
20,785
5,096
15.3
2.2
9.8
1.8
13.6
F16e
49,684
23,997
6,240
18.8
1.9
8.7
1.8
15.0
slow traffic growth a short term concern.: A deceleration in traffic growth has
been witnessed by most of the players on account of a slowing economy that is also
reflected in our study set of 50 projects (across four players). The study shows that a
slowdown in economic activity has led to traffic growth of 1.3% YoY and 3.7% YoY in
F13 and F14e. We believe traffic growth is likely to be cyclical in nature and lower
traffic growth is merely a short term blip. In our view, any improvement in the GDP
growth would lead to a proportionate growth in traffic. We expect an average traffic
growth to inch up to ~5% plus YoY on a medium term basis.
BUY
257
309
20
awarding to pickup.: We believe, with a new and decisive government, the road
sector would get a much needed impetus. The new government is expected to resolve
issues related to stalled road projects before resuming meaningful awarding activity.
The near term outlook looks challenging for developers. However, we expect the
scenario to improve over the next 2-3 years aided by (a) pick up in execution, (b)
improvement in cash flows and (c) step up in asset monetisation.
IL&FS Transportation Networks Ltd

Y/E March (Rs mn)
Sales
EBITDA
PAT
EPS (Rs)
P/BV
EV/EBITDA
Dividend Yield (%)
ROE (%)
Recommendation
Rating
CMP (Rs)
Target price (Rs)
Upside (%)
F15e
74,905
22,771
4,583
18.6
0.9
11.1
2.2
8.6
F16e
85,279
25,925
5,585
22.6
0.9
10.2
2.2
9.4
.lean period has helped nurse strength: In our analysis, the lull period of roughly
over two years brought on by elusive project clearances has given certain companies,
like SEL, IRB, ITNL and ASBL, accumulate a healthy asset portfolio. Executing
bagged BOT projects has nursed their balance sheets such as to make them more
robust and impart cash flow visibility.
BUY
219
272
24
Valuations: Going forward, we expect the growth in road sector to be driven by (a) 5
6% medium-term traffic growth, (b) 56% of growth in toll rates, (c) pick-up in
construction activity and (d) reduction in interest rate that would be beneficial in the
long run. We initiate coverage with a BUY rating on Sadbhav Eng (SEL) with a target
price of Rs251 and re-initiate our coverage with a BUY rating on IRB Infrastructure
(IRB) with a target price of Rs309 given (a) healthy asset portfolio, (b) robust order
book, (c) healthy cash flow and (d) relatively strong balance sheet. We also re-initiate
IL&FS Transport Networks (ITNL) with a BUY rating with a target price of Rs272 given
a healthy mix of portfolio (Toll/Annuity), strong parentage and fulfilled equity
requirements. We initiate our coverage on Ashoka Buildcon (ABL) with a HOLD rating
with a target price of Rs155 due to the limited upside available from current levels.
Ashoka Buildcon Ltd

Y/E March (Rs mn)
Sales
EBITDA
PAT
EPS (Rs)
P/BV
EV/EBITDA
Dividend Yield (%)
ROE (%)
Recommendation
Rating
CMP (Rs)
Target price (Rs)
Upside (%)
F15e
19,256
4,949
993
6.3
1.7
11.4
0.8
7.6
HOLD
144
155
7
F16e
23,119
5,941
1,109
7.0
1.6
9.7
0.8
8.0
Key risks: We highlight a sluggish economic growth leading to lower-than-expected

growth in traffic and high interest rate as the key macro risk to our sector call. Other
factors like delay in decision making, issues pertaining to land acquisition and elusive
environment clearances could weigh upon the pace of awarding activity.
viral.shah@sbicapsec.com I pranjal.sanghvi@sbicapsec.com
July 8, 2014 | 2
Table of Contents
Back on the roads..................................................................................................................................... 2
Investment summary ................................................................................................................................ 4
slow traffic growth a short term concern. ........................................................................................... 7
awarding to pickup. ........................................................................................................................... 8
.Lean period has helped to rethink .................................................................................................. 11
Relative valuation ................................................................................................................................... 13
Key risk ................................................................................................................................................... 16
Companies under coverage

Sadbhav Engineering Ltd .................................................................................................................... 17
Investment rationale ........................................................................................................................ 18
Financial Analysis ............................................................................................................................ 22
Valuations........................................................................................................................................ 23
Key risk............................................................................................................................................ 25
Company Profile .............................................................................................................................. 26
Key management ............................................................................................................................ 27
Financials ........................................................................................................................................ 28
IRB Infrastructure Developers Ltd ...................................................................................................... 29

Valuations........................................................................................................................................ 37
Key risk............................................................................................................................................ 39
Company Profile .............................................................................................................................. 40
Key management ............................................................................................................................ 41
Financials ........................................................................................................................................ 42
IL&FS Transportation Networks Ltd ................................................................................................... 43

Valuations........................................................................................................................................ 52
Key risk............................................................................................................................................ 54
Company Profile .............................................................................................................................. 55
Key management ............................................................................................................................ 56
Financials ........................................................................................................................................ 57
Ashoka Buildcon Ltd ............................................................................................................................ 58

Valuations........................................................................................................................................ 65
Key risk............................................................................................................................................ 67
Company Profile .............................................................................................................................. 68
Key management ............................................................................................................................ 69
Financials ........................................................................................................................................ 70
July 8, 2014 | 3
Investment summary
Over the past couple of years, the infrastructure sector has been plagued by several
headwinds such as inflationary pressures, tacky order inflows, high interest rates and
excruciating policy paralysis. The resultant execution slowdown shrunk bottom-lines of
most of infrastructure companies. Many projects could not take off due to delay in
approvals and decision making. Along with this, a lack of investment in the
infrastructure sector resulted in a downward spiral for infrastructure stocks over the
last couple of years. Since most companies have become cautious on new
investments or have declared investment holidays, we believe that overall situation will
not improve until critical decision/reforms related to land acquisition, environment
clearances and long term funding options are taken.
We now expect, with a new and decisive government in place, the caution exercised
on investments thus far to be lifted and believe the road sector would get a much
needed impetus. The new government is expected to resolve issues related to stalled
road projects before resuming meaningful awarding activity. Further, new positive
policy announcement along with improvement in GDP growth and lowering of interest
rate would benefit the companies in the road sector going forward.
Exhibit 1: 12th Plan likely to see investment of Rs9,145bn (~US$152bn) in road & highways
th
(Rsbn)
Electricity
Total 10
Plan
2,747
Renewable Energy
% of total
spend
30.0
th
Total 11
Plan
7,285
% of total
F12-13 F13-14
spend
29.9
2,284
2,593
th
F14-15
F15-16
F16-17
2,944
3,335
3,862
Total 12
Plan
15,017
% of total
spend
26.9
0.0
892
3.7
312
426
581
791
1,076
3,186
5.7
Roads & Bridges
1,526
16.7
4,531
18.6
1,505
1,645
1,804
1,982
2,210
9,145
16.4
Telecommunications
1,447
15.8
3,850
15.8
1,059
1,361
1,765
2,306
2,948
9,439
16.9
Railways
1,035
11.3
2,012
8.3
647
786
969
1,217
1,574
5,192
9.3
0.0
417
1.7
136
171
223
298
413
1,242
2.2
Irrigation (incl Watershed)
1,215
13.3
2,435
10.0
771
874
992
1,125
1,282
5,044
9.0
Water Supply & Sanitation
606
6.6
1,208
5.0
366
426
497
581
683
2,553
4.6
Ports
224
2.4
445
1.8
187
255
353
491
693
1,978
3.5
MRTS
Airports
Oil & Gas Pipelines
Storage
Grand Total
74
0.8
456
1.9
77
107
152
220
321
877
1.6
234
2.6
625
2.6
122
166
238
364
598
1,489
2.7
56
0.6
179
0.7
45
64
96
147
232
584
1.0
9,162
100
24,335
100
7,510
8,875
10,613
12,856
15,893
55,747
100
Source: Planning Commission, SSLe
The road journey so far

Post the euphoria of robust awarding activity of road projects in F11 and F12, the road
sector has seen significant slowdown in awarding of projects. In F13 & F14e only
~1,933 kms & ~1,600 kms of road projects were awarded mainly due to tepid
response from developers and also due to various issues such as delay in decision
making, land acquisition and environment clearance problems. Moreover, developers
were also bidding very cautiously for road BOT projects and were looking to procure
more EPC/cash contracts during this period. This was mainly on account of (a) high
interest cost and tough business environment, (b) difficulties in achieving financial
closure and (c) banks turning cautious lenders to road projects and demanding higher
equity contribution. Of the total projects awarded, ~8,126 lane kms of projects are
either yet to receive LOA or commence construction work.
July 8, 2014 | 4
Exhibit 2: Phase-wise status of road project till Jan 14

NHDP Phases
Total
Length
(Kms)
Already
2/4/6/8
Laned
(Kms)
Under
Implementation
(Kms)
Contracts Under
Implementation
(No.)
Balance
length for
award
(Kms)
Approved
Cost
(Rsbn)
Cumulative
Expenditure
(Rsbn)
Expected
Completion
Time
Overrun
(days)
GQ
5,846
5,846
303
318
Jun-12
767
NS - EW Ph 1 & 2
7,142
6,226
544
49
372
343
629
Dec-13
219
NHDP Phase III
12,109
5,927
4,497
61
1,685
806
757
Dec-13
219
NHDP Phase IV
14,799
409
4,548
9,842
278
55
Dec-15
(511)
NHDP Phase V
6,500
1,750
2,331
19
2,419
412
261
Dec-12
584
NHDP Phase VI
1,000
1,000
167
Dec-15
(511)
Dec-14
(146)
NHDP Phase VII
700
22
19
659
167
16
48,096
20,180
11,939
139
15,977
2,476
2,035
SARDP
388
75
37
276
Port Connectivity
380
375
Others
1,465
1,280
185
Total by NHAI
50,329
21,910
12,166
147
16,253
NHDP Total
621
0
Included in
GQ Cost
0
104
2,476
2,139
Source: NHAI, SSLe
Exhibit 3: Only ~1200 kms of projects are awarded
1,200
1,133
1,432
1,780
2,247
2,706
3,360
2,693
2,203
643
635
1,234
1,734
1,685
4,740
753
2,351
1,305
1,318
342
391
671
3,476
480
262
809
2,000
895
4,000
959
(Kms)
6,000
5,058
6,551
8,000
Completed Length (Kms)
13-14*
12-13
11-12
10-11
09-10
08-09
07-08
06-07
05-06
04-05
03-04
02-03
01-02
00-01
Before 2000
Awarded Length (Kms)
Source: NHAI, SSLe
Exhibit 4: 14,794 kms projects completed as on Jan14
Exhibit 5: 12,341 kms projects under implementation as on Jan14

EPC, 1,507
Toll , 3,614
Annuity,
1,128
Annuity,
1,213
EPC, 9,967
Toll , 9,706
Source: NHAI, SSLe
July 8, 2014 | 5
Exhibit 6: Phase-wise kms already awarded
Exhibit 7: . kms to be awarded/under implementation
16,000
112
0
Others
5
0
Port Con
37
276
SARDP
19
659
Phase VII
Phase VI
Phase V
Under Implementation (Kms)
Already 2/4/6/8 Laned (Kms)
1,000
2,419
838
496
Phase IV
Phase III
Phase II
GQ
Others
1,969
1,685
544
372
380
375
Port Con
Phase VI
Phase V
Phase IV
Phase III
Phase II
GQ
0
0
388
75
SARDP
NHDP Total (Kms)
6,000
3,000
1,465
1,280
700
22
Phase VII
409
4,000
1,000
1,750
6,500
(Kms)
9,000
12,109
5,927
7,142
6,226
8,000
5,846
5,846
(Kms)
12,000
9,842
14,799
12,000
Balance length for award
Source:NHAI, SSLe
Exhibit 8: No. of projects under implementation in terms of Toll, Annuity & EPC (as on Jan 14)
240
30 30 29 29 29 28 28 27 27 26 25 27 26 27 27 27 27 26 26 26 27
68 68 67 65 65 63 63 61 61 59 56 60 59 59 60 60 61 56 58 57 59
75%
30
30
31
31
31
31
31
31
31
31
31
31
31
30
30
30
30
30
30
30
28
13 13 14 14 14 14 14 14 14 14
50%
60
25%
0%
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Toll
Annuity
14 14 14 14 14 14 13 14 14 14 13
57
57
57
58
58
58
59
59
59
60
60
59
60
60
59
59
59
60
60
60
60
129
129
131
132
132
132
135
133
133
133
133
133
133
132
132
132
132
131
131
132
130
120
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
(No. of Contracts )
180
100%
EPC
Toll
Annuity
EPC
Source: NHAI, SSLe
Exhibit 10: ~1,219 lane kms constructed till Jan 14 for F14
0%
07-08 08-09 09-10 10-11 11-12 12-13 13-14e
Awarded Length (LHS)
3,000
50%
1,219
3,000
2,706
2,500
2,247
2,500
3,165
2,693
75%
1,780
5,000
0
Award Target (LHS)
Achieved (RHS)
1,000
1,200
25%
2,000
3,519
3,000
2,203
75%
100%
2,885
4,000
(Kms)
8,000
7,300
6,491
5,058
100%
50%
1,144
643
1,234
3,000
3,360
7,000
6,000
5,738
(Kms)
9,000
9,000
10,610
12,000
1,685
Exhibit 9: only ~24% target achived in F14
25%
0%
07-08 08-09 09-10 10-11 11-12 12-13 13-14*
Construction Target (LHS)

Achieved (RHS)
Completed Length (LHS)
Source: NHAI, SSLe
July 8, 2014 | 6
slow traffic growth a short term concern.

Over the last couple of years, most of the players in the road BOT space have
witnessed a weakness in traffic growth emanating from a slowdown in the economy.
The decline in GDP growth rate from 8.5-9% few years ago to 4-5% current levels past
few years caused in part by governments policy paralysis and in part by slowdown in
the global economy growth led to the pain. As per our study that involves study of set
of projects (~50 projects across four players); there is a positive correlation between
the traffic growth and economic growth. The study shows that the slowdown in
economy activity has led to traffic growth of 1.3% YoY and 3.7% YoY in F13 and
F14e. Moreover, there was a decline in automobile sales, particularly in the
commercial vehicle segment, that eventually resulted into lower traffic growth on most
stretches of roads across the country. We believe, inspite of a limited history and
paucity of data currently available on traffic in India, its growth is likely to be cyclical in
nature and the lower growth phase is a mere short term blip. In our view, any
improvement in the GDP growth would lead to a proportionate growth in traffic. Going
forward, we expect an average traffic growth to inch up to ~5% plus YoY on a medium
term basis.
Exhibit 11: Like-to-Like avg YoY traffic growth for 50 BOT projects Exhibit 12: Traffic growth positively correlated to Indian GDP
16
16
13.3
13.3
9.5
9.5
9.7
7.9
(%)
(%)
12
10.5
7.9
8
8.6
9.3
3.7
(%)
12
5.0
6.2
4
1.3
1.3
0
0
F10
F11
F12
F13
Traffic growth YoY (LHS)
F14e
F15e
0
F10
F16e
F11
India GDP
Average traffic growth (RHS)
F12
F13
Traffic growth YoY
Source: Planning commission, Company, SSLe
Exhibit 13: % GDP growth in Gujarat & Maharashtra

16
12
14.9
13.3
13.5
11.2
11.0
10.0
11.3
(%)
Exhibit 14: State-wise % CAGR over F08-13 of GDP
6.8
8.4
9.3
10.2
State Name
%CAGR over F08-13
Chhattisgarh
14.8
Gujarat
11.2
Madhya Pradesh
10.2
10.0
8.5
7.1
7.1
Maharashtra
7.2
Odisha
6.8
West Bengal
6.6
India GDP
7.2
4
2.6
0
F06
F07
F08
F09
Gujarat GDP growth
F10
F11
F12
F13
Maharashtra GDP growth
Source: Planning commission, SSLe
July 8, 2014 | 7
Exhibit 16: LCV & MHCV sales decline over past couple of years
50
60,000
600,000
25
400,000
200,000
(25)
40,000
20,000
(50)
M&HCV DOMESTIC (LHS)
M&HCV DOMESTIC
Growth (RHS)
F07
LCV DOMESTIC
(%)
800,000
No. of Vehicles
80,000
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
(No. of Vehicles)
Exhibit 15: LCV & MHCV sales under pressue
F08
F09
F10
F11
F12
F13
F14
LCV DOMESTIC (LHS)
Source: SIAM, SSLe
awarding to pickup.
Currently, the road sector is going through a bumpy ride due to various issues
mentioned above. However, we believe, with a new and decisive government, the
road sector would get a much needed impetus. The new government is expected to
resolve issues related to stalled road projects before resuming meaningful awarding
activity. The near term outlook looks challenging for developers. However, we expect
the scenario to improve over the next 2-3 years aided by (a) pick up in execution, (b)
improvement in cash flows and (c) step up in asset monetisation.
Exhibit 17: Award target set at 6,500 kms for F15e; however we believe ~4,500kms would be awarded
Award (Kms)
F15e
% Change
F14e
% Change
F13
% Change
F12
% Change
F11
NHAI
5,000
316.7
1,200
4.9
1,144
(82.4)
6,491
28.3
5,058
PWD's
1,500
275.0
400
(49.3)
789
(46.2)
1,466
1257
108
Total (Kms)
6,500
306.3
1,600
(17.2)
1,933
(75.7)
7,957
54
5,166
Number of projects
NHAI
11
PWD's
Total projects
11
49
32
13
15
62
47
Source: NHAI, SSLe
Exhibit 18: 8,126 kms are yet to be issued LOA-Jan14
4,599
4,564
4,392
4,239
4,020
7,941
8,040
8,126
7,644
7,706
4,759
4,688
7,643
7,712
4,556
4,713
7,957
7,618
4,690
4,738
7,994
7,893
7,958
5,529
5,203
7,893
5,517
5,519
8,433
8,172
5,131
5,161
8,755
8,599
5,069
5,128
8,987
8,874
5,096
5,184
8,866
8,579
5,236
5,217
9,039
4,779
4,887
8,223
8,080
8,865
4,173
4,735
3,876
8,523
4,010
8,186
3,547
7,283
7,808
3,028
3,470
3,083
7,162
6,908
3,008
7,072
7,358
3,042
3,140
6,882
3,042
7,045
3,041
6,060
6,729
2,559
2,743
6,287
2,726
6,199
6,617
2,905
2,838
5,940
2,741
6,001
5,940
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
4,582
4,000
2,979
2,938
8,000
5,920
(Kms)
12,000
8,904
16,000
Letter of award issued / agreement signed and work to be started
Currently Under Implementation
Source: NHAI SSLe
July 8, 2014 | 8
Exhibit 19: BOT projects to be awarded

Total Prj
Length
cost
km
(Rsmn)
Last Date of
2/4/6 Submission
lane km (e-Tendering
Mode)
Type
Project
Name
Source
Scope of Work
BOT
Toll
SolapurBijapur
NHAI
Four/Six Laning of Solapur- Bijapur Section of NH-13

in the states of Maharashtra and Karnataka to be
executed under NHDP Ph III
14,054
109
2-LANE/
14th July
4-LANE
30-May-14
YamunanagarDBFOTSaha-Barwala- NHAI
Toll
Panckula
Four laning of UP/Haryana borderYamunanagarSaha-Barwala-Panckula Section of NH-73 from km

71.64 to km 179.3 in the State of Haryan.
11,364
105
27th June 2014(

4-LANE On e-Tendering
Mode)
28-May-14
BOT
(Toll)
NHAI
Four Laning of Yadgiri-Warangal section of NH-163

from 54km to 150km in the State of Andhra Pradesh
under NHDP Ph IV
11,232
99
9th July 2014

4-LANE (On e-Tendering
Mode)
23-May-14
NHAI
RFP for development of Delhi-Meerut Expressway and

other connecting roads including 6/8-laning of NH-24
from 0km to 49.9km, 6-laning of NH-58 from 6.8km to
52.6km and NH-235 from km 0.36 to 8.80 in the state
of Delhi & Uttar Pradesh on DBFOT (Toll) basis under
NHDP Phase-VI.
150
6th
June 2014(On e6/8-LANE
Tendering
Mode)
4-May-14
Yadgiri Warangal
DBFOT Delhi-Meerut
(Toll)
Expressway
65,710
Posted
Date
Source: NHAI, SSLe
Exhibit 20: EPC contracts to be awarded

Type
Project
Name
EPC
ChhapraRewaghatMuzaffarpur
EPC
ChasRamgarh
EPC
JodhpurBarmer
EPC
JodhpurBarmer
Source
Scope of Work
NHAI
Improvement/augmentation of chhapra-rewaghatmuzaffarpur section of nh-102 to 2-lane with paved

shoulders from km 1.3 to km 73.080 in the state of
Bihar.
NHAI
Two laning with paved shoulders of Chas-Ramgarh

Section of NH-23 from 0km to 78.2km in the state of
Jharkhand under Ph-IV.
NHAI
Widening and strengthening of Jodhpur-Barmer

Section of NH-112 to 2/4 lane with paved shoulder
from 140km to 225Km under NHDP- IV in the state of
Rajasthan on EPC mode.
NHAI
Widening and Strengthening of Jodhpur-Barmer

Section of NH-112 (Bagundi-Barmer Package-II) to
Two lane with Paved Shoulder from Km 254.800 to
Km 328.900 (Length 74.1 Km.) under NHDP- IV
EPC
Jaisalmer
Barmer
NHAI
Widening and strengthening of Jaisalmer Barmer

section of NH-15 to 2/4 lane with paved shoulder from
0km to 153km under NHDP Ph-IV
EPC
PhalodiJaislmer
NHAI
Widening and strengthening of Phalodi-Jaislmer

section of NH-15 to 2/4 Lane with paved shoulder
under NHDP-IV in the state of Rajasthan
Total Prj
Length
cost
km
(Rsmn)
Last Date of
2/4/6 Submission
lane km (e-Tendering
Mode)
Posted
Date
4th July 2014

