Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IRB Infrastructure
Developers Ltd
Bags First Ultra Mega
Highway: Expensive but
Value-Accretive
IRB has emerged as the preferred bidder for the first
Ultra Mega road to be awarded by the NHAI: The
project involves six-laning 102 km of the Ahmedabad -
Vadodara section of National Highway (NH)-8 and
improvement of the existing Ahmedabad - Vadodara
Expressway in Gujarat under Phase V of the NHDP.
The project’s initial cost (six-laning) will be around Rs36
bn. IRB will have the tolling rights on both roads – NH8
and the Expressway – for a period of 25 years.
The price is aggressive… This is the NHAI’s first large
project after a long hiatus. Thus, there was heavy
competition, with 22 bidders participating. IRB will pay a
premium of Rs3,096 mn to the NHAI in the first year;
which will increase by 5% every year. We believe that
this is a significant 38% premium to the second highest
bidder (Madhucon consortium – first year premium of
Rs1,920 mn, increasing by 5% every year).
…but we view the project as value-accretive: In the
past, we have highlighted that roads are a low-IRR
business and that intense competition is further
diminishing returns in the segment. While we believe
that IRB’s bid is aggressive, the strong traffic (over
73,000 PCUs including both roads) on the route makes
up for it. Our back-of-the-envelope calculation suggests
that IRB will earn equity IRR above its cost of equity of
14.1% – thus implying the project is value-accretive.
Investment thesis: After the lull since July 2010, we
expect a pickup in road awards from F1Q12 from the
NHAI. We continue to believe that IRB, as one of the
most experienced road developers with a proven track
record, is the best play on the immense opportunities
coming up in Indian roads. The company is currently
qualified to bid for projects worth Rs494 bn and is in the
RFP Stage for projects worth Rs31 bn.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IRB Infrastructure
Developers Ltd
Bags First Ultra Mega
Highway: Expensive but
Value-Accretive
IRB has emerged as the preferred bidder for the first
Ultra Mega road to be awarded by the NHAI: The
project involves six-laning 102 km of the Ahmedabad -
Vadodara section of National Highway (NH)-8 and
improvement of the existing Ahmedabad - Vadodara
Expressway in Gujarat under Phase V of the NHDP.
The project’s initial cost (six-laning) will be around Rs36
bn. IRB will have the tolling rights on both roads – NH8
and the Expressway – for a period of 25 years.
The price is aggressive… This is the NHAI’s first large
project after a long hiatus. Thus, there was heavy
competition, with 22 bidders participating. IRB will pay a
premium of Rs3,096 mn to the NHAI in the first year;
which will increase by 5% every year. We believe that
this is a significant 38% premium to the second highest
bidder (Madhucon consortium – first year premium of
Rs1,920 mn, increasing by 5% every year).
…but we view the project as value-accretive: In the
past, we have highlighted that roads are a low-IRR
business and that intense competition is further
diminishing returns in the segment. While we believe
that IRB’s bid is aggressive, the strong traffic (over
73,000 PCUs including both roads) on the route makes
up for it. Our back-of-the-envelope calculation suggests
that IRB will earn equity IRR above its cost of equity of
14.1% – thus implying the project is value-accretive.
Investment thesis: After the lull since July 2010, we
expect a pickup in road awards from F1Q12 from the
NHAI. We continue to believe that IRB, as one of the
most experienced road developers with a proven track
record, is the best play on the immense opportunities
coming up in Indian roads. The company is currently
qualified to bid for projects worth Rs494 bn and is in the
RFP Stage for projects worth Rs31 bn.
No comments:
Post a Comment