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IRB Infrastructure:: “a play on road development...”
IRB Infrastructure, owned by Mhaiskar family, is a premier road developer and
operator in India with 16 road BOT projects spread over 1,272kms of which 10
are currently operational and 6 are under various stages of development.
IRB’s integrated business model enables value creation since its operations
span across construction, operation and maintenance of roads and highways.
While its in-house engineering and construction (E&C) business (with
unexecuted order book of ` 95 bn) improves visibility in its EPC revenues and
helps reduce execution risk significantly, its BOT projects generates significant
cash flows from operations which help sustain the growth momentum.
Investment Argument
Given the governments renewed thrust on building roads and highway
infrastructure, when over 34,000 kms of projects will be awarded in next 3 to 4
years, we believe a total of $60 bn worth of opportunity exists for road developers
in India. We strongly believe, even a 50% success ratio in project awardance
annually would provide a humungous opportunity in the road sector development.
The pace of NHAI’s road construction activity remained sluggish in FY11, with
only 34 projects of 3,470 kms being awarded till date. Our discussion with NHAI
and various road developers suggests that, a total of ~8,000 kms of projects are
in RFQ and RFP stages. We believe at least 3,500 to 4,000 kms of projects are
likely to be awarded over next four months.
IRB has around 726km of toll road BOT projects under operation, an additional of
164km are scheduled to start generating revenue in FY12 and the balance (383km)
expected to contribute to the toll revenue by FY13. E&C division is expected to
drive revenue and earnings growth over FY10-12 at a higher pace on the back of
strong order book (`95 bn) and BOT earnings driving growth thereafter as projects
get completed. We forecast consolidated revenue CAGR of 54% and a 19%
consolidated EPS CAGR over FY10-12 respectively. New project wins is expected
to be the key catalyst for the company.
Valuation
We value IRB’s BOT projects on a FCFE-DCF basis and its EPC business at 6x
FY12 EV/EBITDA which compares favorably with other peer-group companies, to
arrive at our SOTP target of `262 per share and initiate coverage with a
Outperformer rating on the stock.
Risks and Concerns
Any unexpected deviation in the traffic volume growth will have a strong and direct
correlation with IRB’s valuation.
Any unforeseen delays in execution and rise in input prices would impair BOT
project profitability and project IRR.
Investment Rationale
(A) External factors
Increased focus of the government to accelerate infrastructure investments…
Infrastructure industry is experiencing unprecedented growth opportunity riding on
increased spending in infrastructure by the government and enhanced participation by
the private players for the same. The government is aiming to raise the infrastructure
investment to 9% of GDP by 2012. With more active participation of private sector,
execution of planned initiatives is becoming a reality. Government of India has made a
projection for the XII five year plan assuming that the GCF in the infrastructure as a
percentage of GDP would rise from 9% in 2011-12 to 10.25% in 2016-17, and that the
GDP would continue to grow at 9% pa. Based on the above required GCF in the
infrastructure sector during the XII Plan would be to the tune of `40,749 bn or US$
1,018bn.
…and increasing share of private investment in road segment
Historically, road projects in India have largely been financed through public funds.
However, we believe that while this trend will continue, the share of public funds is
gradually reducing in favour of private sector participation through the build-operatetransfer
(BOT) route for national highways and few state road projects.
In addition to this, we believe that private sector participation in the development and
maintenance of roads is being encouraged, as there is growing need to improve the
quality of roads and speeding up of execution process. The opportunity size and potential
to earn high returns will continue to drive private sector investment in road construction.
A favourable policy framework would further facilitate to increase the private sector
participation. Private sector share to the total investment is expected to rise to 44%
during the XII Plan.
Mammoth capacity addition planned by NHAI
Government has outlined a work plan to build 37,000kms of road projects over a period
of next three to four years. However, against a planned capacity of approximately 12,000
kms, only 3,166 kms were awarded in FY10.
The pace of NHAI’s road construction activity remained sluggish in FY11, with only 34
projects of 3,470 kms being awarded till date. Our discussion with NHAI and various
road developers suggests that, a total of ~8,000 kms of projects are in RFQ and RFP
stages. We believe at least 3,500 to 4,000 kms of projects are likely to be awarded
over next four months.