Mode)
6-Jun-14
78
04th September
2014(On e2-LANE
Tendering
Mode)
6-Jun-14
86
24th
2-LANE/ June 2014(On e4-LANE Tendering
Mode)
23-May-14
74
24th
June 2014(On e2-LANE
Tendering
Mode)
23-May-14
2987.7
131
3rd
2-LANE/ June 2014(On e4-LANE Tendering
Mode)
1-May-14
5675.1
161
18th June 2014

Mode)
1-May-14
3416
3416.1
2124
1671.7
73.080
Source: NHAI, SSLe
July 8, 2014 | 9
Exhibit 21: Contract to be awarded on OMT/O&M basis

Type
Project
Name
Total Prj
Length
cost
km
(Rsmn)
Last Date of
2/4/6
Submission
lane km
(e-Tendering Mode)
Posted
Date
Source
Scope of Work
O&M
Hinganghat
ROB
NHAI
Short term improvements & routine maintenance O&M

for stretch from Km.36.600 to Km 93.750 of NH-7
(Excluding Package NS-59-A(MH)-Hinganghat ROB
from Km.75.950 to Km.77.100) in the state of
Maharashtra
2,119
56
17th June 2014

(On e-Tendering Mode)
5-Jun-14
O&M
NagpurHyderabad
NHAI
Operation & Maintenance on Nagpur-Hyderabad

section of NH-7 in the state of Maharashtra
1,645
30
17th June 2014

5-Jun-14
O&M
Garamore Gagodhar
NHAI
Remaining work of Garamore - Gagodhar Section of

NH-8A & NH-15 on risk & cost
2,125
90
19th June 2014

5-Jun-14
O&M
Gorhar to
Barwa Adda
NHAI
Short term improvement and routine maintenance of

Gorhar to Barwa Adda section of NH-2 in the state of 11,270
Jharkhand.
79
3rd July 2014(On eTendering Mode)
4-Jun-14
O&M
Kotwa-MehsiNHAI
Muzaffarpur
Short term improvement and routine maintenance of

Kotwa-Mehsi-Muzaffarpur section of NH-28 &
Muzaffarpur to Darbhanga section of NH-57 in the
state of Bihar.
9,353
118
4th July 2014(On eTendering Mode)
4-Jun-14
O&M
SUNAKHALA
TO
NHAI
ICHAPURAM
O&M work of Sunakhala to Ichapuram section of NH16 in the state of odisha for a period of two years
9,921
107
1st July 2014(On eTendering Mode)
4-Jun-14
O&M
BamanboreGaramore
NHAI
Short term improvement and routine maintenance

work of Bamanbore-Garamore section of NH-8A and
Rajkot Bamanbore section of NH-8B in the state
of Gujarat
4,231
102
2nd July 2014(On eTendering Mode)
4-Jun-14
BelgaumKhanapur/Kha
Tollway napurNHAI
Karnataka/Go
a
Short term repair works to the existing carriageway of

proposed 4 laning of Belgaum- Khanapur section and
2-laning with paved shoulders of KhanapurKarnataka/Goa Border Section of NH-4A in the state
of Karnataka at the risk and cost of the concessionaire
M/s. GVRMP Belgaum-Khanapur Tollway Private
Limited.
2,890
84
Short term improvement & routine

Garhmukteshwar section of NH-24
17,215
35
27th June 2014(On eTendering Mode)
30-May-14
Repair and maintenance of NH-95 Ludhiana Talwandi

Section in the state of Punjab.
3,268
78
2nd July 2014(On eTendering Mode)
23-May-14
O&M
O&M
HapurGarhmuktesh NHAI
war
Ludhiana
NHAI
Talwandi
of
Hapur-
2-LANE/ 10th June 2014

4-LANE (On e-Tendering Mode)
2-Jun-14
O&M
NH-4B, NH-4 NHAI
Short term improvements and routine maintenance of

NH-4B and NH-4 in the State of Maharashtra
3,750
30
21-May-14
O&M
USAYANI
MOD
JUNCTION
Remedial works of black spot / improvement of

Usayani mod junction and providing & fixing of MS
railing at different locations in Firozabad city of NH-2
(new NH-19) in the state of U.P.
881
30
21-May-14
O&M
Bakhtiyarpur
NHAI
Khagaria
63
12-May-14
OMT
Chandikhole
Paradip
NHAI
77
1-May-14
OMT
Purnea
Junction Dalkhola Islampur Siliguri
NHAI
RFP for O & M of Purnea Junction - Dalkhola Islampur - Siliguri section of NH-31 in the states of
Bihar and West Bengal on OMT Basis [PACKAGE
NO:OMT/07/2013]
1,361
143
2nd June 2014(On eTendering Mode)
29-Apr-14
OMT
IchchapuramSrikakulamNHAI
Anandpuram
O&M
of
Ichchapuram-Srikakulam-Anandpuram
section of NH-5 in the state of Andhra Pradesh on
OMT Basis. Pkg:OMT-25-(GQ)
1,972
206
21-Apr-14
OMT
AgraMakhanpurEtawah
Replacement of flexible pavement with rigid pavement

at toll plaza locations at 225km & 285km of NH-2
under O&M of Agra-Makhanpur-Etawah section
725
184
21-Apr-14
NHAI
NHAI
Periodical repair work of Bakhtiyarpur Khagaria

14,780
Section of NH-31 for the year 2014-15
RFP for O&M of Chandikhole Paradip section of NH
5A in the state of Odisha on OMT basis (Package No.
793
33/2013)
Source: NHAI, SSLe
July 8, 2014 | 10
.lean period has helped to rethink

In our analysis, the lull period of roughly over two years brought on by elusive project
clearances has given certain companies, like SEL, IRB, ITNL and ASBL, accumulate a
healthy asset portfolio. Executing bagged BOT projects has nursed their balance
sheets such as to make them more robust and impart cash flow visibility. We believe
the above names will benefit the most from the recovery of the investment cycle as
they are strategically positioned in the market.
Exhibit 22: Monthly completed projects till Jan14
Exhibit 23: Monthly awarded projects till Jan14

1,800
660
1,350
(Kms)
220
LeanPeriod
900
Phase III
SARDP
GQ
Phase IV
Port Connectivity
Oct-13
Dec-13
Aug-13
Apr-13
NS-EW Ph1&2
Phase VII
Others
Jun-13
Feb-13
Dec-12
Oct-12
Jun-12
Aug-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
NS-EW Ph1&2
Phase VII
Others
Jun-11
(220)
GQ
Phase IV
Port Connectivity
Feb-12
Dec-11
Oct-11
Aug-11
450
Jun-11
(Kms)
440
Phase III
SARDP
Source: NHAI, SSLe
Exhibit 24: 16,253 km of projects yet to be awarded as on Jan 14

10,000
NHDP SARDP NS - EW
Phase VII
2% Ph 1 & 2
2%
4%
NHDP
Phase VI
6%
(Kms)
7,500
NHDP
Phase III
10%
NHDP
Phase V
15%
5,000
2,500
0
NS - EW NHDP
NHDP NHDP
Ph 1 & 2 Phase Phase IV Phase
III
V
NHDP
Phase
VI
NHDP SARDP
Phase
VII
NHDP
Phase IV
61%
Source: NHAI, SSLe
July 8, 2014 | 11
20
1,350
15
Awarded Length (LHS)
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Jul-13
Aug-13
Jun-13
May-13
Apr-13
Mar-13
Jan-13
Feb-13
Dec-12
Oct-12
Nov-12
Sep-12
Aug-12
Jul-12
Jun-12
Apr-12
May-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Jul-11
Aug-11
450
Jun-11
10
May-11
900
Apr-11
(Kms)
1,800
(Kms/day)
Exhibit 25: Annualized kms/day of road project awarded
Awarded (RHS) Annualised
Source: NHAI, SSLe
Exhibit 26: SEL & IRB has a healthy order backlog led by new order inflow in F14 while ABL has order book-to-sales of 1.7x
SEL
IRB
120
6.0
120
8.0
100
97
101
89
90
4.5
30
0
F12
F13
Order backlog (LHS)
4.0
1.5
30
2.0
0.0
F14
0.0
F11
Order book-to-sales (RHS)
F12
F13
Order backlog (LHS)
ITNL
F14
ABL
152
60
4.5
147
4.0
50
121
47
115
45
114
3.0
3.0
76
(Rs bn)
36
(%)
92
(Rs bn)
64
65
60
35
30
2.0
15
1.0
(%)
F11
6.0
(%)
3.0
(Rs bn)
60
(%)
(Rs bn)
70
90
76
1.5
38
0.0
F11
F12
Order backlog (LHS)
F13
F14
0.0
F11
F12
Order backlog (LHS)
F13
F14
Source: Company, SSLe
July 8, 2014 | 12
Relative valuation
We expect SEL and IRB to report revenue CAGR of ~15% over F14-16e mainly led by
commissioning of new BOT projects and growth in construction income. BOT revenue
of ITNL is expected to grow at CAGR of 10.6% over F14-16e driven by commissioning
of BOT projects. On the other hand, we expect ABL to report revenue of CAGR of
13.4% over F13-16e, mainly led by commissioning of Sambalpur-Baragarh, DhankuniKharagpur, Jaora-Nayagaon and Belgaum-Dharwad BOT projects.
Exhibit 27: SEL & IRB has decent ~15% CAGR over F14-16e while ITNL & ABL has ~13.5% CAGR over F14-16e
80,000
24
21.0
16
15.3
74,905
60,000
15.0
18
15
12
43,737
(%)
13.7
40,000
(%)
(Rs mn)
17.2
13.8
14
13.4
7.3
20,000
28,542
13
12
19,256
0
SEL
IRB
Revenues (LHS)
ITNL
SEL
ABL
IRB
ITNL
ABL
Revenue % CAGR over F14-16e
Growth (RHS)
Despite sluggish order inflows F13 and F14, the order book of the developers has
been decent. Slowdown in execution pace in some cases due to headwinds at
governments end has also kept the company's order book at higher levels. This order
backlog gives comfort for growth over the next couple of years. IRB bagged three new
BOT projects worth Rs70bn during F14 while SEL bagged various project worth
Rs2.3bn during the year.
Exhibit 28: SEL & IRB has bagged healthy order inflows during F14
120,000
100,198
120%
114,970
80,000
73,206
89,407
90%
90,000
60%
60,000
35,460
30%
30,000
(Rs mn)
(Rs mn)
60,000
34,223
40,000
23,170
17,729
20,000
0%
0
SEL
IRB
Road BOT projects
Power
Irrigation
% captive orders
ITNL
ABL
Road EPC projects
Mining
Metro Rail
0
SEL
IRB
ITNL
ABL
Order inflow
July 8, 2014 | 13
Margins improvement driven by change in revenue mix

We expect the share of BOT revenues to increase due to commissioning of BOT
projects thereby improving EBITDA margins for all the four developers in the range of
150-300bps. We expect the road companies to maintain their construction margins.
Exhibit 29: Margins to improve owing to commissioning of BOT projects
60%
24
45%
30%
44%
47.0%
47.5%
18
29%
26%
28%
22%
20%
28.7%
30.4%
25.7%
15%
19%
10.8%
10.8%
F11
F12
8.6%
16.9
17.1
IRB
ITNL
16.2
30%
(%)
(%)
45%
44%
22.7
48%
12
25.7%
22.0%
10.6%
10.8%
10.8%
F14
F15e
F16e
0%
0
Sadbhav
F13
IRB
ITNL
Sadbhav
Ashoka
Ashoka
EBITDA % CAGR over F14-16e
Infrastructure companies have projects with asset profiles spread across roads,
airports, power, real estate etc. Also, most companies have risks that vary
considerably depending on their project portfolio. Thus, the companies are strictly not
comparable. As SEL, IRB, ITNL and ABL cater primarily to the BOT road segment, we
believe some comparisons may be in order though not entirely. SEL & IRB have an
impressive execution track record and amongst their peers they also have a healthy
EPC order book. We initiate/re-initiate coverage on three companies, SEL, IRB and
ITNL with a BUY rating with a TP of Rs251, Rs309 and Rs272 respectively. We initiate
with a HOLD rating on ABL with a TP of Rs155 due to limited upside from current
levels.
Exhibit 30: Valuation Summary
Company
CMP
Sadbhav Eng. (S)
BUY
203
251
7.4
IRB Infra
BUY
257
309
15.3
ITNL
Ashoka Buildcon
TP
EPS (Rs.)
F15e
F16e
Rating
P/E (x)
F15e
F16e
P/B (x)
F15e
F16e
RoE (%)
F15e
F16e
8.3
27.6
24.5
2.9
2.6
11.1
11.3
18.8
16.8
13.7
2.2
1.9
13.6
15.0
BUY
219
272
18.6
22.6
11.8
9.7
0.9
0.9
8.6
9.4
HOLD
144
155
6.3
7.0
22.9
20.5
1.7
1.6
7.6
8.0
Source: SSLe, Company, (S) - Standalone Financials
July 8, 2014 | 14
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Sep-12
Apr-13
Nov-13
Jun-14
20
15
5
4.0
1.0
0.0
SEL
50
40
10
25
40
13
20
30
11
15
9
10
10
7
5
0
5
0
IRB
1.4
IRB
ITNL
12
25
11
20
10
10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Mar-14
Jun-14
(x)
15
ITNL
2.8
ITNL
2.0
2.1
1.5
0.7
0.5
0.0
0.0
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Mar-14
Jun-14
20
Mar-10
Sep-10
Mar-11
Aug-11
Feb-12
Jul-12
Jan-13
Jul-13
Dec-13
Jun-14
50
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Mar-14
Jun-14
0.0
5.0
(x)
SEL
(x)
1.5
IRB
Mar-10
Sep-10
Mar-11
Aug-11
Feb-12
Jul-12
Jan-13
Jul-13
Dec-13
Jun-14
4.5
(x)
SEL
Mar-10
Sep-10
Mar-11
Aug-11
Feb-12
Jul-12
Jan-13
Jul-13
Dec-13
Jun-14
6.0
(x)
10
(x)
(x)
20
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Sep-12
Apr-13
Nov-13
Jun-14
(x)
30
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Sep-12
Apr-13
Nov-13
Jun-14
3.0
(x)
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Sep-12
Apr-13
Nov-13
Jun-14
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Sep-12
Apr-13
Nov-13
Jun-14
(x)
40
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Sep-12
Apr-13
Nov-13
Jun-14
10
(x)
(x)

Exhibit 31: P/E band comaprison

ABL
Source: Bloomberg, SSLe
Exhibit 32: P/BV band comparison
ABL
3.0
2.0
1.0
Exhibit 33: EV/EBITDA band comparison
Ashoka
30
15
20
July 8, 2014 | 15
Key risk
Execution risk: In the road sector, there can be various issue such as - delay in land
acquisition by NHAI thereby delay in providing Right of Way, delay in clearances from
various authorities like environment, forest and railways etc. which could lead to
execution risk. Such delays have a larger impact on BOT project compared to an EPC
project. Thus, any delay in the underdevelopment projects would adversely impact our
NPV valuation.
Sensitivity to traffic growth: The feasibility of any BOT (toll) road projects is highly
dependent on traffic growth and toll rate hike. While, the toll rate hikes are fixed as per
contractual terms, traffic growth is more a function of the overall health of economy. In
our view, if the traffic growth is well below estimate by more than 5-7%, it would have
an adversely impact on profitability. In the present scenario, we have seen a relatively
low traffic growth in most projects which is compensate by high enough toll rate hike
(linked to inflation).
Slowdown in new projects: The order inflows for the road companies would be
affected by any slowdown in new projects being awarded by NHAI or state
governments.
Aggressive bidding: Due to slowdown in order inflows in various other sectors due to
variety of reasons, the competitive intensity in NHAI bids had increased tremendously.
There few road companies who had bid aggressively bid for road projects. However,
the competition has reduced lately with only few serious players biding for the project.
In our view a project based on aggressive assumptions, it would act as a negative
trigger.
Interest rate & liquidity risk: The road BOT projects are high leverage assets since
most of the funding is done in the D/E ratio of 70:30. Thus, any surge in interest rate
can have a negative impact on the profitability of the road asset. Further, financial
closure of road BOT project is dependent on prevailing economic and market
conditions and any delays can negative impact on returns.
July 8, 2014 | 16
Institutional
Equity
Research

SADE IN; SADE.BO
Initiating Coverage
BUY
On an upward journey; Initiate with a BUY
Current price (4 Jul)

Target price
Upside/(downside)
Rs
Rs
%
Market data
Mkt capitalisation
Average daily vol
52-week H/L
Shares O/S
Free float
Promotor holding
Foreign holding
Face value
Sadbhav Engineering Ltd (SEL), a leading EPC and infrastructure development

company, has more than two decades of experience in developing projects in the
road & highway, irrigation and mining sectors. SEL started as an EPC player in
Gujarat and gradually expanded across the country. The company has a portfolio of
13 projects (comprising 2,710 lane kms), of which nine are operational and four are
under various stages of construction. SEL has an order book of Rs89.4bn (3.8x on a
trailing basis) as on 4QF14. Going forward, based on healthy order inflows and
execution pick-up in its under-construction BOT projects, we expect the
company to report EPS of Rs7.4 and Rs8.3 in F15e and F16e respectively. We
initiate with a BUY rating on SEL with a TP of Rs251 valuing the company on
SOTP basis.
203
251
23
Rs bn
'000
Rs
mn
mn
%
%
Rs
30.9
86.8
213 / 51.25
151.8
77.9
48.7
16.0
1.0
Management strategy for cautious bidding played a key role: SEL has been a
disciplined player as far as the bidding profile or execution of projects is concerned,
especially in the road BOT space. As a part of its strategy, the company has not bid
aggressively for road projects in F11 and large part of F12, when most of the industry
players were bidding very aggressively. Going forward, we expect the company to
continue to bid strategically for BOT projects aided by (a) relatively low competitive
intensity at the biding stage, and (b) expectation of awarding activity to pick-up in
2HF15e.
Price performance (%)

Nifty (abs)
Stock (abs)
Relative to Index
1m
4.7
2.2
(2.5)
3m
15.8
105.5
89.7
Performance
250
(Rs)
6m
24.8
122.5
97.7
1yr
32.8
122.6
89.8
(%)
200
150
100
150
50
100
0
Jul-13
Oct-13
Dec-13 Mar-14
Sadbhav (LHS)
Robust order inflows over past few quarters: Despite weak macroeconomic
environment and investment sentiment, SEL has won new orders across various
sectors worth Rs76.5bn during the last two years (F12 and F13). Continuing with the
trend, SEL has already won ~Rs23.1bn of orders in F14, primarily in the mining
sector. As on 4QF14, SELs order book stood at Rs89.4bn, thereby converting into an
order book-to-sales ratio of 3.8x on a trailing basis. With the new and decisive
government in place we expect the ordering activity to pick up in 2HF14 and expect
order inflows of Rs29.9bn in F15e & Rs35.4bn in F16e, respectively.
Equity requirement completely funded: The Company has already invested
~Rs2.4bn till F14 in under-development BOT portfolio of ~US$384mn and would
require an incremental equity investment of ~Rs3.5bn over the next two years. We
believe that the company is well-positioned to meet of its medium-term equity
requirement based on: (a) recently raised Rs1.3bn through non convertible debenture
issue and (b) securitization amount from Ahmedabad project.
50
July 8, 2014
(50)
Jun-14
Rel. to Nifty (RHS)
Initiate with a BUY: Given, the healthy order book (3.8x trailing revenue) and strong
execution capabilities, we expect the company to report revenues of Rs28.5bn and
Rs31.2bn for F15e and F16e, respectively. We have used sum-of-the-parts (SOTP)
valuation method for SEL, valuing the construction business at an EV of 7x on F16e
EBITDA which is lower than its 3-year average and the BOT projects on a NPV basis
at a CoE of 14%. We initiate coverage on the stock with a BUY rating and a target
price of Rs251.
Key risk to our call would be lower than expected traffic growth, slower execution,
lesser expected project wins, and greater competitive intensity in the roads sector.
Financial Summary
Y/E Mar (Rsmn)
Net sales
F12
26,755
F13
18,110
F14e
23,581
F15e
28,542
F16e
31,171
growth (%)
21.1
(32.3)
30.2
21.0
9.2
EBITDA margin (%)
10.8
8.6
10.6
10.8
10.8
1,404
214
1,445
1,119
1,261
9.3
17.2
0.9
(90.7)
9.5
995.1
7.4
(22.6)
8.3
12.7
Adjusted net profit

EPS (Rs)
growth (%)
Viral Shah
+91 22 4227 3388
P/E (x)
21.8
233.8
21.4
27.6
24.5
EV/EBITDA (x)
11.9
24.5
15.5
12.7
11.7
Dividend yield (%)
Pranjal Sanghvi
+91 22 4227 3428
RoE (%)
RoCE (%)
0.3
0.3
0.3
0.3
0.3
18.4
2.7
16.1
11.1
11.3
8.6
3.6
9.6
5.7
5.8
SBICAP
Investment rationale
Dominant BOT player in the road BOT space
SEL has one of the largest portfolios of BOT road projects with the portfolio
aggregating to ~US$2bn spread across most parts of the country (~85% portfolio
skewed towards west and north). The portfolio includes 13 projects (comprising 2,710
lane kms), of which nine are operational and four are under various stages of
construction. Of the four projects under development, the work on three (Shreenathji
Udaipur, RajsamandBhilwara and RohtakHissar) has already commenced, while the
construction of the fourth project (Karnataka state highway project) is expected to
begin by 1QF15e.
Exhibit 34: BOT portfolio increase to ~US$2bn
Name of the Project
Total Cost Length

