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India Infrastructure
Major projects up for bidding – 1,411km near-term pipeline
Intense competition – 32 bidders per project on average
NHAI announces pipeline of 100 projects – INR1.1t
We prefer IRB in this space
Green shoots emerging
Major projects on the anvil; watch out for pricing
The National Highways Authority of India (NHAI) has listed 13 projects for
financial bids due by mid-April 2011. These projects are worth INR129b
and cover 1,411kms. Recently, certain projects including annuity projects
were awarded to mid-size developers, which we believe were won on
aggressive pricing. Certain major projects such as Beawar-Pali-Pindwara
(244kms, INR22.9b) and Ahmedabad-Vadodara (102kms, INR21.3b) are
due for submission of bids in the near future. The implied returns on
these major projects should provide leading indication of the profitability
trend for this sector.
Competition intense due to award hiatus
On average, there are 32 bidders (with a range of 19 to 50 bidders) for
the projects that are coming up for bidding over the next one month. We
estimate this number has nearly doubled from 15-20 bidders in the last
one year. Long gaps in the award process have resulted in this bunching
up and competition for select projects, in our view.
NHAI highlights 100 projects spanning 11,151kms
We believe showcasing the pipeline of projects that the NHAI is likely to
award is an important aspect that was long due. Private developers had
demanded a project pipeline to enable them to choose the projects they
may be interested in. This step should prevent private developers from
being forced to bid for projects in fear of long gaps between project
awards. We estimate the total size of this opportunity is INR1.1t
(assuming INR100m per kilometer).
Near-term pipeline of 1,411kms worth INR129b
The NHAI has listed 13 projects spanning 1,411kms worth INR129b.
Annuities constitute 19% of these projects by value. Rajasthan has the
majority proportion of the projects, at 27%. Approximately, 57% of the
projects (by value) are in the western states (Punjab to Karnataka).
We continue to prefer IRB Infrastructure in this space
Our top pick, IRB Infrastructure (IRB IN, BUY, TP: INR301, CP:
INR185.05), has bid for six projects worth INR68b. Most of the projects
are in the western states, a key area of focus for IRB (most of its existing
projects are in this region). We reiterate that the company is a better
play among its peers, due to its operational capabilities and ability to
finance its projects. Further, we believe IRB is one of the few players who
are unlikely to dilute their equity base for the purpose of infusing equity in
future projects; we estimate that the company can execute projects of up
to INR50b annually without having to dilute equity.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Infrastructure
Major projects up for bidding – 1,411km near-term pipeline
Intense competition – 32 bidders per project on average
NHAI announces pipeline of 100 projects – INR1.1t
We prefer IRB in this space
Green shoots emerging
Major projects on the anvil; watch out for pricing
The National Highways Authority of India (NHAI) has listed 13 projects for
financial bids due by mid-April 2011. These projects are worth INR129b
and cover 1,411kms. Recently, certain projects including annuity projects
were awarded to mid-size developers, which we believe were won on
aggressive pricing. Certain major projects such as Beawar-Pali-Pindwara
(244kms, INR22.9b) and Ahmedabad-Vadodara (102kms, INR21.3b) are
due for submission of bids in the near future. The implied returns on
these major projects should provide leading indication of the profitability
trend for this sector.
Competition intense due to award hiatus
On average, there are 32 bidders (with a range of 19 to 50 bidders) for
the projects that are coming up for bidding over the next one month. We
estimate this number has nearly doubled from 15-20 bidders in the last
one year. Long gaps in the award process have resulted in this bunching
up and competition for select projects, in our view.
NHAI highlights 100 projects spanning 11,151kms
We believe showcasing the pipeline of projects that the NHAI is likely to
award is an important aspect that was long due. Private developers had
demanded a project pipeline to enable them to choose the projects they
may be interested in. This step should prevent private developers from
being forced to bid for projects in fear of long gaps between project
awards. We estimate the total size of this opportunity is INR1.1t
(assuming INR100m per kilometer).
Near-term pipeline of 1,411kms worth INR129b
The NHAI has listed 13 projects spanning 1,411kms worth INR129b.
Annuities constitute 19% of these projects by value. Rajasthan has the
majority proportion of the projects, at 27%. Approximately, 57% of the
projects (by value) are in the western states (Punjab to Karnataka).
We continue to prefer IRB Infrastructure in this space
Our top pick, IRB Infrastructure (IRB IN, BUY, TP: INR301, CP:
INR185.05), has bid for six projects worth INR68b. Most of the projects
are in the western states, a key area of focus for IRB (most of its existing
projects are in this region). We reiterate that the company is a better
play among its peers, due to its operational capabilities and ability to
finance its projects. Further, we believe IRB is one of the few players who
are unlikely to dilute their equity base for the purpose of infusing equity in
future projects; we estimate that the company can execute projects of up
to INR50b annually without having to dilute equity.
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