Mega projects and Expressway - an upcoming trend
Mega projects and eastern peripheral expressways were announced by the government
in FY10. Nine mega projects have been identified with the length of each project varying
from 390 kms to 700 kms. Out of the nine mega projects planned, NHAI has asked
request for qualification (RFQ) for only one project recently in the month of June and
approximately 10 to 12 companies has submitted RFQ. Cost of this project as estimated
by NHAI is `51.34 bn
The government has outlined a new expressway programme which plans to build
18,637 kms of greenfield expressways by 2022. Stretches in these phases have been
identified based on the traffic density on nearby stretches, economic activity in the
surrounding areas and financial stability. We believe, IRB with its internal capabilities
and balance sheet strength will be a key beneficiary for the upcoming opportunity.
(B) Internal factors
Pure play on toll road segment
IRB has been in the road construction business for almost 30 years. It was one of the
first movers when the sector was opened up for BOT. IRB won its first BOT project in
FY96. The Mumbai-Pune Expressway win in 2004 was a key milestone for the company.
Since then it has expanded its portfolio rapidly with a growing focus on NHAI projects.
It has a portfolio of 16 road assets covering 1,272kms. IRB has won 4 new projects
totaling a length of 383kms, implying a market share of c12% in NHAI project awards in
FY10. The company claims to have a market share of c9.31% in the Golden Quadrilateral
project of NHAI. Government’s focus on building road infrastructure in the country is
well established and therefore we believe IRB with its experience and expertise in BOT
road projects, is well positioned to capitalize on this colossal opportunity.
In-house value creation
IRB’s area of expertise involves developing roads and highways on a BOT basis. It has
an in-house construction business, which undertakes the construction of road projects.
Also, the operation and maintenance activity, including toll collection, is executed by
IRB group. This not only captures the entire value chain, but also reduces IRB’s
dependence on sub-contractors. We believe this enables IRB to control costs, timelines
and quality, thereby reducing execution risk significantly.
Strong order book position
The order book for E&C division currently stands at `95bn (10x FY10E E&C division
revenue), comprising of EPC projects worth `72bn, O&M of worth `23bn and funded
projects of `301 mn as on Sept 2010. This includes the five new projects worth `59bn,
which will be executed over FY11-13. This imparts strong earnings visibility for the E&C
business for over next 3 years. We estimate earnings CAGR of 82% over FY10-12 for
the E&C division. Also, we expect traffic volume to improve over next couple of years
with a revival in economic activity.
Valuation
We have valued IRB Infrastructure on sum-of-the-parts (SOTP) valuation and arrived at a
target price of `262 per share. This consists of `120 (46% of the total value) from Engineering
and Construction (E&C) business and `140 (53% of the total value) from road assets
(BOT). Other investments and real estate contributes balance 1% of the total value.
BOT road assets valued at `140 per share
Each of the road projects has been valued on free cash flow to equity method of DCF to
account for varying degree of gearing for assets across the project life. We have assumed
a cost of equity of 12.4% for projects under operations and 13.2% for projects under
construction (Surat–Dahisar and Kolhapur Integrated project) and 14.3% each for 4 new
greenfield projects, which includes Amritsar – Pathankot, Jaipur – Deoli, Talegaon – Amravati
and Goa – Karnataka projects.
We have not considered value of Tumkur – Chitradurga project in our valuation, since the
project is yet to achieve financial closure. However, if we were to assume a project IRR of
18%, D/E ratio of 70:30 and a cost of equity of 14.3%, we would arrive at a price of `10 for the
project, which will eventually factor into our valuation.
Construction business valued at `120 per share
We have valued IRB’s E&C business at 6x FY12E EV/EBIDTA. Our target multiple implies
a 30% to 40% discount to large sector players such as L&T, GMR and a 15% to 20%
discount to mid-size construction companies such as Sadbhav, IVRCL and ITNL, as
most of the EPC business for IRB is captive in nature (i.e. construction of its own BOT
road assets). We believe that the growth in its business would be driven by IRB’s ability
to win BOT road projects and internal strength. Other investment and real estate business
is valued at 0.5x its book value
Investment Risk
Change in government policy
Slowdown in infrastructure spending due to change in policy by the government and
any delay in land acquisition for BOT projects by NHAI, would adversely impact the
growth prospect of the industry as a whole.
Volume and value growth a key parameter
BOT projects provide huge potential for higher returns but also carry risk associated
with the estimation of traffic volume. Toll collection and future cash flow depends hugely
upon traffic volumes and increase in toll rates, any deviation from estimated figures will
directly impact future earnings.