(Rsmn)
(km)
Length Concession
(Lane km) period
Toll
revision
dates
Client
COD/
Expected
COD
Debt
(Rsmn)
AUDA
30-Jun-08
4,050
740
360
MSRDC
28-Jul-09
1,940
830
100
Every
3 year
NHAI
1-Dec-12
6,500
520
510
20
July
Equity Grant
(Rsmn) (Rsmn)
Sadbhav 's
share (%)
Operational projects
Ahmedabad Ring Road
5,150
Aurangabad- Jalna
2,770
Mumbai-Nashik
7,530
Nagpur-Seoni
Dhule-Palasner
76
304
20 years
66
263
23 years &
6 months
30
20 years
2,780
28
56
20 years
NHAI
1-May-10
1,711
1,068
51
14,200
97
194
18 years
NHAI
1-Jun-12
10,650
3,550
27
April
12
24 years &
6 months
100
Every
3 year
Mah. State
Govt
Maharashtra Border
14,264
Rohtak Panipat
12,136
66
132
25 years
NHAI
Bijapur- Hungund
12,571
100
200
20 years
NHAI
1-Mar-13
Hyderabad-Yadgiri
4,802
35
71
23 years
NHAI
1-Jun-12
76,203
482
1,262
Total (a)
80 September
1-Apr-12
9,985
4,279
9,708
2,428
100
April
8,465
1,370
2,736
77
April
3,802
1,000
60
April
56,811
15,785
3,606
Project under construction / LOA

Shreenathji-Udaipur
11,515
79
317
27 years
NHAI
1-Apr-16
8,400
3,115
100
April
Rajsamand-Bhilwara
6,761
87
349
30 years
NHAI
1-Apr-16
2,764
1,333
2,664
100
April
387
10 years
Karantaka
State Govt
3,486
1,494
2,392
50
22 years
NHAI
9,524
1,077
2,115
100
24,174
7,018
7,171
22,804
10,777
Mysore Bellary Highway

Private Limited
7,372
193
Rohtak- Hissar
12,716
99
395
Total (b)
38,363
459
1,448
Total (a+b)
114,566
940
2,710
1-Apr-16
80,985
April
Source:NHAI, Company, SSLe
Disciplined player as far as the bidding

process followed or execution of projects is
concerned, especially in the road BOT space.
Management strategy for cautious bidding played a key role

SEL has been a disciplined player as far as the bidding process followed or execution
of projects is concerned, especially in the road BOT space. As a part of its strategy,
the company has not bid aggressively for road projects in F11 and large part of F12,
when most of the industry players were bidding very aggressively. This was evident as
the company did not bag new projects during that period. Only towards the end of F12,
the company bagged two road BOT projects (ShreenathjiUdaipur and Solapur
Bijapur) with both the projects strategically fitting its existing portfolio. However, as
NHAI was not able to get environment clearance for more than one year, the company
terminated the contract for SolpaurBijapur BOT project. Going forward, we expect the
company to continue to bid strategically for the BOT projects aided by (a) relatively low
competitive intensity at the biding stage, and (b) expectation of awarding activity to
pick-up in 2HF15e.
July 8, 2014 | 18
Exhibit 35: NO project wins during aggressive bidding
Excellent execution helps company

receive performance bonus in couple of
projects
Strong execution track record

The company has a strong execution track record. Most of its projects are completed
in time or well ahead of the schedule. This timely/earlier completion of projects has
helped the company (a) improve toll collection, (b) avoid project cost overruns, and (c)
enhance the IRR of the project. At a time when some of its peers were experiencing
significant project delays and looking for equity, the companys performance on
execution has been very impressive. SEL has completed projects, Dhule-Palesnar and
Bijapur-Hungud, well ahead of schedule for which it received a performance bonus of
Rs609mn in F13.
Exhibit 36: Project-wise bonus received
BOT project
Bonus Received
(Rsmn)
Dhule-Palasner
182
B ijapur Hungud
427
Total Amount (Rs)
609
S ource: Company,SSLe
BOT to increase 54% CAGR over F13-16e

led by commissioning of BOT projects
BOT revenues to increase 54% CAGR over F1316e

SEL has nine projects that are currently operational and generate revenues, while the
remaining four projects are under various stages of construction. Currently, the
operational BOT projects generate toll revenues of Rs3.2mn per day, up from
Rs2.4mn in F10. The commissioning of the road BOT projects such as Rohtak
Panipat, BijapurHungund, HyderabadYadgiri and Maharashtra Border has led to
substantial growth in toll revenues. During F14, based on WPI, the company had toll
rate hike of 5-6% in projects such as BijapurHungund and HyderabadYadgiri while
18% toll hike was witnessed in Aurangabad BOT project. Meanwhile, the company
witnessed an average traffic growth of 12% on most of its operational projects.
We estimate SELs toll revenues to increase from Rs1.9bn to Rs7.1bn in F16e, a 54%
CAGR over F13-16e, mainly on account of (a) 45% medium-term traffic growth, (b)
56% of growth in toll rates, and (c) CAGR of 33.8% over F13-16e in lane kms.
July 8, 2014 | 19
Exhibit 37: BOT revenues to increase 54% CAGR over F1316e

8,000
Exhibit 38: Portfolio to increase 2.4x by F16e

3,000
7,157
387
6,338
2,500
263
2,710
1,061
(Lane kms)
(Rs mn)
6,000
4,435
4,000
1,976
2,000
1,500
313
1,000
2,000
253
359
F08
F09
643
871 1,008
F10
F11
500
0
F12
F10
F11
56
304
F13 F14e F15e F16e
BOT revenues
457
132
F09
F12
F13 F14e F15e F16e F17e F17e

(Total)
Source: Company, SSle
Robust order inflows over past few quarters

Despite weak macroeconomic environment and investment sentiment, SEL has won
new orders across various sectors worth Rs76.5bn during the last two years (F12 and
F13), translating into a healthy order inflow-to-sales ratio of 3.0x. Continuing with the
trend, SEL has already won ~Rs23.1bn of orders in F14, primarily in the mining and
irrigation segment. As on 4QF14, SELs order book stood at Rs89.4bn, thereby
converting into an order book-to-sales ratio of 3.8x on a trailing basis. With a new and
decisive government in place we expect the ordering activity to gather pace in 2HF15e
and expect order inflows of Rs29.9bn in F15e & Rs35.4bn in F16e, respectively.
Exhibit 39: Healthy order inflows over past few quarters
Exhibit 40: Segment-wise breakup as on F14

6.0
108
15
9
54
8
6
10
46
51
F10
F11
10
12
6
7
27
54
20
19
22
24
26
28
42
42
66
46
30
Iriigation
22%
4.5
3.0
Captive
Road BOT
34%
(%)
(Rs bn)
81
25
1.5
Transportation
51%
0.0
0
F09
F12
F13
Mining
27%
F14e F15e F16e
Road (LHS)
Irrigation (LHS)
Mining (LHS)
OB-to-sales (x) (RHS)
Road EPC
contracts
17%
Construction revenues to increase 19.8% CAGR over F1316e

The construction segment revenue had declined significantly (32.3% YoY) in F13 on
the back of early completion of projects and delay in securing clearances for newly
awarded BOT projects in F12. In our view, robust order inflows, start of construction
activity in its under-construction BOT projects and strong order book-to-sales of 3.8x
on trailing revenues provide a comfortable revenue visibility over the next 34 years.
Going forward, as execution of its four under-construction projects ramps up, and as
construction activity picks up in mining and irrigation segments, we estimate the
company would report construction revenues of Rs28,5bn and Rs31.2bn in F15e and
F16e, respectively.
July 8, 2014 | 20

Exhibit 41: Strong execution to boosts construction revenue growth
32,000
2,194
2,146
24,000
5,600
3,084
(Rs mn)
2,777
2,205
2,856
16,000
3,399
6,545
7,501
2,462
9,788
17,112
22,415
12,792
17,099
16,397
16,978
2,023
754
7,670
8,000
1,464
1,475
6,691
F09
F10
F11
F12
F13
F14e
F15e
F16e
0
Road
Irrigation
Mining
Equity requirement completely funded

The company has a portfolio of four projects of ~US$2bn at various stages of
construction. It has already invested ~Rs2.4bn in under-development BOT portfolio till
F14 and would require an incremental equity investment of ~Rs3,472mn over the next
two years. The company has already securitised its Ahmedabad Ring Road project for
Rs2,520mn in F14, and is in process to securitising Nagpur Seoni project (raising
~Rs175200mn). We believe that the company is well positioned to meet of its
medium-term equity requirement based on (a) recently raised Rs1.3bn through non
convertible debenture issue and (b) securitization amount from Ahmedabad project.
Exhibit 42: Equity requirement in under construction projects
BOT project details (Rsm n)
Equity
requirement
Equity E quity to be invested in

projects
inve sted
till F14
F15e
F16e
S hreenathji-Udaipur
3,115
1,037
1,020
Rajsamand-Bhi lwara
1,332
867
465
395
200
195
Rohtak- Hissa r
1,077
543
534
Total
5,919
2,447
2,219
1,253
Application of Funds
(Rsmn)
3,472
K arantaka state highway improvement

proje ct
1,058
S ource: Compnay, SSLe
Equity requirement of Rs3.5bn well

taken care of
Exhibit 43: Under-constrcution project funded completely

Source of funds
(Rsmn)
Non covertible debenture issued
1,300
Equity in BOT projects
Securitisation amount from Ahmedabad prj.
2,520
Repayment to SEL
Total
3,820
Total
348
3,820
July 8, 2014 | 21
Financial Analysis
EBIDTA margin to stabilise in the range of 1011% on standalone basis
SELs margins had declined to 8.6% in F13, mainly due to (a) poor execution, which
led to lower fixed-cost absorption and (b) rising raw material prices. For F14, with
execution picking up, the company has reported an EBIDTA margin of 10.6%. On the
back of healthy execution and change in project mix, we expect margins to remain
stable in the range of 1011% for F15e and F16e, respectively.
Margins to remain stable in the range of 1011% on the back of strong execution
Exhibit 44: EBITDA margins to remain stable

3,500
12
10.9
2,625
10.8
10.8
10.8
10.8
11
10.2
10
1,750
(%)
(Rs mn)
10.6
8.6
F12
3,366
F11
3,083
2,903
F10
2,494
2,377
F09
F14e
F15e
F16e
1,557
1,367
1,079
875
0
F13
EBIDTA (LHS)
EBIDTA (RHS)
Release of receivable from Dhule projects

to improve working capital
Working capital cycle poised to improve

SEL witnessed significant increase in working capital requirement in F13 as its
receivables were stuck with Dhule project for over 2 years. In May 2013, the NHAI
provided approval to start toll on the developed section and the balance section along
the Tapi River of the Dhule project. As on 4QF14, the company has Rs720mn of
receivable pending which is expected to be release by 2QF15e. It would significantly
improve SELs working capital position. We believe the working capital requirement
would remain stable for the next 12 years as the company is expected to focus on
the execution of BOT road projects (does not have negative impact on working capital)
and mining projects.
Strong balance sheet and leverage
Despite the increasing working capital requirement, SEL ended F13 with 0.9x debt-toequity ratio (standalone) which demonstrates the strength of the balance sheet of the
company. We expect the leverage to improve going forward as execution picks up and
would subsequently lower the working capital requirement.
9,000
0.9
9,133
8,633
7,630
3,915
4,242
6,257
4,004
7,623
4,488
8,325
9,572
10,586
11,741
0.6
3,435
2,111
6,000
9,633
1.2
(Rs mn)
12,000
F09
F10
F11
F12
F13
F14e
F15e
F16e
3,000
(x)
Exhibit 45 : Comfortable D/E of 0.9x
0.3
0.0
Net worth (LHS)

Total Debt (LHS)
Debt to equity (RHS)
July 8, 2014 | 22
Valuation
Given, the healthy order book (3.8x trailing revenue) and strong execution capabilities,
we expect the company to report revenues of Rs28.5bn and Rs31.2bn for F15e and
F16e, respectively. We have used sum-of-the-parts (SOTP) valuation method for SEL,
valuing the construction business at an EV of 7x on F16e EBITDA estimate which is
lower than its 3-year average and the BOT projects on a NPV basis at a CoE of 14%.
We initiate coverage on the stock with a BUY rating and a target price of Rs251,
indicating an upside of 23%.
Exhibit 46: SOTP Valuation

Particulars
Segment
Engineering & Construction business
Construction
Driver Multiple
3,366
Value Value per Proportionate

Basis
(Rsmn) share (Rs)
stake (%)
23,565
155
61.8
EV/EBIDTA of 7x one year rolling

forward earnings
Standalone net debt as on Mar '14
Net debt
(7,871)
(52)
(20.6)
Total
15,694
103
41.2
Road BOT projects

Ahmedabad Ring Road
Toll
3,699
24
9.7
NPV at CoE of 14%
Aurangabad- Jalna
Toll
2,329
15
6.1
NPV at CoE of 14%
Toll
1,230
3.2
NPV at CoE of 14%
240
0.6
P/BV of 1x
Mumbai-Nashik
Nagpur-Seoni
Annuity
Dhule-Palasner
Toll
822
2.2
NPV at CoE of 14%
Maharashtra Border
Toll
3,329
22
8.7
NPV at CoE of 14%
Rohtak Panipat
Toll
5,046
33
13.2
NPV at CoE of 14%
Bijapur- Hungund
Toll
1,893
12
5.0
NPV at CoE of 14%
Hyderabad-Yadgiri
Toll
1,115
2.9
NPV at CoE of 14%
Shreenathji-Udaipur
Toll
2,348
15
6.2
NPV at CoE of 14%
Rajsamand-Bhilwara
Toll
3,321
22
8.7
NPV at CoE of 14%
Rohtak-Hissar
Toll
2,382
16
6.2
NPV at CoE of 14%

NPV at CoE of 14%
Mysore-Bellary Highway
Annuity
297
Total SIPL value
27,754
SEL's stake in SIPL @ 80%

Grand Total
43,448
0.8
185
73.6
148
58.8
251
100.0
Source: SSLe
50,000
180
37,500
120
25,000
Share price
2.0x
3x
Feb-14
Jun-14
1.5x
Jan-13
May-13
Oct-13
0.8x
Dec-11
May-12
Sep-12
Dec-10
Apr-11
Aug-11
Nov-09
Mar-10
Aug-10
12,500
Nov-08
Mar-09
Jul-09
60
3.0x
Feb-08
Jun-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
May-12
Sep-12
Jan-13
May-13
Oct-13
Feb-14
Jun-14
(x)
240
Feb-08
Jun-08
(x)
Exhibit 47: P/BV and EV/EBIDTA graphs
EV
5.0x
7.5x
10.0x
12.5x
15.0x
July 8, 2014 | 23
Exhibit 48: BOT assumption sheet

(Rsmn)
Project
Client
Lane
Kms
SEL's
Stake (%)
TPC
SPV
Equity
Debt
Grant/
(Prem.)
Toll revision
month
Int.
Rate (%)
Toll
Inc (%)
Traffic
Inc (%)
Operational Projects
Ahmedabad RAUDA
304
80
5,150
740
4,050
360
September
11
Aurangabad- MSRDC
263
100
2,770
830
1,940
Every 3 year
11
18
Mumbai-NashNHAI
30
20
7,530
520
6,500
510
July
12
Nagpur-Seoni NHAI
56
51
2,780
1,068
1,711
Dhule-Palasn NHAI
194
27
14,200
3,550
10,650
April
12
18
Maharashtra BMah. State Govt
12
100
14,264
4,279
9,985
Every 3 year
11
Rohtak Panip NHAI
132
100
12,136
2,428
9,708
April
12
Bijapur- Hung NHAI
200
77
12,571
1,370
8,465
2,736
April
12
Hyderabad-YaNHAI
71
60
4,802
1,000
3,802
April
12
Shreenathji-U NHAI
317
100
11,515
3,115
8,400
April
11
Rajsamand-B NHAI
349
100
6,757
1,329
2,764
2,664
April
12
Mysore Bellar NHAI
387
50
7,893
1,650
3,850
2,392
Rohtak- HissaNHAI
395
100
12,716
1,077
9,524
2,115
April
12
Under cons./develop.
Source:Company, SSLe
Exhibit 49: Order book assumption

F12
F13
F14e
F15e
F16e
29,113 31,803 32,651
F10
43,999
11,558
29,877
35,385
(Rsmn)
Order inflow
F11
Revenue
12,565 22,094 26,755
18,110
23,581
28,542
31,171
Order backlog (Y/E)
59,936 69,645 75,541
101,430
89,407
90,743
94,957
5.6
3.8
3.2
3.0
Order bookto-sales ratio (x)
4.8
3.2
2.8
Exhibit 50: Operating expense assumption

As % of sales
F12
F13
F14e
F15e
F16e
Material Consumed
12.3
14.8
12.5
12.5
12.5
Construction Expenses
6.5
9.1
6.5
6.5
6.5
(Increase)/Decrease in stocks
0.0
0.0
0.0
0.0
0.0
65.2
60.0
63.5
63.9
63.9
2.5
Labour expense
Employee Costs
1.5
2.4
2.6
2.5
Administrative and Other Expenses
3.7
5.1
4.4
3.8
3.8
89.2
91.4
89.4
89.2
89.2
Total cost
July 8, 2014 | 24
Key risk
NPV valuation.
Slowdown in new projects: The order inflows for the road companies would be
affected by any slowdown in new projects being awarded by NHAI or state
governments.
July 8, 2014 | 25
Company Profile
Incorporated in 1988, Sadbhav Engineering Ltd (SEL) is an Ahmedabad based
leading infrastructure development and construction company. On the infrastructure
side, SEL through Sadbhav Infrastructure Project Ltd holds 80% stake, post dilution).
It holds a stake in various SPVs, which develop, operate and maintain road
infrastructure assets. Currently, it has a BOT project portfolio of 13 projects,
aggregating Rs114bn. On the construction side, the company undertakes EPC work in
roads, irrigation and mining operations. With a presence of over more than two
decades in the industry, the company has a reputation for completing projects ahead
of schedule along with quality work. SEL has executed projects for clients such as
Sardar Sarovar Narmada Nigam, NHAI, Coal India, GIPCL and GHCL and worked
with industry majors like L&T, HCC, Punj Lloyd and Gammon.
Exhibit 51: SEL company structure
July 8, 2014 | 26
Key management
Mr. Vishnubhai M Patel, promoter
Mr. Patel is the promoter of Sadbhav Engineering Limited (SEL). He has 40 years of
experience in the construction business. Since 1968, he has been actively involved in
the family construction business as partner of M/s Bhavna Construction Co. where he
was in-charge of canal and road projects. In the year 1988, SEL was incorporated and
took over the business of M/s. Bhavna Construction Co. SEL has successfully
completed various canal works for one of the largest irrigation projects in the world viz.
Sardar Sarovar Narmada Project under his leadership. Mr. Vishnubhai has been
conferred the UdyogRatna Award by the Institute of Economic Studies of New Delhi
for outstanding performance in the field of Industrial Development of our country.
Under his guidance the company has successfully completed various projects
displaying high quality standards and has also been awarded the Excellence Award
for excellence in Quality, Innovation and Management. He has also been awarded the
Paridar Ratna
Nitin R Patel, Executive Director
Nitin R Patel is a Chartered Accountant and full time director of the company. His
areas of responsibility include execution of projects and overall functioning of the
entire corporate affairs of the company. He plays an important role in policy
implementation and liaisoning with banks and financial institutions.
July 8, 2014 | 27
Financials (Standalone)
Income Statement
Y/E Mar (Rsmn)
Net sales
growth (%)
Operating expenses
EBITDA
growth (%)
Depreciation &amortisation
EBIT
Other income
F12
F13
F14e
F15e
26,755
18,110
23,581
28,542
21.1
(32.3)
30.2
21.0
9.2
23,853
16,553
21,087
25,459
27,804
2,903
1,557
2,494
3,083
3,366
22.1
(46.3)
60.1
23.6
274
318
474
529
2,628
1,239
2,020
2,554
108
103
114
138
931
1,022
Interest paid
651
Extraordinary/Exceptional items
PBT
Tax
Effective tax rate (%)
Net profit
Minority interest
Reported Net profit
Non-recurring items
Adjusted Net profit
growth (%)
844
609
(383)
Current liabilities
1,883 Borrowings
621 Other non-current liabilities
820
1,670
681
285
(242)
551
32.7
25.7
(29.5)
33.0
33.0
823
1,062
1,119
1,261
1,404
-
823
(609)
1,062
383
1,119
-
1,404
214
1,445
1,119
17.4
(84.8)
576.1
(22.6)
F12
F13
F14e
F15e
EBITM
1,261 Minority interest

12.7 Total equity & liabilities
Cash Flow Statement
F16e Y/E Mar (Rsmn)
Pre-tax profit
10.8
8.6
10.6
10.8
9.8
6.8
8.6
8.9
NPM
5.2
1.2
6.1
3.9
RoE
18.4
2.7
16.1
11.1
RoCE
8.6
3.6
9.6
5.7
RoIC
7.6
0.7
5.9
4.0
10.8 Depreciation
9.0 Chg in working capital
4.0 Total tax paid
11.3 Other operating activities
5.8 Operating CF
150.4
150.9
151.7
151.7
EPS
9.3
0.9
9.5
7.4
FDEPS
9.3
0.9
9.5
7.4
CEPS
11.2
3.0
12.7
10.9
BV
50.7
55.2
63.1
69.8
0.7
0.7
0.7
0.7
DPS
P/BV
EV/EBITDA
EV/Sales
21.4
27.6
4.0
3.7
3.2
2.9
11.9
24.5
15.5
12.7
1.3
2.1
1.6
1.4
F15e
F16e
762
951
1,184
14,627
16,004
19,326
21,703
23,817
3,323
5,385
5,210
5,360
5,510
2,881
3,303
4,982
4,953
4,898
21,394
24,908
30,279
32,966
35,409
9,048
8,636
11,717
12,891
13,678
4,488
7,630
8,633
9,133
9,633
235
317
357
357
357
13,771
16,583
20,707
22,381
23,668
150
151
152
152
152
7,473
8,174
9,421
10,434
11,590
7,623
8,325
9,572
10,586
11,741
21,394
24,908
30,279
32,966
35,409
F13
F14e
F12
2,086
274
1,108
318
820
474
(241)
F15e
1,670
529
F16e
1,883
556
(1,572)
(1,788)
(1,203)
(1,327)
(680)
(368)
242
74
(527)
423
(551)
0
(621)
0
182
(1,256)
1,718
445
490
(858)
(740)
(51)
(2,062)
(909)
(2,802)
(1,979)
(650)
(650)
(727)
(4,058)
(261)
(205)
(160)
8.3 FCF
12.0
77.4 Equity raised/(repaid)
0.7 Debt raised/(repaid)
Other financing activities
233.8
F14e
218
Chg in investments
Dividend (incl. tax)

21.8
F13
563
Capital expenditure
151.7 Other investing activities
8.3 Investing CF
Valuation ratios (x)

PE
F12
4.2
Per share data (Rs)

O/s shares (mn)
Total liabilities
Share capital
1,261 Reserves & surplus
Shareholders' funds
Profitability and return ratios (%)

EBITDAM
Investments
151 Total assets

1,079
1,108
1,404
Other Current assets
9.2 Net fixed assets

556 Goodwill & intangible assets
2,811 Other non-current assets
2,086
Key Financials ratios

Y/E Mar
Balance Sheet
F16e Y/E Mar (Rsmn)
31,171 Cash & Bank balances
24.5 Financing CF
2.6
11.7 Net chg in cash & bank bal.
1.3 Closing cash & bank bal
(2,153)
174
(500)
(500)
(150)
(150)
232
484
3,142
1,003
500
500
(106)
(105)
(105)
(106)
(106)
64
675
(325)
(0)
444
3,713
805
394
(0)
394
(282)
(346)
544
189
234
563
218
762
951
1,184
Other key ratios

D/E (x)
0.6
0.9
0.9
0.9
0.8
DSO (days)
101
158
118
106
111
NPM (%)
5.2
1.2
6.1
3.9
4.0
Asset turnover (x)
1.3
0.8
0.9
0.9
0.9
Equity multiplier (x)
2.8
2.9
3.1
3.1
3.1
18.4
2.7
16.1
11.1
11.3
Du Pont Analysis - RoE
RoE (%)
July 8, 2014 | 28
Institutional
Equity
Research
IRB Infrastructure Ltd

IRB IN; IRBI.BO
Re-initiating Coverage
BUY
Steadfastly growing; Re-initiate with a BUY

Target price
Upside/(downside)
Rs
Rs
%
Market data
Mkt capitalisation
Average daily vol
52-week H/L
Shares O/S
Free float
Promotor holding
Foreign holding
Face value
IRB Infrastructure ltd (IRB) is a fully integrated road developer with a portfolio
of 21 projects worth US$4bn under its belt. It has a healthy order book of
~Rs100bn (3.8x trailing construction revenues) as on 4QF14, indicating a
growth of 56% YoY, mainly led by new BOT project wins during the year. On
consolidated basis we expect the company to report revenue and PAT CAGR of
15.4% and 16.6% during F14-16e respectively. We re-initiate our coverage with
a BUY rating on the stock with a target price of Rs309 based on SOTP basis.
The construction business contributing Rs179 and Mumbai-Pune expressway
contributing Rs48 are two major driving SOTP.
257
309
20
Rs bn
'000
Rs
mn
mn
%
%
Rs
85.4
7508.5
260 / 51.9
332.4
127.3
61.7
25.7
10.0
Excellent portfolio of BOT toll road projects: IRB has a strong BOT portfolio of 21
projects worth ~US$4bn, of which 16 projects have already commenced operation.
The company has a healthy market share of 11.07% in the total Golden Quadrilateral
stretch. With the commissioning of 4 projects during F14 the companys operational
portfolio has increased to 4,646 lane kms. We expect BOT revenue to clock 23%
CAGR over F13-16e led by commencement of under-construction BOT projects,
growth in traffic and rise in toll rates.

