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India: Construction: Infrastructure
Equity Research
Takeaways from NHAI conf call – step-up in road awards likely
NHAI confident of a strong pick-up in road project awards
We hosted a call with Mr. Nihar Ranjan Dash, CGM – Finance, NHAI today.
Key takeaways from the call:
1) Targeting 11,000 Km of road project awards for FY12E: NHAI
proposes to award projects worth 11,000 Km in FY12E and c.30,000 Km
over the next 3-4 years. Of this, RFQs have already been received for about
700 Km and these are likely to be awarded in April 2011 itself. The DPR for
another 3,000 Km is also ready – so easier to be awarded in 4-6 months.
This uptick in awards would mean NHAI would have c.17,000 Km under
implementation by FY12E, leading to an uptick in execution subsequently.
2) Land Acquisition – although still a structural issue is now moving at
a faster pace: NHAI acquired 9900 acres of land in FY10 and 8300 acres in
FY11. This land now places NHAI in possession of > 80% of the land for
about 6500kms of projects (across phase 2, 3 and 5). The creation of 180
Land Acquisition units and high level committees at local levels and the
signing of SSAs with several states have helped to expedite this process.
3) The RFAQ (Annual RFQs) process and the proposed e-tendering
process would also quicken the project award process: The introduction of
RFAQ towards end Apr’11 is expected to shorten the project award process
from the current 6 months to about 3 months. This would also be helped by
the launch of electronic tendering and procurement process in the next 3
months, improving transparency in the award mechanism in the process
(addressing one of the key concerns for the space).
4) Private sector would contribute to 50% of the proposed Rs470bn
investment in roads in FY12E: Market borrowings of Rs 120bn, cess of Rs
85bn would be NHAI’s key funding sources. Private sector’s participation is
expected to go to 50% from last three years average of 38% share.
5) NHAI’s assumes traffic growth at 5% while planning for target
traffic in new projects – which looks achievable to us.
Implications
An uptick in road award activity starting April 2011 looks likely and would be
positive for sector valuations even though competition may continue to be
high. We prefer companies with a strong execution track record and existing
strong order book that would enable them to bid conservatively; 1)
IRB( IRBI.BO, Buy) and ITNL(ILFT.BO, Buy) - top picks. Risks: 1)Aggressive
bidding, volatile interest rates, lower spending by government.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India: Construction: Infrastructure
Equity Research
Takeaways from NHAI conf call – step-up in road awards likely
NHAI confident of a strong pick-up in road project awards
We hosted a call with Mr. Nihar Ranjan Dash, CGM – Finance, NHAI today.
Key takeaways from the call:
1) Targeting 11,000 Km of road project awards for FY12E: NHAI
proposes to award projects worth 11,000 Km in FY12E and c.30,000 Km
over the next 3-4 years. Of this, RFQs have already been received for about
700 Km and these are likely to be awarded in April 2011 itself. The DPR for
another 3,000 Km is also ready – so easier to be awarded in 4-6 months.
This uptick in awards would mean NHAI would have c.17,000 Km under
implementation by FY12E, leading to an uptick in execution subsequently.
2) Land Acquisition – although still a structural issue is now moving at
a faster pace: NHAI acquired 9900 acres of land in FY10 and 8300 acres in
FY11. This land now places NHAI in possession of > 80% of the land for
about 6500kms of projects (across phase 2, 3 and 5). The creation of 180
Land Acquisition units and high level committees at local levels and the
signing of SSAs with several states have helped to expedite this process.
3) The RFAQ (Annual RFQs) process and the proposed e-tendering
process would also quicken the project award process: The introduction of
RFAQ towards end Apr’11 is expected to shorten the project award process
from the current 6 months to about 3 months. This would also be helped by
the launch of electronic tendering and procurement process in the next 3
months, improving transparency in the award mechanism in the process
(addressing one of the key concerns for the space).
4) Private sector would contribute to 50% of the proposed Rs470bn
investment in roads in FY12E: Market borrowings of Rs 120bn, cess of Rs
85bn would be NHAI’s key funding sources. Private sector’s participation is
expected to go to 50% from last three years average of 38% share.
5) NHAI’s assumes traffic growth at 5% while planning for target
traffic in new projects – which looks achievable to us.
Implications
An uptick in road award activity starting April 2011 looks likely and would be
positive for sector valuations even though competition may continue to be
high. We prefer companies with a strong execution track record and existing
strong order book that would enable them to bid conservatively; 1)
IRB( IRBI.BO, Buy) and ITNL(ILFT.BO, Buy) - top picks. Risks: 1)Aggressive
bidding, volatile interest rates, lower spending by government.
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