Increase in input costs
BOT projects typically are longer duration projects and are also mostly fixed price
contracts. Any significant increase in input prices, mainly cement, steel, bitumen and
diesel would likely impact profitability of the company. IRB’s E&C division enters into a
fixed price contract with an in built material cost escalation. If the material cost turns out
to be higher than what is built into the contract price, the impact has to be borne by the
E&C division. Also, we believe that the E&C revenue is expected to grow at a faster pace
than the lucrative toll revenue, which is expected to put higher pressure on the working
capital requirement.
Timely execution a key challenge
Timely execution of the projects under construction and under development is of vital
importance. Although we do believe that IRB’s in-house execution capabilities does
reduce execution risk to some extent, timely execution is essential to maintain project
profitability.
Higher interest rates to impede project profitability
Company is dependent on banks and financial institutions for meeting long and medium
term financial requirements. Any delay in disbursement of funds from these bodies
could delay projects completion. Also the company is exposed to interest rate risk
because of huge funding requirement.
Majority of order book in-house
IRB’s majority of the order book comprises of in-house projects. Any delay in achieving
financial closure and necessary approvals for the new projects will significantly impact
revenue of E&C division.
Industry overview
NHAI – Journey so far…
The National Highway Development Programme (NHDP) has been the key driver in
expanding the country’s road network. The NHDP encompasses upgradation,
rehabilitation and broadening of existing national highways. The programme is primarily
executed by the National Highways Authority of India (NHAI), with the public works
department (PWD) of the various states and the Border Roads Organisation (BRO)
also executing some stretches.
NHDP Phases…status update
The NHDP is being implemented in seven phases. Phases II, III and V are under
execution whereas, implementation under Phase VII commenced in July 2009. Phases
IV and VI are at various stages of planning and bidding.
NHDP had some early successes with steady progress in the nodal GQ and NSWE
projects. GQ and NSEW (phase I and II were largely funded by the government)
Golden Quadrilateral (Phase I) – largely completed: The phase covers 5,846 kms at
an estimated cost of `303 bn (1999 prices). As on October, 2010 around 99% was
completed at a cost of `378 bn.
NSEW Corridor (Phase II) – under execution: Phase II comprised NSEW Corridor, the
total length 7,300 kms. As on Oct 2010, around 73% of NSEW is completed and 19% is
under execution. In 2009-10, a total of 210 kms worth `69 bn were awarded.
Approximately 8% of the NSEW Corridor is yet to be awarded.
Phase III – future action phase: Phase III involves 2 lane roads into 4 lanes. It includes
high density traffic corridors not included in phase I & II, providing connectivity of state
capitals with NHDP (phase I & II), connectivity of centers of tourism and places of
economic importance.
-As of October 2010, 16% is completed and 43% under implementation at a total cost
of `127 bn. Approximately 41% of the projects under the phase are yet to be awarded.
-The government plans to implement most of the projects under this phase through the
BOT Toll model. However, projects which are not attractive for private players, the
government will award these under BOT-Annuity, with the least attractive stretches
awarded under cash contracts
Phase IV – to be implemented by MoRTH: Around 14,799 kms of highways are planned
to be improved to two-lane standards with paved shoulders. The CCEA has approved
around 5,000 kms in July 2008, with MoRTH tasked with the implementation of this
phase instead of NHAI
Phase V – 87% from GQ: This phase involves 6 laning of 6,500 kms of selected
stretches of existing 4 lanes NHs on DBFOT basis. This includes 5,700 kms of GQ and
other selected stretches at a total cost of `412 bn (2006 prices). Around 65% of the
projects is yet to be awarded. The government aims to implement all projects under
this phase on BOT-Toll basis, since traffic on these stretches is attractive for private
players.
Phase VI – no action on the ground: This phase includes the development of around
1,000 kms of access-controlled 4-6 lane divided carriageway expressways. The
Planning Commission has estimated the project cost `167 bn (2006 prices). Although
this phase has been approved by the government, it is yet to see any execution on the
ground.
Phase VII – initial stages of implementation: This phase involves construction of ring
roads, flyovers and by-passes on selected stretches of the NHs at an estimated cost of
`167 bn. While 700 kms have been identified, stretches covering only 41 kms have
been awarded.
Increased government focus to speed up implementation
With a view to eliminate non-serious players from bidding and to have a better matching
between the size and complexity of the projects with the financial and technical strength
of the constructors, NHAI has restructured its net-worth requirement for bidders for
various project sizes.