Nifty (abs)
Stock (abs)
Relative to Index
1m
4.7
23.5
18.8
3m
15.8
128.4
112.6
6m
24.8
169.4
144.6
1yr
32.8
169.7
136.9
Performance
320
(%)
(Rs)
150
240
100
160
50
80
0
Jul-13
Oct-13
Dec-13 Mar-14
IRB (LHS)
New project wins to boost construction revenue: IRB has recently won two new
projects YedeshiAurangabad and KaithalRajasthan taking its order book to
~Rs100bn (excluding O&M contracts) as on 4QF14. This translates into order bookto-sales ratio of 3.8x trailing construction revenues that provides comfortable revenue
visibility over next 2-3 years. Going forward, we estimate construction revenues to
register 4.7% CAGR over F13-16e mainly led by pickup in execution in its under
construction portfolio.
Equity investment of Rs28.5bn over next 2-3 years: Over the past few years, the
company has been generating healthy available cash flows from operation of
Rs10.2bn and Rs7.5bn in F13 and F14 respectively. Going forward, we expect IRB to
generate cash flows from operation of US$390mn (Rs23.4bn) till F16e which would
be sufficient to fund equity requirement for its under-development projects.
(50)
Jun-14
Rel. to Nifty (RHS)
July 8, 2014
Re-initiate with a BUY: We re-initiate coverage on the stock with a BUY rating with a
target price of Rs309. We have used Sum-Of-The-Parts (SOTP) method to value the
stock. We value the construction business at a EV/EBITDA of 7.5x F16e EBITDA
estimate, which in line with its 3-year average of 7.5x, and IRBs BOT projects on a
NPV basis at a CoE of 14%. We have not included the Sindhudurg airport project, the
4-star hotel in Kolhapur and Real Estate business in our SOTP valuation. At the CMP,
the stock trades at a P/BV of 2.2x F15e and 1.9x F16e earnings and trades at
EV/EBITDA of 9.8x F15e and 8.7x F16e EBITDA.
Key risk to our call would be lower than expected traffic growth, slower execution, and
lesser expected project wins.
Financial Summary
Y/E Mar (Rsmn)
Net sales
F12
F13
31,330
36,872
growth (%)
28.5
EBITDA margin (%)
43.7
4,960
Adjusted net profit

EPS (Rs)
growth (%)
F14e
F15e
F16e
37,319
43,757
49,684
17.7
1.2
17.3
13.5
44.3
47.0
47.5
48.3
5,567
4,591
5,096
6,240
14.9
16.7
13.8
15.3
18.8
9.6
12.2
(17.5)
11.0
22.5
13.7
Viral Shah
+91 22 4227 3388
P/E (x)
17.2
15.3
18.6
16.8
EV/EBITDA (x)
10.1
9.7
10.5
9.8
8.7
Dividend yield (%)
0.8
1.8
1.8
1.8
1.8
Pranjal Sanghvi
+91 22 4227 3428
RoE (%)
17.4
18.2
13.5
13.6
15.0
8.4
8.6
6.9
6.4
6.7
RoCE (%)
SBICAP
Excellent BOT toll road portfolio of 21

projects worth US$4bn
Excellent portfolio of BOT toll road projects

IRB is one of the largest BOT toll operators in the country having market share of
11.07% in the total Golden Quadrilateral projects. The company has a total portfolio of
21 BOT projects out of which 16 projects, aggregating ~Rs107bn (US$1.8bn), have
already commenced operation. Of the five projects under construction, aggregating to
~Rs132bn, the company has already commenced work on Ahmedabad-Vadodara
project and Goa-Karnataka Border to Kundapur while remaining three projects
(Solapur-Yedeshi, Yedeshi-Aurangabad and KaithalRajasthan BOT project) are set
to see construction activity by 4QF15e.
Exhibit 52: Excellent BOT portfolio of ~Rs239bn (~US$4bn)

Name of the Project
Total Cost Length Concession

(Rsmn) (km) period
Grant
(Rsmn)
IRB"s
share
(%)
Client
Debt
(Rsmn)
Equity
(Rsmn)
Revenue
Sharing
PWD
728
312
100
MOSRT&H
224
96
100
Operational
Thane Bhiwandi Bypass 4
Lane BOT
18 years
& 6months
17 years
& 9 months
1,040
24
320
368
60
15 years
PWD
260
110
100
180
33
16 years
PWD
130
50
100
Pune-Solapur BOT
630
26
16 years
MOSRT&H
440
190
100
Pune-Nashik BOT
737
30
18 years
MOSRT&H
520
217
100
Mumbai-Pune BOT
3,836
206
15 years
MSRDC
11,814
1,202
Thane Ghodbunder BOT
2,463
15
15 years
MSRDC
2,066
403
28,350
239
12 years
incl const.
NHAI
19,560
8,790
Bharuch - Surat
9,655
65
15 years
NHAI
12,714
1,981
(5,040)
100
IRDP , Kolhapur
4,300
50
30 years
MSRDC
2,580
1,720
(270)
100
Omallur-Salem-Namakkal
BOT project:
3,076
65
20 years
NHAI
2,385
691
Pathankot- Amritsar
14,453
102
20 years
NHAI
9,229
3,955
1,269
100
Talegaon-Amravati
8,800
67
22 years
NHAI
4,648
1,992
2,160
100
3,060
Kharpada Bridge BOT

Ahmednagar-KarnalaTembhurni BOT
Mohol-Mandrup-Kamtee
BOT
Surat Dahisar BOT
Jaipur- Deoli
17,330
146
25 years
NHAI
9,989
4,281
Tumkur-Chitradurga
11,420
114
26 years
NHAI
7,994
3,426
106,958
1,244
85,281
29,416
Total
(9,180)
100
100
38% of total revenue for 1st
increasing by 1% every year
Rs22.4cr every year
100
100
100
Rs104.4cr for 1st year
100
Rs309.6cr for 1st year
100
(8,001)
Under development/ yet received LOA

Ahmedabad- Vadodara
36,000
196
25 years
NHAI
27,000
9,000
Goa/Karnataka Border to
Kundapur
26,390
189
28 years
NHAI
14,060
6,968
5,362
100
Solapur to Yedeshi
15,000
99
29 years
NHAI
9,177
3,933
1,890
100
Yedeshi to Aurangabad
32,000
190
26 years
NHAI
18,494
7,926
5,580
100
Kaithal to Rajasthan
23,000
166
27 years
NHAI
14,462
6,198
2,340
100
Total
132,390
840
83,193
34,025
15,172
100
Grand Total
239,348
2,083
168,474
63,441
7,171
Source: Company,NHAI, SSLe
Largest operational portfolio with strong in-house capabilities

IRB has one of the largest operational road BOT toll portfolio in the sector in terms of
both number of projects and lane kms. It has operational BOT toll portfolio of 4,646
lane kms vis--vis 4,455 lane kms (only toll) of ITNL. Though ITNL has the largest
road portfolio, IRB is an integrated road developer with more than three decades of
experience in development, construction and operation of road projects. The company
undertakes EPC work through its 100% owned, in-house, subsidiary Modern Road
Makers Pvt. Ltd (MRM) and has been one of the first companies to venture into the
public private partnership (PPP) model of road projects in India.
July 8, 2014 | 30

Exhibit 53: One of the largest toll operator
10,000
7,500
(lane kms)
One of the largest operational BOT toll

portfolio of 4,646 lane kms
5,000
2,500
0
F09
F10
F11
F12
Ashoka
F13
IRB
ITNL
F14e
F15e
F16e
Sadbhav
Source: Planning Commissioning, SSLe
Portfolio skewed towards high growth western

corridor (Contribution by Maharashtra41% &
Gujarat23%)
Portfolio skewed towards high growth western corridor

Over the years the company has strategically built its portfolio around high growth
western (Mumbai-Delhi) corridor mainly covering the states of Maharashtra and
Gujarat. The corridor has historically witnessed a high traffic growth mainly due to its
strategic location. Currently, even with the commissioning of projects in Punjab,
Rajasthan and Karnataka, the company share in Maharashtra and Gujarat remains
41% and 23% respectively. In our view, the company would continue to focus on the
western corridor mainly on account of an over decade long experience in these states
and know-how of traffic pattern in the corridor.
Exhibit 54: Year-wise % GDP growth of Maharashtra & Gujarat
12
11.2
11.0
10.0
9.0
(%)
8.5
6
6.8
9.3
9.3
8.6
6.7
3
11.3
2.6
6.2
9.3
10.2
7.1
5.0
7.1
0
F08
F09
Maharashtra
F10
F11
Gujarat
F12
F13
India GDP
Source: Planning Commissioning, SSLe
July 8, 2014 | 31
Exhibit 55: State-wise portfolio mix

F10
F14
Rajasthan
13%
Karnataka
16%
Punjab
9%
Haryana
7%
Maharashtra
41%
Tamil Nadu
3%
Goa
8%
Rajasthan
6%
Maharashtra
55%
Punjab
4%
Gujarat
15%
Goa
0%
Gujarat
23%
BOT revenue to grow at CAGR of 23% CAGR over F13-16e

IRB currently has 16 projects that are operational and generating revenue while five
projects are under various stages of construction. Out of 16 operational projects, there
are four projects which got full/partially commissioned in F14; thereby contributing their
full revenue in F15e. Currently, the company generates toll revenues of ~Rs45.9mn
per day, up from Rs33.6mn per day in F12, from its operational BOT projects.
BOT revenues to clock 23% CAGR over F13-16e

on the back of (a) 18% toll hike of Mumbai-Pune
expressway, (b) 5-6% growth in traffic and toll
rate and (c) commissioning of BOT projects.
During the year, based on average WPI of F13 most of the operational toll projects
has witness a toll rate hike of 8-10% along with a traffic growth of 4-6% (Except Surat
Dahisar and BharuchSurat). We expect BOT revenues of Rs16bn and Rs19.5bn in
F15e and F16e mainly on account of (a) 18% toll hike of Mumbai-Pune expressway
(w.e.f 1st April 2014), (b) 5-6% growth in traffic and toll rate for other BOT projects and
(c) full commissioning of its under-construction projects.
Exhibit 56: BOT revenue growth to clock 23% CAGR over F13-16e
20,000
19,489
16,027
(Rs mn)
15,000
9,513
10,000
10,460
10,740
F13
F14e
8,218
7,214
5,000
0
F10
F11
F12
F15e
F16e
July 8, 2014 | 32

Healthy traffic growth
A deceleration in the traffic growth was witnessed by all the players in the sector
mainly due to slowdown in the economy. The decline in GDP growth from 8-9% few
years ago to 4-5% at current levels past few years due to governments policy
paralysis and slowdown in the global economy has visibly led to lower traffic on most
stretches of road projects. In contrast, IRBs portfolio has witnessed a decent growth in
traffic mainly due to its presence on high growth western corridor. Nevertheless, some
of its road projects were impacted by other factors such as (a) SuratDahisar project
witnessing diversion of traffic and (b) TumkurChitradurga project due to mining ban
pressures.
We believe that traffic growth will continue to grow in the range of 5-6% in the medium
term and would toe the line of an improving activity in the economic.
Exhibit 57: % YoY traffic growth for key operational projects
Exhibit 58: India GDP growth trend
24
12
23.7
9.3
18
15.3
9.9
9.8
10.8
6.7
4.7
6.2
9.9
9.4
(%)
(%)
12.7
12
9.3
8.6
5.2
5.0
3.4
1.0
0
F12
F13
F14
Mumbai-Pune BOT
Surat Dahisar BOT ^
Bharuch - Sarut$
Thane Bhiwandi Bypass 4 Lane BOT
0
F08
F09
F10
F11
F12
F13
Source: Company, Planning Commission, SSLe
Construction business: New project wins to impart momentum

IRB has a well integrated business model with strong in-house capabilities of
executing road projects right from the design stage to construction stage. MRM
undertakes the initial construction as well as the operation and maintenance (O&M) of
road projects.
Order book grew by56% YoY to ~Rs100bn
mainly led by new project wins during the year
As on 4QF14, the company has an order book of ~Rs100bn (excluding O&M orders)
translating into order book-to-sales ratio of 3.8x trailing construction revenues. Further,
it has O&M order book of Rs19.5bn as on 4QF14 from its operational BOT projects.
Currently, the companys two projects (AhmedabadVadodara and Goa-kundapur
highway project) have already commenced execution while we expect construction
work on SolapurYedeshi to start from 2QF15e. Two recently won BOT projects;
YedeshiAurangabad and Kaithal toRajasthan, to start from 4QF15e is what we
expect.
July 8, 2014 | 33
Exhibit 59: Order book-to-sales of 3.8x provides revenue visibility Exhibit 60: Project wise order book break-up
82,500
2.5
AhmedabadVadodara
11%
GoaKundapur
19%
KaithalRajasthan
17%
1.5
100,198
58,298
56,747
64,311
70,998
74,659
27,500
2.0
50,533
55,000
O&M
contracts
16%
(%)
3.0
(Rs mn)
110,000
SolapurYedeshi
11%
Sindhudurg
3%
1.0
2QF13 3QF13 4QF13 1QF14 2QF14 3QF14 4QF14
Order Backlog (LHS)
YedeshiAurangabad
23%
OB-to-sales (x) (RHS)
IRBs construction revenues have increased at a 30.6% CAGR over F10-14e. This
was mainly due to commissioning of its four under-construction projects, (a)
TalegaonAmravati, (b) TumkurChitradurga, (c) JaipurDeoli and (d) PathankotAmritsar, during F14. Going forward, we expect the company to report construction
revenue of Rs27.7bn and Rs30.2bn in F15e and F16e respectively, on the back of
execution pickup in AhmedabadVadodara and Goa-Kundapur highway project and
start of construction work on newly awarded projects.
Exhibit 61: New project wins to impart momentum
32,000
(Rs mn)
24,000
26,312
26,579
F13
F14e
27,730
30,195
21,693
16,012
16,000
9,144
8,000
0
F10
F11
F12
F15e
F16e
Strong balance sheet takes care of equity fund requirement

The company has a project portfolio of US$4bn, of which under-development portfolio
stands at ~US$2.2bn. Due to commissioning of four under-development projects,
companys net debt-to-equity stands at ~2.8x with a cash balance of ~Rs15bn. Going
forward, with most of the projects operational, we estimate the company to see a peak
consolidated debt-to-equity of ~3.2x in F16e. Going forward, we estimate IRB would
require incremental equity of ~US$475mn (~Rs28.5bn) over F14-16e for its underdevelopment portfolio.
Exhibit 62: Equity requirement of ~US$475mn (Rs28.5bn)
Particlulars
Ahmedabad- Vadodara
Goa-Karnataka Border to Kundapur
Solapur to Yedeshi
Total
Total (Rsmn)
5,500
5,220
3,910
8,120
5,750
28,500
July 8, 2014 | 34
Strong cash flows to take care of equity

requirement of Rs28.5bn

Over the past few years, the company has been generating healthy available cash
flow from operation of Rs10.2bn and Rs7.5bn in F13 and F14 respectively. Going
forward, we expect IRB to generate cash flows from operation of ~US$390mn
(~Rs23.4bn) which would be sufficient to fund equity requirement of its underdevelopment projects.
Exhibit 63: Cash flow from operation to meet equity requirement
(Rsmn)
Net profit
Depn and w/o
Deferred tax
Change in working cap
Cash flow from Operations
Less: Dividend
Net available cash flow
F14e
4,591
4,771
143
(3,846)
5,659
1,556
4,103
F15e
5,089
6,274
143
(956)
10,550
1,556
8,994
F16e
6,226
7,293
143
(1,830)
11,833
1,556
10,276
Total
15,906
18,338
430
(6,632)
28,042
4,668
23,374
Diversification in new verticals a long term strategy

As a part of a long term strategy the company has diversified into new business
verticals such as Real Estate and Airports. However, given various issues, the work on
Real Estate verticals is progressing at a slower pace.
Long term strategy the company has diversified

into new business verticals such as real estate
&airports
Real Estate
The company has acquired ~1,200 acres of land along the Mumbai-Pune expressway
with a capital investment of Rs1,500mn (till date) and has plans to acquire additional
land to develop an integrated township. However, it is yet to start development on the
acquired land and we believe this would take time as (a) the demand dynamics in real
estate are low and (b) interest rates are high. As per the management, the company
would look for a leading real estate developer in order to lower their risk and capital
allocation for the project.
As a part of IRDP Kolhapur agreement project, the company was allotted 30,000 sq.
meter of commercial land for development with concession period of 99 years.
Currently, the company in a joint venture (JV) with Indian Hotels Co. Ltd, is developing
a 4-star hotel with a capacity of 125 rooms. According to the management, investment
required in this project would be ~Rs500mn.
Airport development
IRB is developing a greenfield airport in Sindhudurg district in Maharashtra on DBFOT
basis which has a concession period of 95 years that includes a construction period of
three years. The project has an area of 670 acres, of which 325 acres will be used for
development of airport and the remaining 345 acres would be developed by IRB for
commercial use. The work on this project has already commenced and the EPC
contract has been awarded to L&T for the development of the airport.
Exhibit 64: Sindhudurg airport details

Project Cost (Rs mn)
Debt
Equity
Payments already made to MIDC
Construction period
Concession period
Developable area, including airport
Developable area, including airport
3,500
2,450
1,050
209
18 months
95 years
650 acres
1,64,000 sqm
July 8, 2014 | 35
Financial Analysis
Consolidated revenue to grow at 15.3% CAGR over F14-16e
We expect IRBs consolidated revenues of Rs43.7bn & Rs49.6bn in F15e and F16e,
registering a 15.3% CAGR over F14-16e, mainly driven by strong toll revenue growth
as some of its major BOT project get operational. We also expect construction
revenue momentum to continue on the back of an improvement in order book
scenario.
Exhibit 65: Consolidated revenue to grow by 17% & 14% in F15e & F16e
56,000
Strong toll revenue growth owing to

operation of some of its major under BOT
projects
F14e
30,195
19,489
27,730
26,579
F13
16,027
F12
10,740
21,817
F11
BOT Revenues
10,460
F10
9,513
16,164
8,218
7,214
14,000
26,413
28,000
9,835
(Rs mn)
42,000
F15e
F16e
Construction revenues
Consolidated EBITDA margins to improve led by change in revenue mix

We expect consolidated EBITDA margins to improve by 400bps to 48.0% due to
increase in portion of BOT revenues to 39.2% of total revenues in F16e from 28.4% of
total revenues in F13. Generally, BOT segment reports higher EBITDA margins of 8085% as compared to 10-12% margins in the construction business.
Exhibit 66: BOT revenues outspace construction
28000
30,000
23,997
16,333
17,537
20,000
13,694
14000
15,000
10,883
7,990
(Rs mn)
(Rs mn)
21000
7000
25,000
20,785
10,000
4,388
5,000
0
0
F09
F10
F11
F12
EBIDTA- Construction (LHS)
F13
F14e
F15e
F16e
EBIDTA-BOT (RHS)

Due to huge capex the return ratios to
remain under pressure
Return ratio to remain at this level

