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UBS Investment Research
Reliance Infrastructure
Site visit: Delhi Metro Airport Express
„ Event: site visit for Delhi Metro Airport line
On Friday (1 July 2011), we visited multiple sites at Reliance Infrastructure’s
(RELI) Delhi Metro Airport Express (23km metro line connecting New Delhi
station to Dwarka through Indira Gandhi International Airport). The project started
commercial operation in February 2011 after being completed within 27 months of
the signing of the concession agreement. Overall, we were impressed with the
execution and initial operational performance.
„ Impact: Metro is only about 5% of RELI’s valuation
The project cost was Rs24.5bn (funded 70:30 debt:equity). In our valuation, we
value this investment at 1.5x book, which is in line with the valuations of other
infrastructure projects such as roads. The project contributes less than 5% of
RELI’s overall valuation. However, it was critical from the standpoint of RELI’s
execution capability.
„ Action: RELI could be a key beneficiary of India’s infrastructure story
We think RELI could be one of the key beneficiaries of infrastructure growth in
India. The company currently has 25 infrastructure projects. In our view, key
factors that contribute to RELI’s success in infrastructure projects include: a) a
captive engineering, procurement, and construction (EPC) capability; b) strong inhouse capabilities in verticals such as metro, transmission and roads; c) a strong
balance sheet; and d) synergies with other group companies.
„ Valuation: maintain Buy rating
Our price target of Rs1,100.00 is based on our sum-of-the-parts valuation. We
value Reliance Power at a 10% discount to our price target of Rs120/share
(effectively Rs108/share).
Q Reliance Infrastructure
Reliance Infrastructure is the electricity distributor for North Mumbai and East
and Central Delhi. It owns 941MW of generating capacity, including a 500MW
coal-fired plant in Dahanu near Mumbai. The company has diversified into
infrastructure assets and the engineering procurement and contracts business.
Reliance Infrastructure owns 44.9% of Reliance Power.
Q Statement of Risk
Regulatory risks, execution risk, and risks involving the progress of Reliance
Power projects are the key risks, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Reliance Infrastructure
Site visit: Delhi Metro Airport Express
„ Event: site visit for Delhi Metro Airport line
On Friday (1 July 2011), we visited multiple sites at Reliance Infrastructure’s
(RELI) Delhi Metro Airport Express (23km metro line connecting New Delhi
station to Dwarka through Indira Gandhi International Airport). The project started
commercial operation in February 2011 after being completed within 27 months of
the signing of the concession agreement. Overall, we were impressed with the
execution and initial operational performance.
„ Impact: Metro is only about 5% of RELI’s valuation
The project cost was Rs24.5bn (funded 70:30 debt:equity). In our valuation, we
value this investment at 1.5x book, which is in line with the valuations of other
infrastructure projects such as roads. The project contributes less than 5% of
RELI’s overall valuation. However, it was critical from the standpoint of RELI’s
execution capability.
„ Action: RELI could be a key beneficiary of India’s infrastructure story
We think RELI could be one of the key beneficiaries of infrastructure growth in
India. The company currently has 25 infrastructure projects. In our view, key
factors that contribute to RELI’s success in infrastructure projects include: a) a
captive engineering, procurement, and construction (EPC) capability; b) strong inhouse capabilities in verticals such as metro, transmission and roads; c) a strong
balance sheet; and d) synergies with other group companies.
„ Valuation: maintain Buy rating
Our price target of Rs1,100.00 is based on our sum-of-the-parts valuation. We
value Reliance Power at a 10% discount to our price target of Rs120/share
(effectively Rs108/share).
Q Reliance Infrastructure
Reliance Infrastructure is the electricity distributor for North Mumbai and East
and Central Delhi. It owns 941MW of generating capacity, including a 500MW
coal-fired plant in Dahanu near Mumbai. The company has diversified into
infrastructure assets and the engineering procurement and contracts business.
Reliance Infrastructure owns 44.9% of Reliance Power.
Q Statement of Risk
Regulatory risks, execution risk, and risks involving the progress of Reliance
Power projects are the key risks, in our view.
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