Also we believe that NHDP programme has received a renewed thrust following the
appointment of a new Minister of Road Transport and Highways - Mr. Kamal Nath last
year. Mr. Nath has set an ambitious target of construction of 20 kms per day. We witnessed
a surge in road projects activity after 3 years of an unexciting phase.
NHAI has a target to award approximately 12,000 kms in FY11. That is 4x of the projects
awarded in FY10. The government has set itself a target of constructing 20 kms of road
every day after the last general election.
NHAI intends to award 12,000 kms of road contracts in FY11. However, the pace of
NHAI’s road construction activity remained sluggish in FY11, with only 34 projects of
3,470 kms being awarded till date. Our discussion with NHAI and various road
developers suggests that, a total of ~8,000 kms of projects are in RFQ and RFP stages.
We believe at least 3,500 to 4,000 kms of projects are likely to be awarded over next
four months. We strongly believe, even a 50% success ratio in project awardance
annually would provide a humungous opportunity in the road sector development.
Mega Projects and Expressway programme – “the upcoming trend”
Mega projects and eastern peripheral expressways were announced by the government
in FY10. Nine mega projects have been identified with the length of each project varying
from 390 kms to 700 kms.
Out of the nine mega projects planned, NHAI has asked request for qualification (RFQ)
for only one project recently in the month of June and approximately 10 to 12 companies
has submitted RFQ. Cost of this project as estimated by NHAI is ` 51.34 bn.
The government has also outlined a new expressway programme which plans to build
18,637 kms of greenfield expressways by 2022.
Stretches in these phases have been identified based on the traffic density on nearby
stretches, economic activity in the surrounding areas and financial stability.
However, we believe that issues such as MCA, bidding process, land acquisition,
setting up of an expressway authority and competing roads are yet to be addressed.
About the company
Background
IRB is an infrastructure development and construction company with wide-ranging
experience in the roads and highways sector. It is primarily a holding company and
various BOT projects as well as the construction activities of the IRB Group are executed
by the company’s subsidiaries.
The IRB Group started operations in 1978 when Ideal Road Builders (IRBPL) was
incorporated to undertake the road contracting business. IRB’s area of expertise in
clude building of roads, highways, bridges and tunnels. Recently, company diversified
its business into real estate development sector as well. It has a total 16 road BOT
projects out of which 10 are operational projects and 6 are under various stages of
development. IRB also has an in-house EPC division which does EPC work for its own
BOT road projects. Its road portfolio holds market share of 9.31% on the Golden
Quadrilateral.
IRB’s key strengths
Undisputed track record: IRB has an undisputed track record and experience of
managing large size projects such as Mumbai-Pune expressway and Surat Dahisar,
which we believe would further enhance its position to pre-qualify for the upcoming
opportunity in the roads and highway projects.
In-house EPC division: IRB’s EPC expertise helps in better evaluating projects including
timely completion and effective cost management. It also allows IRB to accrue cash flow
and earn profits even during construction phase, thereby lowering external reliance for
funding. The EPC order backlog of `95bn will help drive earnings growth over FY11-13.
Mature portfolio: Ten out of sixteen IRB’s projects are operational and two more projects
are expected begin toll collection from FY12 onwards. Out of the 10 operational projects
six projects are debt free. The cash flow from its mature portfolio allows it to further fund
its growth momentum.
Debt financing at competitive rates: Given IRB’s strong track record and timely
completion of projects, would help it to raise debt at a competitive rate. Company has
been able to negotiate a fixed interest rate loan for its Mumbai-Pune project at 10.6%
for the entire period until completion. Also the four new projects has achived financial
closure at a competitive rate. Financial closure for Tumkur-Chitradurga project is
expected by mid December 2010.
IRB’s Project Portfolio
IRB has a total project portfolio length of 1,272kms. It has several large projects, such
as the Mumbai-Pune Expressway (206kms), Mumbai-Surat-Baruch (304kms), Jaipur-
Deoli (149kms), Tumkur Chitradurga (114kms) and Amritsar-Pathankot (102kms). We
expect an additional 164kms of projects (Tumkur – Chitradurga and IRDP Kolhapur) to
start generating revenues in FY12 and the balance 383kms by FY13.
The company operates on almost all the major entry-exit routes out of the cities of
Mumbai and Pune. Recently, it has also won projects in Punjab, Rajasthan and
Karnataka and is now slowly emerging as a pan-India player in the roads segment.