We expect the company to maintain consolidated debt-to-equity ratio of 3.2x as five
projects are under various stages of construction. As four of its under-construction
projects got operational in F14, we expect cash flows to improve significantly from
F15e. However, due to huge capex over F15e-17e, we estimate IRBs RoE would
continue to remain at this levels. Going forward, as its under-construction project start,
we expect RoE to improve from F17e.
July 8, 2014 | 36
Valuations
We estimate IRB to report an earning CAGR of 16.6% over F14-16e and a RoE of
15% in FY16. The stock currently trades at F16e P/E and P/B of 13.7x and 1.9x
respectively.
We have used Sum-Of-The-Parts (SOTP) method to value the stock. We value the
construction business at an EV of 7.5x F16e EBITDA estimate which is in line to its 3year average. IRBs BOT projects on NPV basis at a CoE of 14% amount to
~Rs43.4bn (Rs131/share). We have not included the Sindhudurg airport project, the 4star hotel in Kolhapur and Real Estate business in our SOTP valuation. We re-initiate
coverage on the stock with a BUY rating and target price of Rs309, indicating an
upside of 20%.
Exhibit 67:SOTP valuation
Particulars
IRB's construction business
Segment
Construction
Driver Multiple
9,209
7.5
Value Value per

(Rsmn) share (Rs)
69,070
208
SOTP proportion
Basis
(%)
67.2
EV/EBIDTA of 7.5x one year rolling

forward earnings
Standalone net debt as on Mar'14
Net debt
(9,630)
(29)
(9.4)
Total
59,441
179
57.8
Road BOT projects

Thane Bhiwandi Bypass
Toll
3,259
10
3.2
NPV at CoE of 14%
Kharpada Bridge
Toll
747
0.7
NPV at CoE of 14%
Nagar - Karnala - Tembhurni
Toll
507
0.5
NPV at CoE of 14%
Mohol - Mandrup - Kamtee
Toll
526
0.5
NPV at CoE of 14%
Pune - Solapur
Toll
1,350
1.3
NPV at CoE of 14%
Pune - Nashik
Toll
1,323
1.3
NPV at CoE of 14%
Mumbai - Pune
Toll
15,821
48
15.4
NPV at CoE of 14%
Thane Ghodbunder
Toll
1,359
1.3
NPV at CoE of 14%
Surat Dahisar
Toll
2,145
2.1
NPV at CoE of 14%
Bharuch - Surat
Toll
1,925
1.9
NPV at CoE of 14%
IRDP, Kolhapur
Toll
1,356
1.3
NPV at CoE of 14%
Pathankot - Amritsar
Toll
1,607
1.6
NPV at CoE of 14%
Talegaon - Amravati
Toll
1,431
1.4
NPV at CoE of 14%
Jaipur- Deoli
Toll
1,808
1.8
NPV at CoE of 14%
Tumkur - Chitradurga
Toll
2,110
2.1
NPV at CoE of 14%
Ahmedabad- Vadodara
Toll
(1)
(0.4)
NPV at CoE of 14%
(391)
Omallur Salem -Namakkal
Toll
1,228
1.2
NPV at CoE of 14%
Goa/Karnataka Border to Kundapur
Toll
2,491
2.4
NPV at CoE of 14%
Solapur to Yedeshi
Toll
543
0.5
NPV at CoE of 14%
Toll
1,150
1.1
NPV at CoE of 14%
Toll
1,094
1.1
NPV at CoE of 14%
43,388
131
42.2
Total
Real Estate+ Sindhudurg Airport
Real Estate
1,500
Grand Total
0
102,829
0.0
309
100.0
No value ascribed
Source: SSLe
July 8, 2014 | 37
280,000
240
210,000
160
140,000
80
70,000
Share price
0.5x
1x
1.5x
2x
2.5x
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
(x)
320
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
(x)
EV
2.5x
5.0x
7.5x
10.0x
12.5x
Exhibit 69: Key BOT assumption

Project
Status
Pune- Pune- MumbaiSolapur Nashik

Pune
BharuchSurat
Surat
Dahisat
IRDP
Kolhapur
PathankotAmritsar
Jaipur
Deoli
TalegaonAmravati
TumkurChitradurga
A'bad
Baroda
Oper.
Oper.
Oper.
Oper.
Oper.
Oper.
Oper.
Oper.
Oper.
Oper.
26
30
206
15
65
240
50
102
146
67
NHAI
NHAI
MSRDC
NHAI
NHAI
NHAI
NHAI
NHAI
Gujarat Guj./Mah
Mah.
Punjab Rajasthan
Mah.
Karnataka
Gujarat
KM
Issuing Auth.
Thane
Ghod
MORTH MORTH
State
Concession (Yrs)
Mah.
Mah.
16
MSRDC MSRDC
Mah.
Mah.
Oper. Under Dev.

114
102
18
15
15
15
12.1
30
20
25
22
26
25
Con. Start
Mar-03 Sep-03
Aug-04
Dec-05
Sep-09
Feb-09
Jul-11
Jun-13
Mar-13
Dec-12
Jun-14
Jan-13
Con. End
Mar-19 Sep-21
Aug-19
Dec-20
Jan-22
Aug-21
Jan-39
Jul-30
Mar-35
Mar-32
May-37
Apr-37
12,920
2490
14,700
25,350
4300
14,420
17,050
8850
11,420
49,200
TPC (Rs mn)
630
740
Equity (Rs mn)
180
60
1050
320
1980
7850
1720
3910
4990
1940
3110
14,200
Debt (Rs mn)
450
680
11,870
2170
12,720
17,500
2580
9240
9000
4750
8310
35,000
-270
1269
3060
2160
1404
Traffic Grth (%)
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
6/5%
Toll inc (%)
5%
5%
#18%
5%
5%
5%
5%
5%
5%
5%
5%
5%
10.6%
10.8%
11.0%
11.5%
10.5%
11.0%
10.5%
10.5%
11.0%
F14e
F15e
Grant (Rs mn)
Int Rate (%)


(Rs mn)
F12
F13
F16e
Order inflow
10,000
25,954
62,466
32,740
35,455
Order book
64,669
64,311
100,198
105,208
110,468
55.8
5.0
5.0
26,579
27,730
30,195
growth %
Contract revenue
Book to Bill (x)
(33.3)
21,693
3.0
(0.6)
26,312
2.4
3.8
3.8
3.7

As % of sales
F12
F13
F14e
F15e
F16e
Contract Expense
23.0
33.0
28.3
31.5
29.5
Materials Consumed
20.4
12.7
11.4
11.5
11.5
other direct expense
2.7
0.0
0.0
0.0
0.0
Others
2.6
2.4
2.4
2.4
3.6
Personnel Exp
4.4
4.2
4.8
4.1
4.1
56.3
55.7
53.0
52.5
51.7
Total Manufacturing exp.

July 8, 2014 | 38
Key risk
NPV valuation.
Management risk: In 2010, IRB Infrastructure CMD Virendra D. Mhaiskar was
investigated by the CBI for possible involvement in the murder of RTI Activist Satish
Shetty in Maharashtra. In 2012, Mr. Virendra has gone through polygraph test along
with others for the same reason. However, post this there has been no development
on this case. We believe this is no more a concern on the company.
July 8, 2014 | 39
Company Profile
IRB Infrastructure Developers Ltd. was incorporated in 1998, and initially operated as
an EPC contractor named as Ideal Road Builders Pvt Ltd which executed various
construction projects in the roads sector including World Bank aided projects. IRB is
one of the leading players in the road infrastructure space and not only designs and
develops but also constructs and maintains roads, bridges and flyovers. The company
undertakes development of various infrastructure projects in the road sector through
several Special Purpose Vehicles. The group also has diversified into various
infrastructure projects like Airports and Hospitality, other than the Roads and
Highways sector. IRB also plans to develop land alongside the Mumbai-Pune
Expressway and has acquired 1200 acres of land for this purpose.
IRB along with its subsidiaries has constructed or operated and maintained around
1200 kms of roads so far and is one of the major road developers in the country. The
company currently has the second largest BOT portfolio with 6,757 lane kms of
operational as well as under-construction projects. Out of the total 21 BOT projects
awarded to the company, currently 16 projects are operational, 2 projects are under
construction and 3 project is on pre financial closure stage, for which the company is
expected to complete the financial closure by 4QF15e.
Exhibit 72: Corporate structure
July 8, 2014 | 40
Key management
Mr. Virendra D. Mhaiskar- Chairman & Managing Director
Mr. Virendra D. Mhaiskar has been the Managing Director and Chairman of IRB
Infrastructure Developers Limited since December 2006. Mr. Mhaiskar is responsible
for directing the IRB group's strategy in BOT and funded projects. He has over 18
years of experience in the construction and infrastructure industry. He joined the IRB
Group in June 1990. He serves as a Director of IRB Surat Dahisar Tollway Pvt., Ltd.,
and Ideal Road Builders Pvt. Ltd. He serves as a Non-Independent and Executive
Director of IRB Infrastructure Developers Ltd. Mr. Mhaiskar has a diploma in civil
engineering from Shriram Polytechnic, Navi Mumbai.
Mr. Dattatraya P. Mhaiskar- Director
Mr. Dattatraya P. Mhaiskar serves as the chief mentor of IRB Infrastructure
Developers Limited. Mr. Mhaiskar is the proprietor of D. S. Enterprises. He has 47
years of experience in the construction and infrastructure industry. In the year 1977,
Mr. Mhaiskar also served at IRBPL, a subsidiary of IRB Infrastructure Developers
Limited. He joined IRB Infrastructure Developers in December 2006. He has been a
Non-Independent & Non-Executive Director of IRB Infrastructure Developers Limited
since July 29, 2008. He serves as a Director of Ideal Road Builders Private Limited,
Thane Godbundhar Toll Road Private Limited, Mhaiskar Infrastructure Private Limited,
NKT Road & Toll Private Limited, MMK Toll Road Private Limited, ITICPL, MEP,
ISTPPL, MRTPL, VTSPL and GSVPL. He serves as the Managing Trustee for a
number of charitable trusts engaged in education, welfare and sports activities. He
served as a Non-Independent Executive Director of IRB Infrastructure Developers
Limited from September 2007 to July 29, 2008. Mr. Mhaiskar holds a Diploma in Civil
Engineering from Sir Kursowadia Institute of Electrical Technology, Pune.
Madhav Kale, Head of Strategy & Planning
Mr. Madhav Hari Kale, FCA serves as the Head of Corporate Strategy & Planning at
IRB Infrastructure Developers Limited. Mr. Kale served as the Chief Finance Officer of
IRB Infrastructure Developers Limited since February 1, 2007. He has approximately
28 years of experience in the fields of audit, taxation and consultancy. Prior he joined
the IRB Group, he was a Partner of M. H. Kale & Co., Chartered Accountants. He
served as an Independent Director of Trigyn Technologies Ltd. until June 3, 2014. He
holds a Bachelor's degree in Commerce from Mumbai University and has been a
Fellow Member of the Institute of Chartered Accountants of India since 1979.
July 8, 2014 | 41
Financials (Consolidated)
Income Statement
Y/E Mar (Rs mn)
Net sales
Balance Sheet
F12
F13
F14e
F15e
31,330
36,872
37,319
43,757
28.5
17.7
1.2
17.3
Operating expenses
17,637
20,540
19,782
22,973
EBITDA
13,694
16,333
17,537
20,785
growth (%)
growth (%)
25.8
19.3
7.4
18.5
2,970
4,415
4,771
6,274
10,723
11,918
12,766
14,510
Other income
1,252
1,301
1,214
1,356
Interest paid
5,464
6,153
7,562
8,262
EBIT
F16e
Y/E Mar (Rs mn)

49,684 Cash & Bank balances
13.5 Other Current assets
25,687 Investments
23,997
7,293 Goodwill & intangible assets
1,540 Total assets
8,932
Current liabilities
9,313 Borrowings
3,073 Other non-current liabilities
PBT
6,512
7,066
6,419
7,605
Tax
1,552
1,530
1,823
2,510
23.8
21.7
28.4
33.0
33.0
4,960
5,536
4,596
5,096
6,240
0.1
(30.8)
5.0
4,960
5,567
4,591

Net profit
Minority interest
Reported Net profit
Non-recurring items
Adjusted Net profit
growth (%)
4,960
9.6
5,096
Share capital
Shareholders' funds
5,567
4,591
5,096
12.2
(17.5)
11.0

F14e
F15e
F16e

Y/E Mar
Total liabilities
F13
Y/E Mar (Rs mn)

Pre-tax profit
EBITDAM
43.7
44.3
47.0
47.5
EBITM
34.2
32.3
34.2
33.2
NPM
15.8
15.1
12.3
11.6
RoE
17.4
18.2
13.5
13.6
RoCE
8.4
8.6
6.9
6.4
RoIC
4.4
4.4
2.9
2.7
48.3 Depreciation
12.6 Total tax paid
6.7 Operating CF
3.0
Capital expenditure
Per share data (Rs)
Chg in investments
332.4
332.4
332.4
332.4
EPS
14.9
16.7
13.8
15.3
FDEPS
14.9
16.7
13.8
15.3
CEPS
23.9
30.0
28.2
34.2
BV
85.9
98.0
107.1
117.8
2.2
4.7
4.7
4.7
DPS

18.8 Investing CF
18.8 FCF
40.7
131.9 Equity raised/(repaid)

PE
P/BV
EV/EBITDA
EV/Sales
F13
F14e
F15e
F16e
14,710
15,012
4,976
10,979
10,239
12,495
11,469
13,137
15,524
139
620
145
245
345
3,344
3,190
3,190
3,190
3,190
76,650
101,058
127,221
153,588
161,295
108,580
132,073
157,038
175,136
191,333
7,910
10,406
7,623
12,182
13,696
70,722
87,761
113,308
123,308
133,308
259
259
143
143
143
78,891
98,425
121,075
135,633
147,147
3,324
3,324
3,324
3,324
3,324
25,243
29,232
32,283
35,823
40,506
28,566
32,556
35,607
39,146
43,830
1,123
1,092
108,580
132,073
356
356
157,038
175,136
356
191,333
Cash Flow Statement

F12
O/s shares (mn)
F12
18,208

17.2
15.3
18.6
16.8
13.7 Financing CF
1.9
3.0
2.6
2.4
2.2
10.1
9.7
10.5
9.8
4.4
4.3
4.9
4.7

2.5
2.7
3.2
3.1
3.0
F12
F13
6,512
7,066
2,970
4,415
(1,878)
(1,552)
239
(1,530)
F14e
6,419
F15e
9,313
7,293
4,771
6,274
(1,757)
2,891
(1,823)
(2,510)
(873)
(3,073)
27
30
6,079
10,221
7,489
14,261
12,659
(24,269)
(28,668)
(29,819)
(32,641)
(15,000)
(100)
(100)
411
(481)
(120)
F16e
7,605
475
(23,858)
(29,149)
(29,343)
(32,741)
(15,100)
(18,190)
(18,448)
(22,329)
(18,380)
(2,341)
(0)
24,480
(720)
227
23,987
17,039
25,548
10,000
10,000
(1,556)
(1,556)
(1,556)
(1,556)
(52)
(1,836)
15,431
6,208
(3,498)
18,208
14,710
(0)
22,156
302
15,012
8,444
8,444
(10,036)
6,003
4,976
10,979
Other key ratios

D/E (x)
DSO (days)
15.8
15.1
12.3
11.6
12.6
Asset turnover (x)
0.3
0.3
0.3
0.3
0.3
3.8
3.9
4.2
4.4
4.4
17.4
18.2
13.5
13.6
15.0
NPM (%)
RoE (%)
July 8, 2014 | 42
Institutional
Equity
Research
IL&FS Transportation Network Ltd

July 8, 2014
ILFT IN; ILFT.BO
Re-initiating Coverage
BUY
Renowned group & reliable performer; Re-initiate with a BUY

Target price
Upside/(downside)
Market data
Mkt capitalisation
Average daily vol
52-week H/L
Shares O/S
Free float
Promotor holding
Foreign holding
Face value
IL&FS Transportation Network Ltd (ITNL), the flagship surface transportation

company of IL&FS group, is among the leading players in road BOT segment,
with presence in 16 states. The company is one of the largest road developers
in the country with a portfolio of 26 road BOT projects aggregating to 13,161
lane kms. The company has a balanced mix of BOT projects under its portfolio,
of which 10 are BOT annuity projects and remaining 16 are BOT toll projects.
On a consolidated basis, we expect the company to report top line and bottom
line of Rs85.3bn and Rs5.6bn in F16e respectively. We re-initiate our coverage
with a BUY rating on ITNL with a TP of Rs272 valuing the company on SOTP
basis. Our BUY precludes its strong parentage and its bolstered finances.
219
272
24
Rs
Rs
%
Rs bn
'000
Rs
mn
mn
%
%
Rs
54.0
114.3
231.7 / 92.7
246.7
67.8
72.5
4.9
10.0
Balance mix of BOT portfolio ensures sustainable growth: ITNL has a well
balanced road portfolio under its belt both in terms of BOT annuity and toll projects.
The annuity project ensures more predictable and stable cash flows while the toll
projects provide growth potential. Further, ITNL is not dependent solely on NHAI for
awarding of projects as it has a healthy mix of projects coming from state/other
departments as well.

Nifty (abs)
Stock (abs)
Relative to Index
1m
4.7
6.7
2.0
3m
15.8
73.4
57.7
Performance
230
(Rs)
6m
24.8
66.2
41.4
1yr
32.8
59.5
26.7
(%)
40
Strong parentage, an advantage: The IL&FS group has over two decades of
experience and is one of the pioneers in promoting, structuring and financing
infrastructure projects across the country. We believe the group has created a strong
brand and credibility that would help ITNL strengthen ahead.
20
180
0
Recent fund raising takes care of equity requirement: ITNL needs equity of
~Rs10.5bn for its project under-development over the next three to four years. The
company has raised Rs7.5bn through non convertible preferential shares in the
month of Dec'13 and also raised Rs5.25bn through a right issue (dilution of 27%) in
the month of May'14. We believe with the recent fund raising the company would
meet its equity requirements comfortably.
130
(20)
80
Jul-13
Oct-13
Dec-13 Mar-14
ITNL (LHS)
(40)
Jun-14
Rel. to Nifty (RHS)
Operational BOT portfolio to increase 1.5x fold: Of total portfolio, the company
has 11 projects aggregating to ~US$2.9bn under various stages of construction. Of
these, three are annuity projects aggregating 498 lane kms, while eight are toll
projects aggregating 3,642 lane kms. Going forward, we believe ITNLs portfolio size
to increase from 7,365 lane kms in F14 to 10,915 lane kms by F17e.
Re-initiate with a BUY: We re-initiate with a BUY rating on the stock with a TP of
Rs272 valuing the company at an EV multiple of 7x on F16e EBITDA thats lower
than its 3-year average multiple and the BOT projects on a NPV basis at a CoE of
14%. We estimate the company to report earnings CAGR of 10.2% over F14-16e and
a RoE of 9.4% in F16e. At the CMP, the stock trades at a P/BV of0.9x F15e and 0.9x
F16e earnings and trades at an EV/ EBITDA of 11.1x F15e and 10.2x F16e EBITDA.
Key risk to our call would be lower than expected traffic growth, slower execution,
lesser expected project wins, and greater competitive intensity in the roads sector.
Financial Summary
Y/E Mar (Rsmn)
Net sales
F12
56,056
F13
66,448
F14e
65,870
F15e
74,905
F16e
85,279
growth (%)
38.5
18.5
(0.9)
13.7
13.9
EBITDA margin (%)
26.1
27.7
28.7
30.4
30.4
Adjusted net profit
4,970
5,202
4,602
4,583
5,585
EPS (Rs)
25.6
growth (%)
14.8
26.8
4.7
18.7
(30.3)
18.6
(0.4)
22.6
21.9
Viral Shah
+91 22 4227 3388
P/E (x)
Dividend yield (%)
Pranjal Sanghvi
+91 22 4227 3428
RoE (%)
EV/EBITDA (x)
RoCE (%)
8.6
8.2
11.7
11.8
9.7
10.5
10.5
12.5
11.1
10.2
2.2
1.7
1.7
2.2
2.2
17.8
16.1
10.6
8.6
9.4
6.5
7.3
7.8
5.5
5.8
SBICAP
Largest player in the surface transport space
IL&FS Transportation Network Ltd (ITNL), the flagship surface transportation company
of IL&FS group, is among the leading players in road BOT segment, with a pan India
presence spread over 16 states. The company is one of the largest road developers in
the country with a portfolio of 26 road BOT projects aggregating to 13,161 lane kms.
The company has also diversified into various verticals such as Metro Rail; Urban
Infrastructure and Border Check Post projects apart from roads. In 2008, ITNL through
acquisition of Elsamex, has entered into international operations providing
maintenance services for roads and highways in Spain and other countries. Currently,
it provides worldwide maintenance for over 21,000 lane km of roads and over 3,100
petrol stations. ITNL has been scouting for BOT assets in Indonesia, Malaysia, South
Africa and other emerging countries for furthering its business interests. The company
has acquired 49% stake in YuHe expressway in China, as a part of divestment
process run by the World Bank and Government of Singapore.
Exhibit 73: Balanced portfolio of ~US$5bn

Total
Cost
(Rsmn)
Client
Project
type
Noida Toll Bridge
State
Toll
5,888
Gujarat roads
State
Toll
4,800
West Gujarat E'way
NHAI
Toll
2,758
389
RIDCOR Phase - I
State
Toll
16,180
Beawar Gomti
State
Toll
RIDCOR Phase - II
State
Toll
Pune Sholapur
NHAI
Narkatpally - Addanki
State
Name of the Project
Length
Concession
(lane km) period (years)
COD
Debt
(Rsmn)
Equity
(Rsmn)
Grant
(Rsmn)
ITNL's
share
30.0
F01
2,580
3,308
30.0
F01
2,485
2,315
20.0
F09
2,178
400
180
100%
2,106
32.0
F08
13,030
1,000
2150
50%
3,550
248
11.0
F10
2,760
400
390
100%
8,126
715
32.0
F13
6,098
2,028
Toll
14,027
571
20.0
F15
9,577
1,600
2850
100%
Toll
17,605
888
24.0
F14
10,600
2,335
4670
50%
Operational projects
60
333 & 190
25%
84%
50%
North Karnataka E'way
NHAI
Annuity
5,995
472
17.5
F05
4,995
1,000
94%
Thiruvananthapuram road Phase-I
State
Annuity
1,083
51
20.0
F07
782
301
50%
AP E'way
NHAI
Annuity
8,629
328
20.0
F10
8,292
337
100%
Hyderabad Ring Road
State
Annuity
2,758
152
15.0
F10
2,308
450
26%
East Hyderabad E'way
State
Annuity
4,279
173
15.0
F11
3,210
293
Thiruvananthapuram road phase-II
State
Annuity
2,626
107
15.0
F13
1,376
1,250
776.5
74%
50%
Hazaribagh Ranchi E'way
NHAI
Annuity
8,692
319
18.0
F14
7,382
1,310
74%
Jharkhand road phase- I
State
Annuity
14,078
466
17.5
F13
12,376
1,702
100%
121,074
7,045
19,836
522
Total (operational)
90,028
20,029
11,017
2,217
4,433
Under Construction projects

Moradabad Bareilly E'way
NHAI
Toll
25.0
Chandrapur Warora
NHAI
Toll
6,886
275
30.0
F14
3,360
1,763
1,763
35%
Kiratpur Ner-Chowk
NHAI
Toll
22,910
327
28.0
F17
14,749
6,816
1,346
100%
Sikar Bikaner
State
Toll
8,029
540
25.0
F17
3,889
1,667
2,473
Kharagpur Baleshwar
NHAI
Toll
6,544
477
24.0
F17
4,581
1,963
Beawar Gomti (Additional)
MoRTH Toll
13,600
217
30.0
F18
9,520
3,690
390
Barwa Adda Panagarh
NHAI
Toll
24,522
727
20.0
F18
17,165
7,357
Khed Sinnar
NHAI
Toll
19,307
557
20.0
F18
13,515
2,826
Jharkhand road phase- II
State
Annuity
6,741
F13 & F15
5,393
1,348
100%
100%
198 17.5 & 15.8
F14
13,186
Chenani to Nashri
NHAI
Annuity
37,200
38
20.0
F16
33,480
3,720
Jorabat to Shillong
NHAI
Annuity
8,240
262
17.5
F15
7,400
840
100%
100%
2,966
100%
100%
100%
50%
Total (under develop)
173,816
4,140
126,238
34,207
13,371
Grand Total
Source: NHAI, Company, SSLe
* Revenue sharing is increase by 5% on yearly basis
294,890
11,185
216,266
54,236
24,388
100%
July 8, 2014 | 44
Largest player in the road BOT space with

a portfolio of ~US5bn

Prime player in the road BOT space
ITNL focuses on surface transport projects with an emphasis on road BOT segment. It
is the largest player in road BOT segment in terms of both no. of projects and lane
kms having a portfolio of 26 BOT road projects aggregating to 13,161 lane kms. The
company has a balanced mix of BOT projects under its portfolio, of which ten are BOT
annuity projects and remaining 16 are BOT toll projects. Of total, the operational
portfolio comprises of 15 projects aggregating to US$2.1bn while the remaining 11
projects (US$2.9bn) are under various stages of construction
Exhibit 74: Leading player in the road BOT space
10,000
(lane kms)
7,500
5,000
2,500
0
F09
F10
F11
Ashoka
F12
IRB
F13
ITNL
F14e
F15e
F16e
Sadbhav
Balance mix of BOT portfolio

The company has a good mix of BOT portfolio. The large number of annuity projects
helps the company to have more predictable revenues and cash flows as they are not
exposed to traffic risk. On the other hand, the toll projects offer an upside to revenue
and cash flow based on potential of traffic growth and toll rate hikes. In terms of total
portfolio, annuity projects constitute 34% of total project cost & 23% in terms of lane
kms. Going forward, post the commissioning of under-construction projects we believe
the company would have a healthy mix of toll and annuity projects.
Exhibit 75: Balance portfolio mix
(Lane Kms)
(Value Rs mn)
Annuity
23%
Annuity
34%
Toll
66%
Toll
77%
Well diversified portfolio mitigates concentration risk

The strong relationship of the parent group with public sector and state governments
enables the company enters into bilateral contracts with state BOT projects. ITNL is
one of the few road players which have significant exposure to state projects. This
diversification reduces the concentration on NHAI. Over the past few quarters, the
awarding activity from NHAI has been muted. Hence, such company with its exposure
to state projects benefits during a downturn since they do not rely solely on NHAI.
July 8, 2014 | 45
Exhibit 76: State wise order book mix as on 4QF14

Orissa &
West
Bengal, 3%
Karnataka,
0%
Andhra
Pradesh,
2%
Uttar
Pradesh, 2%
Jharkhand &
West
Bengal, 17%
Rajasthan,
16%
Meghalaya,
2% Madhya
Pradesh, 2%
Exhibit 77: Reduced dependence of NHAI
Himachal
Pradesh,
16%
State
40%
Haryana,
12%
J&K, 13%
Maharashtra,
15%
Jharkhand,
1%
NHAI
60%
Kerala, 2%
Unique business model as compared to its peers

ITNL performs various construction related activities from the project planning phase
to commencement of project and O&M activities post construction. However, it
operates on an asset-light model and subcontracts its construction to local/smaller
players. Thus, when a project is awarded to a SPV, it gives an EPC order to the
holding company which does the designing/engineering and project management
services (through the parent company), while construction is sub-contracted to
local/smaller players.
Exhibit 78: Life cycle of a project
Differential accounting policy for Annuity projects

ITNL follows IFRS principles for accounting of Service Concessions Agreement (SCA)
for BOT projects in terms of revenue recognition. The Company earns construction
and other incomes due various other composite services provided by the holding
company to road SPVs. The services provided can be classified as follows:
Design engineering and PMS: The initial project design and engineering
services for bidding of the project and also supervision for the execution of
the project is done by the ITNL. Hence, it earns revenues under this head;
revenues from these services are ~8-10% of the total project cost.
Construction revenues: As ITNL operates on asset-light model, the

construction work is sub-contracted to local contractors. ITNL only books
revenues according to the billings of the sub-contractor. The holding
company generally recognises 1-4% margins over the construction revenues.
July 8, 2014 | 46

Differential accounting policy for its Annuity
projects
IL&FS group pioneers in promoting,

structuring and financing infrastructure
projects an advantage

As mentioned earlier, ITNL follows a differential accounting policy for BOT, Annuity
and Toll, projects. For the toll projects, they are reported as intangible assets (toll
collection rights), while annuity projects are accounted as financial assets (receivables
against SCA). Given below are the principles used for accounting of annuity and toll
projects:
Toll-based projects: The income from construction is recognised at fair

value of the contract and recorded as an intangible asset in the balance
sheet. The revenue collected from toll is recognised in the P&L, while
intangible assets recognised is amortised over the duration of the concession
period (post construction) of the projects.
Annuity-based projects: ITNL follows a differential accounting policy for its

annuity projects. It treats its annuity projects as financial assets and thus
interest is charged to its P&L and not capitalised during the construction
period. Further, annuity revenues received during operations are recognised
as finance income in the P&L and are calculated from the year in which
construction activities started for the project. However, it should be noted that
there is no impact on cash flow as it is only financial accounting treatment.
Strong parentage an advantage

The IL&FS group has over two decades of experience and is one of the pioneers in
promoting, structuring and financing infrastructure projects across the country. We
believe the group has created a strong brand and credibility, which would in turn help
ITNL in the following ways:
Given its existing relationship with various financial institutions the project
funding/re-financing is lot easier and comparatively cheaper. The company
also has been able to maximise returns through different financing options
like mezzanine funding, bond issue, securitisation, refinancing etc driven by
the expertise of the company at the parent level.
IL&FS brand helps in strengthening ITNLs position while negotiating terms

with various stake holders at the state and national level as well as with
project financiers.
ITNLs senior management comprises of senior people from IL&FS group

itself helping the company to benefit from the experience and expertise.
July 8, 2014 | 47
Urban infrastructure
Apart from roads, the company has diversified into various verticals such as Metro
Rail, Border Check Post project and Bus Terminals making it a wholesome surface
transport solution provider.
Diversified into various verticals such as

Metro Rail, Border Check Post project and
Bus Terminals has made a complete surface
transport operator
Metro Rail segment: In this segment, the company has already commissioned 4.9km
elevated metro rail line from Sikanderpur to NH-8 in Gurgaon. The total project cost is
Rs11.3bn and has a concession period is 99 years. ITNL holds 81.4% stake in the
project. The company has also undertaken construction of metro rail project of 7 kms
from Sikanderpur station to sector 56 in Gurgaon along the Golf Course road. The
project has a concession period of 98 years which includes two and half years of
construction period. The estimated project cost is Rs21.4bn.
Nagpur city bus project: The company has signed a concession agreement with
Municipal Corporation of City of Nagpur for mobilizing, running, operating and
maintaining the Nagpur City Bus Services on a BOO basis. The project has a
concession period of 10 years ending on 2017 with a renewable option for a further
period of 5 years. Currently, ITNL holds 90% stake in this project and ~450 buses has
been deployed so far.
Madhya Pradesh border check post project: The Company has won a project to
develop 24 border check posts in Madhya Pradesh amounting to ~Rs13.5bn from
Madhya Pradesh Road Development Corporation ltd. The project has a concession
period of 12.5 years which includes a construction period of two and half years. As on
4QF14, of the total check posts, the company has already commissioned seven check
post & two central control facilities.
Charminar Robo Park Project: The Company has recently won Charminar Robo
Park Project in Hyderabad awarded by Greater Hyderabad Municipal Corporation. The
project involves building and maintaining an integrated multi-level automated car park
on BOT basis and has a concession period of 30 years.
Exhibit 79: Balanced portfolio of ~US$795mn

Name of the Project
Client
Total Cost
Concession
(Rs mn) period (years)
Debt
(Rsmn)
Equity
Grant
(Rs mn) (Rs mn)
ITNL's
share
(%)
Vansh nimay Infraprojects ltd
Muncipal Corp. of Nagpur
712
10 years
556
156
Metro Rail Gurgaon Ph-I
HUDA
11,340
99 years
8,076
3,264
81
Metro Rail Gurgaon Ph-II
HUDA
21,430
98 years
15,000
6,430
81
Madhya Pradesh Entry Point project
MPRDC
13,500
12.5 years
11,475
2,025
51
Charminar road
Greater Hyderabad Muncipal Corp.
725
30 years
508
218
89
35,615
12,093
Total
47,707
90
July 8, 2014 | 48
Global presence
ITNL has been foraying into global markets either through acquisition/participation in
certain international companies/projects to increase its overall portfolio. International
presence would help the company bring expertise of global players into India and also
reduce risks by enabling the company enter newer geographies. Over the past few
years, the company has acquired Elsamex (2008) and a road BOT project in China
(2011).
Globally presence through various
acquisitions such as Elsamex and YuHe
Expressway
Elsamexbrings global expertise to the group: ITNL marked its global presence by
acquiring Elsamex S.A. (Elsamex) which provides maintenance services for roads and
highways for Eur50mn in Mar08. The company wanted to use Elsamexs maintenance
capabilities along with its own BOT road expertise in India and also facilitate ITNLs
entry into international markets such as Spain, Portugal and Latin America. Currently,
Elsamex is providing maintenance services for ~31,000 lane kms of roads and
maintains ~3,100 gas stations for European fuel suppliers. Also, it provides consulting
services for roads and water supply projects and conducts research and development
for road maintenance projects, with particular focus on bitumen technology.
For 4QF14, the companys Elsamex segment has reported a healthy revenue growth
of 20% YoY and 37% QoQ to Rs3.9bn.
60
3,000
40
2,000
20
3,923
2,871
0
2,372
3,276
2,312
1,958
2,059
1,000
(%)
4,000
1,836
(Rs mn)
Exhibit 80: Elsamex revenues back on track over past few quarters
(20)
0
1QF13 2QF13 3QF13 4QF13 1QF14 2QF14 3QF14 4QF14
Revenue (LHS)
Growth YoY (RHS)
YuHe Expressway: In 2011, the company has acquired a 49% stake in YuHe
expressway for US$160mn through its subsidiary ITNL International Pte Ltd. The
expressway is operational and has a remaining concession period of ~18 years. The
company has funded the entire acquisition through debt. The project has been
operational for ~12 years and is profitable at the net level. It has seen its revenues
increase at a CAGR of 25% over C10-C14. The management expected the project to
report revenues of RMB475mn (US$76mn) and PAT of RMB130mn (US$20.8mn) in
C14.
Exhibit 81: Strong revenue growth in YuHe Expressway
Exhibit 82: YuHe Expressway project details
11.83
11.12
11.65
10.57
9.57
8.80
8.78
(3)
2QF13 3QF13 4QF13 1QF14 2QF14 3QF14 4QF14

Revenue (LHS)
Growth (RHS)
Particulars
Initial project cost
RMB3bn
Location
Inner Ring road, Yu Bei

District to Hechaun Country
Concession Period
30 years
Design Speed
60-80 km/hr
Vehicle Categories
Passenger
4 (Seat Capacity)
Goods
5 (# of axels)
(%)
12
(Rs mn)
12
(8)
D/E:1.35
Residual: 18 years

July 8, 2014 | 49
Financial Analysis
Operational BOT portfolio to increase to 10.6% CAGR over F14-17e
Of total portfolio of 26 projects, the company has 11 projects aggregating US$2.9bn
under various stages of construction. Of these, three are annuity projects aggregating
498 lane kms, while eight are toll projects aggregating 3,642 lane kms. The
construction activity on all under-construction projects are as per schedule. Going
forward, we believe ITNLs portfolio size to increase to 10,915 lane kms, indicating a
CAGR of 10.6% over F14-17e.
Exhibit 83: Portfolio to increase 1.5x over F14-17e
12,000
(Lane kms)
10,000
867
732
10,915
F16e
F17e
F17e
(Total)
1,257
1,459
8,000
785
1,057
6,000
4,000
173
656
3,929
2,000
0
F09
F10
F11
F12
F13
F14e
F15e
BOT revenues to increase

The companys BOT revenues has clocked a CAGR of 42.4% over F11-14e mainly led
by commissioning of (a) Ramky Elsamex Hyderabad Ring Road, (b) East Hyderabad
Expressway, (c) Beawer-Gomti road project and (d) Pune-Solapur BOT project.
Currently operational BOT (toll) projects generate revenues of ~Rs33.86mn per day,
up from ~Rs8.5mn per day in F11.
Going forward, we expect annuity revenues of Rs7.8bn and Rs14.1bn in F15e and
F16e led by commissioning of its under-construction annuity projects. On the other
hand, toll revenues are expected to increase at a CAGR of ~34% over F13-16e to
Rs8.7bn in F16e. This would be on the back of (a) commissioning of some of its under
development toll projects, (b) 5-6% traffic growth in the medium term and (c) toll rate
hike of ~5-6%.
Exhibit 84: Commissioning of new BOT projects increases BOT revenues
24,000
22,900
(Rs mn)
18,000
15,715
11,061
12,000
8,692
5,402
6,000
3,698
1,517
2,242
0
F09
F10
F11
F12
Annuity revenue
F13
F14e
F15e
F16e
Toll revenue
July 8, 2014 | 50

Strong order book to drive construction revenues
During the year, the company has secured orders worth ~Rs34bn taking its EPC order
book to ~Rs115bn as on 4QF14. This converts into an order book-to-sales ratio of
2.7x F14 construction revenues providing comfortable revenue visibility over the next
two to three years. As ITNL has changed its business model and is channelising all
EPC orders through the holding company, any new project win would also add to the
order book.
Exhibit 85: Order book & order book-to-sales ratio

160,000
2.2
2.2
2.5
2.2
56,000
2.0
1.8
120,000
Exhibit 86: Pick-up in execution to keep momentum continuing
1.8
1.8
1.7
2.0
42,000
Order book (LHS)
0.0
12,557
14,000
F09
F10
49,707
47,336
41,854
47,384
42,851
27,878
0.5
28,000
2,592
114970
4QF14
119710
3QF14
130000
2QF14
138557
1QF14
146617
4QF13
97955
3QF13
107432
108793
2QF13
1QF13
40,000
120573
1.0
(Rs mn)
(%)
1.5
80,000
4QF12
(Rs mn)
1.5
0
F11
F12
F13
F14e F15e F16e
Construction revenues
Order book to sales (RHS)
EBITDA margins to increase to 30.4%

Consolidated EBITDA margins are expected to increase from 28.7% in F14 to 30.4%
in F16e led by increase in contribution of BOT revenue projects. The proportion of
BOT revenues which contributes 5.5% in F13 is expected to increase to 10.3% in
F16e. Generally, BOT segment s report a higher EBITDA margins of 80-85% as
compared to 10-12% posted by the EPC segment.
48
21,000
36
18,896
(Rs mn)
28,000
14,000
24
(%)
Exhibit 87: Higher share of BOT revenues leading to EBITDA improvement
12
14,655
18,379
F11
F12
F13
25,925
11,549
F10
22,771
7,993
7,000
F15e
F16e
0
EBITDA (LHS)
F14e
Growth (RHS)
Financial position comfortable to fund equity requirements

ITNL has 11 projects under construction aggregating ~US$ 2.9bn as on 4QF14. The
company has an equity requirement of ~Rs10.5bn for its under-construction projects
over next three-four years period. ITNL has recently raised Rs7.5bn through issue of
non convertible preference share (in Dec13) and Rs5.25bn through rights issue (in
May14). We believe improvement in operating cash flows as more projects get
operational and recent fund raising would suffice the need of incremental equity
requirement for the company over next three-four years.
July 8, 2014 | 51
Valuations
We have used Sum-Of-The-Parts (SOTP) valuation method for ITNL. We value the
construction business at an EV of 7x F16e EBITDA estimate thats lower than its 3year average and the BOT projects on a DCF basis at a CoE of 14%. Also, we have
valued the international business, Elsamex and YuHe Expressway using P/BV multiple
of 1.5x and 1x.The projects such as Nagpur bus transport, Metro Rail Ph I and MP
Entry Point project are valued using P/BV multiple of 1x.
We re-initiate our coverage on the stock with a BUY rating and a target price of Rs272,
indicating an upside of 30%. At the CMP, the stock trades at a P/BV of 0.9x F15e and
0.9x F16e earnings and trades at EV of 11.1x F15e and 10.2x F16e EBITDA.
Exhibit 88: SOTP valuation

Particulars
ITNL's construction business
Segment
Construction
Driver Multiple
6,462
Net debt
Total
Value
(Rsmn)
Value per
share (Rs)
Proportionate
Basis
stake (%)
45,233
183
67.5
EV/EBITDA of 7x
(37,329)
(151)
(55.7)
Standalone net debt as on Mar'14
7,904
32
11.8
Road BOT projects

Noida Toll Bridge
Toll
5,502
25%
1,376
2.1
NPV at CoE of 14%
Gujarat Toll Roads
Toll
8,312
84%
6,950
28
10.4
NPV at CoE of 14%
West Gujarat E'way
Toll
1,628
100%
1,628
2.4
NPV at CoE of 14%
RIDCOR Phase-I & II
Toll
12,870
50%
6,435
26
9.6
NPV at CoE of 14%
Beawar-Gomti
Toll
704
100%
704
1.0
NPV at CoE of 14%
Pune Sholapur
Toll
3,810
100%
3,810
15
5.7
NPV at CoE of 14%
Moradabad Bareilly
Toll
1,714
100%
1,714
2.6
NPV at CoE of 14%
Chandrapur Warora
Toll
2,511
35%
879
1.3
NPV at CoE of 14%
Narkatpally Addanki
Toll
2,700
50%
1,350
2.0
NPV at CoE of 14%
Kiratpur Ner-Chowk
Toll
4,326
100%
4,326
18
6.5
NPV at CoE of 14%
Sikar Bikaner
Toll
1,585
100%
1,585
2.4
NPV at CoE of 14%
Baleshwar Kharagpur
Toll
926
100%
926
1.4
NPV at CoE of 14%
Barwa Adda Panagarh
Toll
1,312
100%
1,312
2.0
NPV at CoE of 14%

NPV at CoE of 14%
Khed Sinnar
Toll
1,045
100%
1,045
1.6
North Karnataka E'way
Annuity
1,471
94%
1,375
2.1
NPV at CoE of 14%
Thiruvananthapuram Phase - I & II
Annuity
1,056
50%
528
0.8
NPV at CoE of 14%
AP E'way
Annuity
248
100%
248
0.4
NPV at CoE of 14%
Hyderabad Ring Road
Annuity
1,438
26%
374
0.6
NPV at CoE of 14%
East Hyderabad E'way
Annuity
1,134
74%
839
1.3
NPV at CoE of 14%
Hazaribagh Ranchi E'way
Annuity
1,579
74%
1,168
1.7
NPV at CoE of 14%
Jharkhand roads Ph-I & II
Annuity
6,820
100%
6,820
28
10.2
NPV at CoE of 14%
Chenani Nashri
Annuity
3,357
100%
3,357
14
5.0
NPV at CoE of 14%
Jorabat Shillong
Annuity
892
50%
446
0.7
NPV at CoE of 14%
73.4
Total
49,195
199
Elsamax
66,941
2,700
1.5
4,050
16
6.0
Valued at 1.5x its investment
Bus transport project
1,600
1.0
1,600
2.4
Valued at 1x its investment
Metro Rail Gurgaon Ph I
3,264
81%
2,657
11
4.0
MP Entry Point project
2,025
51%
1,033
1.5
Yuhe Expressway
1,200
49%
0.9
272
100.0
Grand Total
588
67,027
July 8, 2014 | 52
300,000
360
225,000
0.5x
1x
1.0x
2x
2.0x
EV
2.5x
5.0x
7.5x
10.0x
Jun-14
Feb-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Dec-11
Aug-11
Apr-11
Jun-14
Feb-14
Sep-13
May-13
Jan-13
Sep-12
Dec-11
Dec-10
Share price
May-12
Aug-11
Apr-11
75,000
Aug-10
120
Dec-10
150,000
Aug-10
240
Mar-10
(x)
480
Mar-10
(x)
Exhibit 89: P/BV and EV/EBIDTA band
12.5x
Exhibit 90: Key BOT assumption