Mumbai – Pune Expressway: (16% of SOTP value)
This is the momentous asset in IRB’s portfolio. IRB has a concession to operate
Mumbai - Pune section of the National Highway – NH-4 (111 kms) and Mumbai – Pune
Expressway (95 kms) for a period of 15 years ending Aug 2019. The project involved
four laning and improvement of NH-4 (completed in Sept 2006) and toll collection and
operation and maintenance of Mumbai-Pune Expressway.
The total cost of the project was `13bn which included an upfront fee to Maharashtra
State Road Development Corporation of `9.2bn. The Expressway accounted for c64%
of IRB’s total toll revenues in FY09. This share has come down to 36% in 1HFY11. The
company has been able to negotiate a fixed interest rate loan for Mumbai-Pune project
at 10.6% for the entire period until completion.
Bharuch – Surat: (6% of SOTP value)
IRB has the concession to operate this section of NH-8 for a period of 15 years starting
Jan 2007. The project involved 6 laning of 65 kms of Bharuch – Surat section. The total
project cost was `14bn including ` 5bn upfront fee to NHAI. This was funded by `12.1bn
debt (86%) and balance `1.98bn equity (14%).
The project is commercially operation from Sept 2009. Increase in toll rates is linked to
WPI and is reset in July every year. There has been a 10% increase in the toll rates on
this toll project from July 2010 onwards.
Surat – Dahisar: (4% of SOTP value)
This project involves six laning of Surat-Dahisar section of NH-8 and falls under NHDP
Phase V. The project is on a revenue sharing basis, with first year a revenue share of
38% with NHAI, thereafter rising by 1% every year. Increase in toll rates is linked to WPI.
Toll rates increased by ~4% from Sept 2010 onwards.
The total project cost is `28.35 bn funded by equity `11.05bn (39%) and balance by
debt. Construction for the project began in Feb 2009 and c35% of the project has
completed construction. The scheduled completion is Aug 2011. Concession period is
for 12 years, ending Feb 2021. Whilst the construction is underway, toll collection has
already begun on the existing route effective Feb 2009.
IRDP Kolhapur: (4% of SOTP value)
First ever urban infrastructure project on BOT basis in India was awarded to IRB. This
project was awarded in July 2008 by Maharashtra State Road Development Corporation
(MSRDC).The project involves implementation of an integrated road development
program in Kolhapur on a BOT basis.
The total length of the project is 50kms.The project is expected to be commissioned by
end of FY11. All 9 entry points will be tolled post substantial completion of the project.
Only vehicles entering or leaving the city will be paying toll. The concession period for the
project is 30 years. The total project cost is `4.3bn to be funded by debt `2.58bn (60%)
and the balance by equity. A negative grant of `270mn has already been paid.
Besides the concession period, IRB has also been allotted land ~30,000 sq meters – on
lease basis for a period of 99 years for commercial development.
Jaipur – Deoli: (4% of SOTP value)
IRB has won the concession for Jaipur-Deoli project under NHDP Phase – III in Dec
2009. The concession period for the project is 25 years. The project involves design,
engineering, finance, construction, operation and maintenance of 149kms of Jaipur-
Deoli section of NH-12 in the State of Rajasthan.
The project is expected to be commissioned by Dec 2012. The total project cost is
estimated, to be `17.05bn to be funded by debt `9.0bn (53%) and `4.99bn (29%) by
equity and balance 18% `3.0bn by way of grant sought for this project from NHAI.
Amritsar – Pathankot: (4% of SOTP value)
Amritsar – Pathankot project was awarded to IRB under NHDP Phase – III in Dec 2009.
The concession period for the project is 20 years. The project involves design,
engineering, finance, construction, operation and maintenance of 102 kms of Amritsar -
Pathankot section of NH 15 in the State of Punjab.
The project is expected to be commissioned by Nov 2012. The total project cost is
estimated to be `14.4bn to be funded by debt ` 9.2bn (64%) and ` 3.9bn (27%) by equity
and balance `1.27bn (9%) is grant sought from NHAI.
Talegaon – Amravati: (3% of SOTP value)
Talegaon – Amravati project was awarded to IRB under NHDP Phase – III in Nov 2009.
The project involves 4 laning of Talegaon-Amravati section of NH 6 in Maharashtra. The
concession period is 22 years.