Operational
Project
West
Pune
Gujarat
Solapur
E'way
KM
Issuing Auth.
Under Development
NAKEL
RIDCOR
Ph - II
MBEL
CWEL
KNC
SBEL
KBEL
Khed
Sinnar
26
30
206
15
65
240
50
102
146
67
114
102
MORTH
MSRDC
MSRDC
NHAI
NHAI
NHAI
State
NHAI
MoRTH
NHAI
NHAI
30
16
18
15
15
25
30
28
25
24
Con. Start
Sep-05
Sep-11
Jan-11
Jun-10
Dec-10
Jan-11
Jan-14
Feb-13
Jan-13
Con. End
Sep-25
Mar-30
Jan-35
Jun-42
Aug-35
Jan-41
Apr-40
Feb-38
Jan-37
2,758
14027
17,605
8,126
19,836
6,886
22,910
8,029
6,544
400
1,600
2,335
2,028
2,217
2,178
9,577
10,600
6,098
180
2,850
4,670
Equity (Rs mn)

Debt (Rs mn)
Barwa
Adda
Panagarh
MORTH
Concession (Yrs)
TPC (Rs mn)
Beawar
Gomti
(Additional)
Grant (Rs mn)
1,763
6,816
13,186
3,360
4,433
1,763
20
20
Apr-14
Feb-14
Jan-44
Apr-34
Feb-34
13,600
24,522
19,307
1,667
1,963
3,690
7,357
2,826
14,749
3,889
4,581
9,520
17,165
13,515
1,346
2,473
390
2,966
Traffic Grth (%)
6%
6%
5%
6%
5%
5%
5%
5%
5%
5%
5%
5%
Toll inc (%)
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
11.0%
11.0%
11.0%
11.0%
11.0%
11.0%
11.8%
11.8%
11.0%
11.0%
11.0%
11.0%
Int Rate (%)

(Rsmn)
F12
F13
F14e
F15e
F16e
Order inflow
71,424
73,431
10,204
64,582
62,928
Order book
120,573
146,620
114,970
132,216
145,437
31.1
21.6
15.0
10.0
42,851
47,384
41,854
47,336
49,707
2.8
3.1
2.7
2.8
2.9
growth %
Contract revenue
Book to Bill (x)
(21.6)

As % of sales
Materials Consumed
F12
F13
F14e
F15e
F16e
2.2
2.3
3.3
3.3
3.3
54.4
51.5
45.3
45.3
45.3
Operation & Maintenance expense
3.0
6.2
6.0
6.4
6.4
Others
1.9
1.7
1.1
1.1
1.1
Employee Cost
6.6
5.7
6.3
6.3
6.3
Contract Expense
Administration & other expenses

Total Manufacturing exp.
5.7
4.8
15.2
7.2
7.2
73.9
72.3
71.3
69.6
69.6
July 8, 2014 | 53
Key risk
NPV valuation.
July 8, 2014 | 54
Company profile
ITNL was incorporated in 2000 by IL&FS, an infrastructure development and finance
company and currently has 26 road projects at various stages. The company has a
total of ~13,161 lane kms in its road portfolio which makes it one of the largest listed
road infrastructure companies. It has successfully commissioned almost 4000 lane
kms of road projects with another 8000 lane kms under development. The company is
engaged in the designing, development, operation and maintenance of national and
state highways, roads, flyovers and bridges. Recently, the company has also ventured
into other infrastructure projects besides roads such as its Nagpur Bus Service,
Gurgaon Metro Rail project and the Gulbarga and Shimoga airports being developed
in Karnataka.
ITNL does not have an in-house construction arm to carry out the construction work
for its projects; rather it relies on sub contractors to carry out the work. INTL is largely
a developer of infrastructure projects and carries out project management as well as
maintenance activities for various infrastructure and road projects.
Exhibit 93: Company structure
July 8, 2014 | 55
Key management
Mr. Deepak Dasgupta, Chairman
Mr. Deepak Dasgupta is as an Advisor of Unitech Limited and serves as the Chairman
of IL&FS Transportation Networks Limited. He has served as the Chairman of NHAI
for more than 5 years and has also served as an Advisor to the Asian Development
Bank on consulting assignments. He has been a Non-Executive & Independent
Director of IL&FS Transportation Networks Limited since June 30, 2009. He is a
retired Indian Administrative Services officer with over 35 years of experience during
which he has headed various departments of Government of Haryana and the
Government of India including those related to infrastructure development and policy
formulation. He has also served as a full time member on the Task Force for
interlinking rivers. Mr. Dasgupta holds a bachelors degree and a masters degree in
science from the Delhi University.
Mr. Karunakaran Ramchand Managing Director
Mr. K Ramchand serves as a Member of Management Board and Chief Executive
Officer of Infrastructure at Infrastructure Leasing & Financial Services Limited. Mr.
Ramchand has been the Managing Director at IL&FS Transportation Networks Limited
since August 13, 2008. He served as Managing Director of Punj Lloyd Ltd. He has
over 25 years of experience in urban and transport infrastructure development sector.
He served as the Chief Executive Officer and President of IL&FS Transportation
Networks Limited. Mr. Ramchand holds a Bachelors degree in civil engineering from
Madras University and a Post graduate degree in development planning from the
School of Planning, Ahmedabad.
Mr. Cherian George, Chief Financial Officer
Mr. George Cherian serves as the Chief Financial Officer of IL&FS Transportation
Networks Limited. Mr. Cherian is responsible for framing of financial policies and
managing the financial affairs of IL&FS Transportation Networks Limited. He has over
35 years of experience in accounting and finance. Prior to joining IL&FS
Transportation Networks, he was associated with Bell Granito Ceramica Limited as its
Vice President (Finance) from June 2006 to March 2007. He served at Wimco Limited
from 1975 to 2006 in various designations, including its Vice President (Corporate
Finance). He holds a bachelor's degree in Science from University of Madras and is
an associate member of the Institute of Chartered Accountants of India.
Mr. Mukund Gajanan Sapre, Executive Director
Mr. Mukund Gajanan Sapre 54 years, is an Executive Director of our Company and
has been associated with the IL&FS group since 1992. He holds a bachelors degree
in civil engineering, a diploma in Systems Management and a diploma in Financial
Management with over 28 years of experience in the industry. Prior to joining the
Company, he was involved with international projects in the Philippines, Indonesia,
Mexico and Spain and has played a vital role in implementing the High Speed Rail
Project and evaluating the Cargo Airport Project in Mexico. He has also been
previously associated with Engineers India Limited as its Deputy Manager during the
period from 1984 to 1992 and with Gammon India Limited as an Assistant Engineer
during the period from 1980 to 1984.
July 8, 2014 | 56
Income Statement
Y/E Mar (Rsmn)
Net sales
Balance Sheet
F12
F13
F14e
F15e
F16e
56,056
66,448
65,870
74,905
85,279
38.5
18.5
(0.9)
13.7
13.9
Operating expenses
41,401
48,070
46,974
52,134
59,354
EBITDA
14,655
18,379
18,896
22,771
25,925
26.9
25.4
2.8
20.5
766
944
1,510
1,916
20,855
growth (%)
growth (%)
13,890
17,435
17,386
Other income
1,238
1,440
2,154
2,585
Interest paid
7,282
11,190
14,710
15,669
EBIT
PBT
7,846
7,684
4,831
7,772
Tax
2,457
2,274
266
2,332
31.3
29.6
5.5
30.0
4,565

Net profit
Minority interest
Reported Net profit
Non-recurring items
Adjusted Net profit
growth (%)
5,389
5,410
(419.2)
(208.1)
4,970
5,202
36.8
4,602
-
3,102 Total assets

Current liabilities
9,216 Borrowings
2,765 Other non-current liabilities
30.0
6,451
(865.9)
Total liabilities
Share capital
Shareholders' funds
4,970
5,202
4,602
4,583
14.8
4.7
(11.5)
(0.4)

F14e
F15e
F16e

Y/E Mar

Investments
F13
Y/E Mar (Rsmn)

Pre-tax profit
EBITDAM
26.1
27.7
28.7
30.4
EBITM
24.8
26.2
26.4
27.8
30.4 Depreciation
NPM
8.9
7.8
7.0
6.1
RoE
17.8
16.1
10.6
8.6
RoCE
6.5
7.3
7.8
5.5
6.5 Total tax paid

5.8 Operating CF
RoIC
2.8
2.5
1.1
1.0
1.2
Capital expenditure
Chg in investments
Per share data (Rs)

194.3
194.3
246.7
246.7
EPS
25.6
26.8
18.7
18.6
FDEPS
20.1
21.1
18.7
18.6
CEPS
29.5
31.6
24.8
26.3
22.6 FCF
31.2
BV
113
149
203
231
249
DPS
3.7
3.8
4.8
4.8

22.6 Investing CF
Equity raised/(repaid)

PE
8.6
8.2
11.7
11.8
1.9
1.5
1.1
0.9
10.5
12.5
11.1
2.7
2.9
3.6
3.4
D/E (x)
3.7
3.9
3.8
3.6
3.6
DSO (days)
54
48
51
52
52
NPM (%)
8.9
7.8
7.0
6.1
6.5
Asset turnover (x)
0.4
0.4
0.3
0.3
0.3
5.4
5.5
5.5
5.3
5.2
17.8
16.1
10.6
8.6
9.4
EV/EBITDA
EV/Sales
F14e
F15e
F16e
6,713
8,485
10,344
27,714
23,857
35,187
36,368
40,496
3,954
6,871
4,691
4,691
4,691
1,447
1,891
1,891
1,891
1,891
116,522
168,620
222,666
246,012
260,909
152,475
205,792
271,148
297,448
318,331
17,667
19,911
26,546
27,929
29,422
102,194
143,591
188,165
206,165
221,165
2,041
2,314
1,810
1,810
1,810
121,902
165,817
216,522
235,904
252,398
1,943
1,943
2,467
2,467
2,467
26,045
34,805
47,571
54,489
58,878
27,988
36,748
50,038
56,956
61,345
2,585
3,227
4,588
4,588
4,588
152,475
205,792
271,148
297,448
318,331
F12
7,846
F13
7,684
766
944
3,484
6,101
(2,457)
(2,274)
300
65
9,938
12,520
F14e
7,772
1,510
1,916
(4,694)
201
(266)
(2,332)
(467)
(857)
914
6,700
F16e
9,216
2,118
(2,633)
(2,765)
(866)
5,070
(58,967) (53,487) (55,556) (25,261) (17,016)

(2,010)
(2,917)
2,180
(60,976) (56,404) (53,376) (25,261) (17,016)

(49,028) (40,966) (54,642) (18,562) (11,946)
47,524
524
41,398
47,464
21,530
15,000
(1,196)
(1,196)
(926)
(946)
(1,196)
2002
5146
7829
48,600
45,598
54,622

F15e
4,831

9.7 Financing CF
0.9
10.5
P/BV
F13
4,552
Cash Flow Statement

F12
O/s shares (mn)
F12
2,838
17,693
5,440
Cash & Bank balances

2,118 Goodwill & intangible assets
(857.1)
4,583
Y/E Mar (Rsmn)
(0)
20,334
0
13,804
(2,438)
1,715
2,160
1,773
1,858
2,838
4,552
6,713
8,485
10,344
Other key ratios
RoE (%)
July 8, 2014 | 57
Institutional
Equity
Research
Initiating Coverage
Target price
Upside/(downside)
PE deal-a morale booster; Initiate with a HOLD

Ashoka Buildcon Ltd (ABL) is an integrated road developer with over a decade
of experience, which is well supported by the companys in-house EPC
business that undertakes EPC activities mainly for roads and power T&D
segment. The company has an order book of Rs35,460mn (excluding Cuttack
Angul BOT project) as on 4QF14, thereby converting into order book-to-sales of
2.0x trailing revenues. On a consolidated basis, we estimate ABL to report an
earning CAGR of 9.6% over F13-16e and a RoE of 8.0% in F16e. We initiate with
a HOLD rating on ABL due to limited upside from current levels.
144
155
7
Rs bn
'000
Rs
mn
mn
%
%
Rs
22.8
58.5
155 / 41.3
158.1
51.3
67.6
0.0
5.0
Enjoys a dominant position on NH-6: The company has strategically built its
portfolio across NH-6, which covers six states West Bengal, Orissa, Chhattisgarh,
Madhya Pradesh, Maharashtra and Gujarat. Of the total, ABL enjoys a healthy share
of 24% on NH-6 covering 1,739 lanes kms. We believe ABL would benefit from
increased economic activities in these sates resulting into high traffic growth.
Moreover, given (a) the relatively poor rail connectivity across the country, (b)
mineral-rich states such as Orissa and Chhattisgarh being in the path of NH-6, and
(c) the export potential of eastern ports such as Haldia, Dhamra and Paradip, we
believe this stretch has immense potential.

Nifty (abs)
Stock (abs)
Relative to Index
1m
4.7
(1.8)
(6.6)
3m
15.8
87.6
71.8
6m
24.8
121.5
96.7
1yr
32.8
128.5
95.7
Performance
200
(%)
(Rs)
150
150
100
100
50
50
0
Jul-13
Oct-13
Dec-13 Mar-14
Ashoka (LHS)
July 8, 2014
AGLL IN; ASBL.BO
HOLD
Rs
Rs
%
Market data
Mkt capitalisation
Average daily vol
52-week H/L
Shares O/S
Free float
Promotor holding
Foreign holding
Face value
Ashoka Buildcon Ltd (ABL)
PE deal a silver lining: The company has roped in SBI Macquarie as a private
equity investor in Ashoka Concessions Ltd (ACL), which holds seven BOT projects,
diluting 34% stake (which can increase to 39% depending on the performance of one
BOT project) for Rs7bn. SBI Macquarie has also committed Rs1bn for any contingent
requirement in these seven BOT projects with further additional commitment of for
new BOT projects. This would help ABL to bid and add new projects worth to its
existing portfolio.
Order backlog of Rs35,460mna short-term concern: ABL had an order book of
Rs35,460mn (excluding CuttackAngul BOT project) as on 4QF14, thereby
converting into order book-to-sales of 2.0x trailing revenues. We expect order inflow
to pickup by 2HF15e with the new and decisive government in place. Going forward,
we expect order inflows of Rs23,646mn in F15e and Rs26,196mn in F16e led by
pickup in ordering activity.
(50)
Jun-14
Rel. to Nifty (LHS)
Initiate with a HOLD: We initiate our coverage with a HOLD rating with a TP of
Rs155 on account of limited upside from current levels. We have valued ABL on an
SOTP basis, assigning 7.0x EV/EBITDA to its standalone business (Rs87/share)
which is 25% discount to its 3-year average and have valued its BOT projects on NPV
basis (Rs68/share). At the CMP, the stock trades at a P/BV of 1.7x F15e and 1.6x
F16e earnings and trades at EV/EBITDA of 11.4x F15e and 9.7x F16e EBITDA.
Key risk to our call would be slower execution, slower than expected traffic growth,
lesser expected project wins and greater competitive intensity in the roads sector.
Financial Summary
Y/E Mar (Rsmn)
Net sales
F12
F13
F14e
15,000
18,527
growth (%)
15.1
23.5
EBITDA margin (%)
21.7
20.1
1,248
999
1,131
Adjusted net profit

EPS (Rs)
growth (%)
17,949
F15e
F16e
19,256
23,119
(3.1)
7.3
20.1
22.0
25.7
25.7
993
1,109
7.9
5.3
6.2
6.3
7.0
(40.0)
(32.5)
15.7
1.9
11.7
20.5
Viral Shah
+91 22 4227 3388
P/E (x)
18.2
27.0
23.4
22.9
EV/EBITDA (x)
12.1
12.6
13.4
11.4
9.7
Dividend yield (%)
0.0
0.6
0.8
0.8
0.8
Pranjal Sanghvi
+91 22 4227 3428
RoE (%)
RoCE (%)
12.1
9.6
9.8
7.6
8.0
3.8
1.7
1.4
1.7
1.9
SBICAP
Established player in the road BOT space
Ashoka Buildcon Ltd (ABL) is an integrated road developer with over a decade of
experience, which is well supported by the companys in-house EPC business that
undertakes EPC activities mainly for roads and power T&D segment. The company is
one of the few developers in the road BOT space who have seen full life cycle of
projects. Over the years, the company has strategically built its portfolio across NH-6
comprising 19 projects. Of these, 15 projects (combined portfolio size of US$838mn)
are operational while four projects (portfolio size of US$872mn) are under various
stages of construction.
Exhibit 94: BOT portfolio increase to US$1.7bn
Name of the Project
Total
Length
Concession
Cost
(Lane km) period
(Rsmn)
Client
Toll revision
Rate of toll revisiob
month
Debt
Equity Grant
Ashoka's
share
Operational
Bhandara
5,350
377
Pune Shirur
1,610
216
Nagar Aurangabad
1,026
168
Nagar Karmala
504
168
Wainganga
409
26
58
12
Nashirabad
147
Sherinalla
123
Dhule Bye Pass
Indore Edalabad
20 years
NHAI
12 years &
PWD
2 months
10 years &
PWD
9 months
16 years &
PWD
9 months
18 years &
MORT&H
9 months
8 years &
PWD
9 months
10 years & 11
MORT&H
months
16 years &
PWD
3 months
15 years
MPRDC
10 years &
PWD
9 months
1-Sep
WPI
3,450
1,800
1-Jul
19.5% every 3 years
1,127
483
100%
1-Apr
19.5% every 3 years
718
308
100%
1-Feb
19.5% every 3 years
352
151
100%
Every year at WPI
286
123
50%
every year
No increase
41
17
100%
No Hike
No increase
103
44
100%
86
37
100%
1,148
492
100%
1-Mar
19.5% every 3 years
1-Apr
7% every year
1-Apr
25% every 3 years
429
184
100%
496
213
100%
406
Dewas Bypass
613
40
Katni Bypass
709
35
12 years
MSRDC
1-Sep
15% every 2 years
Pimpalgaon-Nasik-Gonde
6,940
454
30 years
NHAI
1-Apr
3%+40% of WPI
4,790
2,150
16,910
452
20 years
NHAI
1-Apr
3%+40% of WPI
11,837
5,073
26%
5,870
368
20 years
NHAI
1-Sep
WPI
4,100
1,770
51%
8,350
340
25 years
MPRDC
1-Apr
7% every year
50,259
3,077
Durg
Jaora-Nayagaon
Total
51%
No Hike
1,641
Belgaum Dharwad
100
5,350
3,000
34,314
15,845
100
100%
37%
Under Development / FC under implementation

Sambalpur Baragarh
11,420
407.6
30 years
NHAI
1-Apr
3%+40% of WPI
8,100
3,320
100%
Dhankuni-Kharagpur
22,050
840.5
25 years
NHAI
1-Apr
3%+40% of WPI
17,460
4,590
100%
Chennai outer ring road
14,400
183
20 years
State
Annuity
10,800
1,630 1,970
10 years
State
Annuity
Karnataka State highway

Total
Grand Total
4,500
52,370
1,431
102,629
4,508
2,198
38,558
72,872
942
1,360
50%
51%
10,482 3,330
26,327
3,430
Source: NHAI, Company, SSLe
Strategically built its portfolio across NH-6

The company has strategically built its portfolio across NH-6, which covers six states
West Bengal, Orissa, Chhattisgarh, Madhya Pradesh, Maharashtra and Gujarat. Of
the total market, ABL enjoys a healthy share of 24% on NH-6 covering 1,739 lanes
kms. With such a dominant position on NH-6, ABL has developed a strong credible
traffic database which gives it an edge in evaluating various prospects of ancillary
patches that come for bidding from state and NHAI level.
July 8, 2014 | 59
Exhibit 95: NH-6 entrance to real traffic
Source: mahapolice.gov.in, SSLe
Gujarat and Maharashtra have

consistently outperformed the average
national GDP growth
NH-6 connects Gujarat and Maharashtra to the eastern state of West Bengal. Over the
past few years, Gujarat and Maharashtra have consistently outperformed the average
national GDP growth. Also, the states such as West Bengal, Orissa, Chhattisgarh and
Madhya Pradesh have not disappointed either, growing marginally above/close to the
national average rate. We believe ABL would benefit from increased economic
activities in these sates resulting into high traffic growth. Moreover, given (a) the
relatively poor rail connectivity across the country, (b) mineral-rich states such as
Orissa and Chhattisgarh falling in the path of NH-6, and (c) the export potential of
eastern ports such as Haldia, Dhamra and Paradip, we believe this stretch has
immense potential going forward.
Exhibit 96: State-wise % GDP CAGR over F08-F13
16
14.8
(%)
12
11.2
10.2
7.2
6.8
6.6
7.2
0
Chhattisgarh
Gujarat
Madhya
Pradesh
Maharashtra
Odisha
West Bengal India GDP
%CAGR ove F08-13
Source: Planning Commission, SSLe
July 8, 2014 | 60
PE deal a silver lining

Key highlights of the deal: In the last year. ABL transferred seven of its underconstruction BOT projects BelgaumDharwad, SambalpurBaragarh, Dhankuni
Kharagpur, Bhandara Highways, Dhule Highways, PimpalgaonNashikGonde and
JaoraNayagaon to its subsidiary Ashoka Concessions Ltd (ACL). ABL has
successfully diluted 34% stake (which can increase to 39% depending on the
performance of one BOT project) in ACL for Rs7bn by roping in SBI Macquarie as a
private equity investor. SBI Macquarie has also committed Rs1bn for any contingent
requirement in these seven BOT projects, with further additional commitment of
Rs6.5bn for new BOT projects.
Exhibit 97: Show the graphically representation of ABL & ACL
Additional equity commitment from SBI

Macquarie enables to bid and add projects
worth Rs6065bn.
Equity requirement of Rs1750mn for its

under-construction portfolio to be meet
through internal accruals.
Additional equity commitment a morale booster:

SBI Macquarie would further issue additional equity commitment for new BOT projects
in ratio of 34:66 which enables ACL to bid and add projects to its existing portfolio.
Post the deal, ACL has successfully added a new project Chennai ORR BOT to its
existing portfolio.
Incremental equity requirement of Rs1,750mn
The company has a total equity requirement of Rs15,950mn for its under construction
BOT portfolio of Rs52.3bn. Of this, it has already invested Rs14.2bn (ABL Rs8bn and
SBI-Macquarie Rs6.2bn) till 4QF14 and would require an incremental equity of
Rs1,750mn over the next 23 years. We believe that the company would meet its
equity requirements through internal accruals.
Exhibit 98: Requirement of under construction projects
Total Equity
requirement
(Rsm n)
ABL share
(Rsmn)
SBI-Macquire
share (Rsmn)
750
340
410
450
300
150
K arnataka State highway*
550
280
1,750
920
560
P articulars
Dhankuni-Kharagpur
Total (Rs mn)
S ource: Company, SSLe,* Holds only 51% stake in the project
July 8, 2014 | 61

Order backlog of Rs35.4bna short-term concern
ABL has an order book of Rs35,460mn (excluding CuttackAngul BOT project) as on
4QF14, thereby converting into order book-to-sales of 2.0x trailing revenues. The
company has terminated its contract with NHAI for CuttackAngul BOT project due to
issues relating to environmental clearances and land acquisition problems. The road
sector, which accounts for 8590% of its order book, has always been the key growth
driver for the company. However, over the past few quarters, ABL has been able to
reduce its concentration risk and improve revenue visibility by securing projects in the
Power T&D space. Currently, the Power T&D space contributes 33% (up from 7% in
F13) to its order book. In 1QF15e, the company has emerged as a lowest bidder for a
project worth Rs3,734mn in the Power T&D segment for North Bihar Power
Distribution Co which involves rural electrification works under Rajiv Gandhi Grameen
Vidyutikaran Yojana and strengthening of distribution network under special plan
(BRGF) for Vaishali District in the state of Bihar.
Order book of Rs35.4bn translates into order

book-to-sales ratio of 2.0xtrailing revenues.
The ordering activity has significantly been lower over the past few quarters mainly on
account of slowdown in investment cycle and due to election being undertaken in
April-May. However, with a new and decisive government in place, we expect order
inflows to pick-up by 2HF15e. Going forward, we expect order inflows of Rs23,646mn
in F15e and Rs26,196mn in F16e.
Exhibit 99: Segment-wise order book break up
Exhibit 100: Project-wise order back of Rs35,460mn
48000
2.8
2.4
(Rs mn)
Power T&D
33%
2.4
2.4
2.2
1.9
24000
2.0
2.0
1.6
12000
Sambalpur
6%
23670
30770
33620
29810
33220
37180
40200
0.8
Belgaum
0%
0.0
2QF13 3QF13 4QF13 1QF14 2QF14 3QF14 4QF14

Road BOT EPC (LHS)
Power T&D (LHS)
Dhankuni
26%
(%)
36000
3.2
OB-to-sales (RHS)
others
19%
Chennai
ORR
16%
July 8, 2014 | 62
Financial analysis
Revenue growth mainly driven by commissioning of BOT projects
We expect consolidated revenues of ABL to grow at 27% CAGR over F1316e mainly
driven by the growth in BOT revenue owing to commissioning of projects. In the
construction segment, we expect the company to report a flat revenue CAGR growth
of 3.1% over F1316e led by lower-than-anticipated order inflow (2x trailing revenues)
during the year.
Exhibit 101: BOT segment to drive consolidated revenues
Consolidated revenue to clock CAGR of
8.8% over F13-16e.
24,000
5,848
2,865
18,000
2,748
75
3,841
50
25
1,653
(%)
1,905
12,000
14,757
(Rs mn)
2,616
0
12,384
15,662
F11
F12
F13
17,247
11,126
F10
15,415
6,302
6,000
F15e
F16e
(25)
0
Construction Revenue (LHS)
F14e
BOT Revenue (LHS)
Growth (RHS)
Full/partial commissioning of new BOT road

projects to drive BOT revenue growth.
In the BOT segment, we expect the company to report revenues of Rs3,841mn and
Rs5,848mn in F15e and F16e respectively, mainly led by fully/partial commissioning of
BOT road projects such as SambalpurBaragarh, DhankuniKharagpur, Jaora
Nayagaon and BelgaumDharwad. It should be noted that ABL follows an accounting
policy that is different from its peers IRB, SEL and ITNL for 46 lane BOT toll
projects under-construction. The toll collected during the construction period, net of
O&M expenses would be credited to capital WIP. Consequently, we have incorporated
the same while estimating its toll revenue.
Exhibit 102: BOT revenues to grow at a CAGR of 27% over F1316e

6,000
Exhibit 103: Construction revenues to remain flat

18,000
17,247
15,662
14,757
15,415
4,500
11,126
3,000
(Rs mn)
(Rs mn)
13,500
1,500
12,384
9,000
6,302
4,500
0
F11
F12
F13
F14e
F15e
F16e
Pune Shirur
Nagar Aurangabad
Nagar Karmala
Wainganga
Sherinala
Indore Edalabad
Dewas Bye Pass
Katni Bye Pass
Bhandara
Belgaum Dharwad
Sambalpur Baragarh
Durg
Dhankuni-Kharagpur
0
F10
F11
F12
F13
F14e
Construction revenue
F15e
F16e
July 8, 2014 | 63

EBITDA margins to improve by 372 bps due to change in revenue mix
We expect consolidated EBITDA margins to increase by 372 bps to 25.7% in F16e led
by change in revenue mix. The proportion of BOT revenues, which contributed 20% to
the total revenue in F10, is expected to improve to 25% by F16e resulting into
increase in consolidated margins. Generally, BOT segments report higher EBITDA
margins of 8085% as compared to 1012% posted by the EPC segment.
F09
F10
F11
F12
5,935
F08
4,949
F07
3,945
12
3,719
1,500
3,250
24
2,506
3,000
2,143
36
1,640
4,500
1,233
48
1,055
(Rs mn)
Higher share of BOT revenue to boost

consolidated EBITDA margins
6,000
(%)
Exhibit 104: Margins to expand by 372 bps
0
EBITDA (LHS)
F13 F14e F15e F16e

Growth (RHS)
Earnings to be under check led by rising interest cost and high depreciation
We expect ABL to register subdued CAGR of 9.9% over F1316e on the earnings
front primarily due to higher interest cost despite growth in revenues and improvement
in EBITDA. We expect the interest cost to increase 46% YoY and 20% YoY for F15e
and F16e mainly due to commissioning of under construction BOT projects.
180
1,800
120
(Rs mn)
2,400
1,200
F11
1,118
2,079
F10
1,004
804
F09
974
348
600
842
1,248
60
(%)
Exhibit 105: Consolidate PAT to grow at CAGR of 9.9% over F1316e
F14e
F15e
F16e
(60)
PAT (LHS)
F12
F13
Growth (RHS)
July 8, 2014 | 64
Valuation
On a consolidated basis, we estimate ABL to report an earning CAGR of 9.6% over
F13-16e and a RoE of 8.0% in F16e. We initiate our coverage on the stock with a
HOLD rating. We have valued ABL on an SOTP basis, assigning 7.0x EV/EBITDA to
its standalone business (Rs87/share) which is 25% lower than its 3 year average and
have valued its BOT projects on NPV basis (Rs68/share). Accordingly, we have
arrived at a target price of Rs155, indicating an upside of 4% from the current levels.
We initiate with a HOLD rating due to limited upside from current levels. At the CMP,
the stock trades at a P/BV of 1.7x F15e and 1.6x F16e earnings and trades at
EV/EBITDA of 11.4x F15e and 9.7x F16e EBITDA.
Exhibit 106: SOTP valuation

Particulars
Ashoka's construction business
Segment
Driver
Multiple
Construction
2,197
ABL's value ABL's value

(Rs mn) (Rs/ share)
Proportionate
Basis
stake (%)
15,376
97
63.0
Net debt
(1,607)
(10)
Total
13,769
87
56.4
EV/EBITDA of 7x one year

rolling forward earnings
Standalone net debt as on
M h 31 2014
Ashoka Concession Road BOT projects

Pune Shirur
Toll
120
100
120
0.5
Nagar Aurangabad
Toll
153
100
153
0.6
NPV at CoE of 14%
Nagar Karmala
Toll
665
100
665
2.7
NPV at CoE of 14%
Wainganga
Toll
765
50
382
1.6
NPV at CoE of 14%
Sherinala
Toll
111
100
111
0.5
NPV at CoE of 14%
Indore Edalabad
Toll
2,249
100
2,249
14
9.2
NPV at CoE of 14%
Dewas Bye Pass
Toll
170
100
170
0.7
NPV at CoE of 14%
Katni Bye Pass
Toll
369
100
369
1.5
NPV at CoE of 14%

NPV at CoE of 14%
Annuity
248
51
Total
126
0.5
4,219
27
17.3
NPV at CoE of 14%
ACL Road BOT Projects

Bhandara
Toll
1,405
51
717
2.9
NPV at CoE of 14%
Belgaum Dharwad
Toll
1,283
100
1,283
5.3
NPV at CoE of 14%
Pimpalgaon-Nasik-Gonde
Toll
4,912
26
1,277
5.2
NPV at CoE of 14%
Sambalpur Baragarh
Toll
2,058
100
2,058
13
8.4
NPV at CoE of 14%
Durg
Toll
1,599
51
815
3.3
NPV at CoE of 14%
Jaora-Nayagaon
Toll
6,745
38
2,543
16
10.4
NPV at CoE of 14%
Dhankuni-Kharagpur
Toll
613
100
613
2.5
NPV at CoE of 14%
Annuity
863
50
NPV at CoE of 14%
431
1.8
Total
9,737
62
39.9
ABL's share @ 66%
6,426
41
26.3
24,414
155
100.0
Grand Total
Source: SSLe
July 8, 2014 | 65
68,000
180
51,000
Share price
0.5x
1x
1.5x
2x
2.5x
EV
2.5x
5.0x
7.5x
10.0x
Jun-14
Mar-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Jan-12
Oct-11
Oct-10
Jun-14
Mar-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Jan-12
Oct-11
Jul-11
Apr-11
17,000
Jan-11
60
Jul-11
34,000
Apr-11
120
Jan-11
(x)
240
Oct-10
(x)
12.5x
Exhibit 108: Key BOT assumption sheet

(Rsmn)
Project
Operational Projects
Indore -Edalabad
Ahmednagar-Aurangabad
Wainganga Bridge
Dewas Bypass
Katni Bypass
PuneShirur
Nagar -Karmala
Bhandara
Dhule Bypass
Nashirabad
Sherinala
Anawali Kasegaon
PNG
Belgaum Dharwad
Durg
JaoraNayagaon
Under cons./develop.
Sambalpur-Baragarh
DhankuniKharagpur
Lane
Kms
ABL's
Stake (%)
TPC
SPV
Equity
Debt
MPRDC
PWD
MORTH
PWD
PWD
PWD
PWD
NHAI
PWD
MORTH
PWD
PWD
NHAI
NHAI
NHAI
MPRDC
407
168
26
40
35
216
160
377
60
8
7
22
452
454
368
340
100
100
50
100
100
100
100
51
100
100
100
5
26
100
51
37
1650
1030
410
610
710
1610
500
5350
60
150
140
74
16,910
6940
5870
8350
495
309
123
183
213
483
150
1800
18
45
42
33
5073
2150
1770
5350
1155
721
287
427
497
1127
350
3450
42
105
98
41
11,837
4790
4100
3000
NHAI
NHAI
NHAI
NHAI
408
840
183
454
100
100
50
51
11,420
22,000
1,440
4500
3426
6600
1630
1350
7994
15,400
10,800
3150
Client
Grant/
(Prem.)
Con.
sign
Int.
Rate (%)
Toll
Inc (%)
Traffic
Inc (%)
100
-
22-Sep-01
18-Dec-06
16-Nov-98
31-Aug-01
19-Aug-02
7-May-03
19-Feb-99
18-Sep-07
28-Aug-97
16-Nov-98
23-Mar-99
1-Mar-04
8-Jul-09
29-Jun-10
23-Jan-08
20-Aug-07
11
11
11
11
11
11
11
11
No debt
No debt
No debt
No debt
12
11.5
11
11
5
15.0*
6
5
6
18.0*
18.0*
5
21.0#
16
n.a.
5
5
5
5
5
5
6
5
6
5
5
5
5
5
5
5
5
6
5
5
29-Jun-10
21-Jun-11
12
11
5
5
5
5
1970

(Rsmn)
Order inflow
Order book
Sales
Book to Bill (x)
Source: SSLe
F12
F13
F14e
F15e
F16e
18,000
49,720
15,000
3.3
3,715
35,680
17,755
2.0
16,401
35,460
16,621
2.1
23,646
40,779
18,327
2.2
26,221
44,857
22,143
2.0

As % of sales
Construction material cost
Sub contracting charges
Others
Cost of material sold
Employee costs
Administrative cost
Total cost
F12
22.2
37.4
9.2
4.6
2.9
2.1
78.3
F13
21.9
37.4
12.5
2.9
2.7
2.6
79.9
F14e
21.5
36.0
12.0
3.0
3.2
2.4
78.0
F15e
20.0
35.0
11.0
2.8
2.9
2.6
74.3
F16e
20.0
35.0
11.0
2.8
2.9
2.6
74.3
July 8, 2014 | 66
Key risk
NPV valuation.
July 8, 2014 | 67
Company Profile
ABL is one of the largest toll road operators in India and has a portfolio of 19 BOT
projects of which 11 are operational and 4 under construction. The company has an
established track record of executing and running BOT projects profitably. ABL is an
early entrant in the BOT road space having seen the full cycle of projects. From RMC
division to construction, operation and maintenance and toll collection, the company is
present in the entire value chain of road construction. The company has a head office
in Nashik and has currently presence in various states such Maharashtra, Madhya
Pradesh, Chhattisgarh, Rajasthan, Karnataka and Orissa across the country.
Exhibit 111: ABLs company structure
July 8, 2014 | 68
Key management
Ashok M. Katariya- Executive Chairman
Aged 62 years is the Executive Chairman of the company. He is a gold medalist in
B.E. from COEP, Pune University, India. Ashok M. Katariya has previously worked
with the Public Health Department in Maharashtra and Prabhakar Takle & Co. In 1975,
he started the working as a contractor to the PWD, Maharashtra. Subsequently, he
ventured into civil construction and infrastructure development. He is an active
participant in the Institute of Engineers, Indian Concrete Institute, Indian Institute of
Bridge Engineers, Builders Association of India and Construction Federation of India.
He has received the Udyog Ratna award from Indian Economic Council and Life
Time Achievement award from the Association of Consulting Civil Engineers.
Satish D. Parakh- Managing Director
Aged 53 years, is the Managing Director of the Company. He holds a B.E. degree in
civil engineering. Satish D. Parakh has been with the Ashoka Group since 1982 and
has executed various industrial/residential and BOT projects. He has previously
worked with Shapoorji Pallonji & Company and M/s Kanitkar-Kulkarni. He is a Member
of Maharashtra Economic Development Council. He was also the chairman of the
Institute of Engineers, Nashik in 2007
July 8, 2014 | 69
Income Statement
Y/E Mar (Rsmn)
Net sales
growth (%)
Operating expenses
EBITDA
growth (%)
EBIT
Other income
Interest paid
PBT
Tax
Net profit
Minority interest
Reported Net profit
Non-recurring items
Adjusted Net profit
growth (%)
Balance Sheet
F12
F13
F14e
F15e
F16e
15,000
18,527
17,949
19,256
23,119
15.1
23.5
(3.1)
7.3
20.1
11,750
14,808
14,003
14,307
17,177
3,250
3,719
3,945
4,949
5,941
F12
F13
F14e
F15e
F16e
Cash & Bank balances
500
517
945
1,662
1,294
8,148
9,940
11,499
12,343
13,555
Investments
2,052
2,824
2,847
2,847
2,847
29.7
14.4
6.1
25.4
20.1
850
1,324
1,389
1,878
2,185
Goodwill & intangible assets
2,401
2,395
2,556
3,071
3,757
Other non-current assets
260
215
246
264
316
1,144
1,395
1,335
1,954
2,342
(157)
(157)
1,058
1,310
1,516
1,380
451
685
688
469
589
29.8
64.7
52.5
34.0
34.0
622
911
1,142
1,065
183
1,248
-
373
469
842
157
353
974
157
82
993
-
999
1,131
993
23.8
(20.0)
13.3
(12.3)
F12
F13
F14e
F15e
Total assets
1,742
1,761
1,761
1,761
1,761
41,296
109,339
118,110
121,916
122,483
53,738
124,380
135,162
140,529
141,940
5,242
8,247
9,271
9,941
11,733
Borrowings
17,069
24,535
31,032
35,532
36,032
Other non-current liabilities
20,457
78,304
77,585
77,179
75,430
Total liabilities
42,768
111,086
117,888
122,652
123,195
(33) Share capital

1,109
-
1,248
Net fixed assets
Current liabilities
1,731
Reserves & surplus

Shareholders' funds
1,109
Minority interest
11.7
Total equity & liabilities

Y/E Mar
Y/E Mar (Rsmn)
552
527
790
790
790
9,789
9,981
11,839
12,641
13,561
10,341
10,507
12,628
13,431
14,351
2,787
4,645
4,446
4,395
124,380
135,162
140,529
141,940
630
53,738
Cash Flow Statement

F16e
Y/E Mar (Rsmn)

Pre-tax profit
F12
1,516
F13
1,731
1,389
1,878
2,185
21.7
20.1
22.0
25.7
25.7
Depreciation
850
1,324
16.0
12.9
14.2
15.9
16.2
Chg in working capital
940
1,214
NPM
8.3
5.4
6.3
5.2
4.8
Total tax paid
RoE
12.1
9.6
9.8
7.6
8.0
Other operating activities
3.8
1.7
1.4
1.7
1.9
Operating CF
RoIC
2.1
1.1
0.8
0.6
0.7
Capital expenditure
Chg in investments
Per share data (Rs)
F16e
1,380
EBITDAM
RoCE
F15e
1,310
EBITM
(451)
F14e
1,058
(685)
(536)
(173)
579
(688)
(469)
(589)
177
451
339
82
3,032
3,362
1,814
2,698
3,873
(5,685)
(2,751)
(26,951) (69,385) (10,100)

(657)
(772)
(23)
(33)
157.9
157.9
157.9
157.9
157.9
EPS
7.9
5.3
6.2
6.3
7.0
Investing CF
(27,608) (70,157) (10,123)
(5,685)
(2,751)
FDEPS
7.9
5.3
6.2
6.3
7.0
FCF
(23,919) (66,023)
(2,987)
1,122
CEPS
13.3
13.7
15.0
18.2
20.9
BV
65.5
66.5
80.0
85.1
90.9
0.0
0.8
1.2
1.2
1.2
O/s shares (mn)
DPS
Other investing activities
Equity raised/(repaid)
Debt raised/(repaid)
PE
P/BV
EV/EBITDA
EV/Sales
4,500
500
(190)
(190)
(190)
59498
2166
(606)
(1800)
Financing CF
24,475
66,812
8,736
27.0
23.4
22.9
20.5
2.2
2.2
1.8
1.7
1.6
12.1
12.6
13.4
11.4
9.7
Net chg in cash & bank bal.
2.6
2.5
2.9
2.9
2.5
Closing cash & bank bal
(127)
263
6,497
20167
18.2
(26)
7,466

69
4,238
(8,286)
3,704
(102)
17
428
717
500
517
945
1,662
(1,490)
(368)
1,294
Other key ratios

1.7
2.3
2.5
2.6
2.5
67.6
42.8
38.5
44.3
42.5
NPM (%)
8.3
5.4
6.3
5.2
4.8
Asset turnover (x)
0.3
0.2
0.1
0.1
0.2
5.2
8.5
11.2
10.6
10.2
12.1
9.6
9.8
7.6
8.0
D/E (x)
DSO (days)
RoE (%)
July 8, 2014 | 70
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Back on the Road: Roads & Highways Sector Outlook

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Back on the Road: Roads & Highways Sector Outlook

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Institutional

Infrastructure & Construction | India

Roads & Highways

SBICAP Securities Ltd (SSL)

Roads & Highways Sector

SBICAP Securities Ltd

Back on the road

Sadbhav Engineering Ltd

IRB Infrastructure Developers Ltd

IL&FS Transportation Networks Ltd

Ashoka Buildcon Ltd

Key risks: We highlight a sluggish economic growth leading to lower-than-expected

Roads & Highways Sector

SBICAP Securities Ltd

Companies under coverage

IRB Infrastructure Developers Ltd ...................................................................................................... 29

IL&FS Transportation Networks Ltd ................................................................................................... 43

Ashoka Buildcon Ltd ............................................................................................................................ 58

Roads & Highways Sector

SBICAP Securities Ltd

Roads & Bridges

Irrigation (incl Watershed)

Water Supply & Sanitation

Source: Planning Commission, SSLe

The road journey so far

Roads & Highways Sector

SBICAP Securities Ltd

Exhibit 2: Phase-wise status of road project till Jan 14

NHDP Phase III

NHDP Phase VII

Source: NHAI, SSLe

Exhibit 3: Only ~1200 kms of projects are awarded

Completed Length (Kms)

Awarded Length (Kms)

Source: NHAI, SSLe

Exhibit 4: 14,794 kms projects completed as on Jan14

Exhibit 5: 12,341 kms projects under implementation as on Jan14

Source: NHAI, SSLe

Roads & Highways Sector

SBICAP Securities Ltd

Exhibit 6: Phase-wise kms already awarded

Exhibit 7: . kms to be awarded/under implementation

Under Implementation (Kms)

Already 2/4/6/8 Laned (Kms)

NHDP Total (Kms)

Balance length for award

Source: NHAI, SSLe

Exhibit 9: only ~24% target achived in F14

Construction Target (LHS)

Completed Length (LHS)

Source: NHAI, SSLe

Roads & Highways Sector

SBICAP Securities Ltd

slow traffic growth a short term concern.

Traffic growth YoY (LHS)

Average traffic growth (RHS)

Traffic growth YoY

Source: Planning commission, Company, SSLe

Exhibit 13: % GDP growth in Gujarat & Maharashtra

Exhibit 14: State-wise % CAGR over F08-13 of GDP

%CAGR over F08-13

Gujarat GDP growth