The project is expected to be commissioned by Nov 2012. The total project cost is
estimated to be `8.85bn to be funded by debt `4.75bn (54%) and `1.91bn (24%) by
equity and balance `2.16bn (24%) is grant sought from NHAI.
Goa Karnataka Border – Panaji: (2% of SOTP value)
Goa Karnataka project was recently awarded to IRB by NHAI. It involves 4 laning of Goa
Karnataka Border to Panaji, Goa stretch of NH-4A. The concession period is for 30 years
and scheduled date of start of operations is Feb 2013. The total project cost is `7.24bn.
The project is funded by debt `3bn (37%) and equity of `3.35bn (41%) and balance of
`1.86bn (23%) grant sought from NHAI.
Tumkur Chitradurga (Not considered in valuation)
IRB has recently awarded this project to Design, Build, Finance and Operation of Six
Lanning of Tumkur - Chitradurga section from km. 75.00 to km. 189.00 of NH-4
(approximately 114.00 km.) in the state of Karnataka under NHDP Phase V on BOT
basis.
This project is on the revenue sharing basis with the NHAI. IRB has to share revenue of
`1,400 mn from the first year, which increases by 1% every year thereon. The total
project cost is ` 10,800 mn with an expected debt to equity ratio of 70:30. The project
has not yet financially closed and is expected to achieve the same by mid Dec 2010.
Diversification in other areas of business
Sindhudurg greenfield airport project
IRB has recently won the bid for developing a Greenfield Airport in Sindhudurg District
of Maharashtra from MIDC on Design Build Finance and Operate (DBFO) basis to build
airport with state-of-the-art technology .The total project cost estimated to be `1.75bn.
Company has paid `200mn to MIDC as an upfront fee for the project. Concession
period is of 95 years. The total airport area for development is 670 acres and a runway
length of 3170m.We do not have much clarity about the cash flow from these projects
which has restricted us to value them.
Real estate development project – no progress yet
IRB intends to develop integrated township alongside Mumbai–Pune Expressway. The
company has already acquired 1168 acres of land for this purpose in Mauje Taje and
Mauje Pimploli Taluka in Pune district and intends to acquire another 250 acres. The
total investment in the project to date is around `1300mn. Existing land has been
valued at 0.5x book value in our valuation.
Commercial property development – IRDP Kolhapur project
Besides the concession agreement of IRDP Kolhapur project, IRB has also been
allotted land ~30,000 sq meters on lease basis for a period of 99 years for commercial
development. It has entered into hotel operating agreement and technical assistance
agreement with the Indian Hotels Company Ltd to operate and maintain its 125 guest
room proposed project. Capital cost of this project is `400-450 mn. Lack of clarity about
cash flow from these projects has restricted us to value them.
We believe that these diversifications, albeit small when compared to the overall size of
the company, could de-focus the management from the huge opportunity in the roads
and highways sector where the company has already build expertise and competitive
advantage.
Financial outlook
Revenue
IRB’s consolidated revenue has witnessed a CAGR of 77% over FY07-10. E&C revenue
and toll revenue has also grown at a CAGR of 96% and 59% over the same period
respectively. We expect EPC division to further grow at a higher pace at a CAGR of 82%
over FY10-12E on the back of commencement of construction work for five new projects.
We have assumed a traffic volume growth of 7% to 6% for initial 5 years followed by a
5% growth for the next 3 years and thereafter a proportional decline in traffic volume.
EBITDA and PAT growth
On a consolidated basis EBITDA for IRB has witnessed a CAGR of 69% over FY07-10.
We expect EBITDA to grow at a CAGR of 35% over FY10-12E. We believe, EBITDA
margin would decline by 500bps to 42% in FY11 and 36% in FY12 from 47% in FY10, on
an anticipated shift in the business mix with a higher contribution from construction
division.
PAT on a consolidated basis has grown at a CAGR of 158% over FY07-10. We expect
PAT to grow at a CAGR of 19% over FY10-12E on the back of lower EBITDA margin
growth, higher interest cost and higher effective tax rate since E&C division comes
under full tax regime. We expect effective tax rate to be in the range of 24% to 26% in
FY11 and FY12 respectively
Debt to Equity ratio
Consolidated net debt is expected to be 1.5x by FY12 at the current equity base. We
believe fresh equity fund-raising in order to accelerate its growth momentum will take
place after the company has bagged new projects.
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