Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CEO speak
In our recent meeting, ITNLs MD Mr. K. Ramchand reiterated that India’s highway
sector presents a large opportunity to infra developers. He notes that project
award momentum from NHAI has picked up and several states are also planning to
develop highways on a PPP model. While it is too early to gauge the profitability of
recent project wins, competitive intensity has increased, with ~100 players
qualified for NHAI projects and 20-40 bids placed for most projects. Debt funding
has not been a constraint so far but stresses in projects becoming operational over
the next few quarters could lead to banks adopting a more cautious approach.
An attractive infra development opportunity
q India’s highway sector is a significant infra development opportunity for the private
sector, with ~24,000km pending for award under NHAI administered NHDP; most
of these would get awarded on BOT basis. Several states are also planning projects.
q Even beyond the stated NHDP programme, further project expansions and
greenfield opportunities will come up for development over the next few years.
Order awards have picked up
q Project awards from NHAI have picked up since Dec-10, following a near-hiatus in
the preceding six months. Since May-11, nearly 600km are being awarded monthly.
At this run-rate, NHAI could meet its ~7,300km project award target for FY12.
q In order to streamline the functioning of NHAI, improve transparency and speed-up
project awards, the new minister has introduced several measures like annual prequalification,
month-wise award targets and e-tendering for new projects.
q The lack of a permanent NHAI Chairman and land acquisition issues remain the two
main obstacles. There is hope, though, with the Prime Minister instructing the
selection panel to appoint the Chairman within the next three months and NHAI
setting up zonal offices with state governments to reduce delays in land acquisition.
Competitive intensity has also increased
q It is too early to gauge the profitability of recent project wins, given the difficulty in
estimating traffic over the long tenure of concession periods (20-30 years).
q That said, competitive intensity has increased, with ~100 players pre-qualified for
NHAI projects, 20-40 bids placed for most projects and difference in bids widening.
q Difference in traffic estimates can partly explain the wide variations in bids but
different return expectations may be the most important factor. Some players with
in-house EPC arms may also be bidding aggressively to ensure a steady backlog.
q India’s largest highway operator, ITNL adopts strict bidding criteria (traffic Cagr
<8%, min-DSCR >1.2x; project IRR >14% for toll and >12% for annuity projects).
Debt funding is not a constraint as of now
q Bank lending to India’s road sector has trebled in the last three years to ~Rs1tr
(2.4% of total bank loans). Most new projects are also achieving financial closure.
the 90% debt guarantee by NHAI under the concession agreement is a comfort.
q Nevertheless, with many projects becoming operational over the next few quarters,
stresses in a few of them could lead to banks adopting a more cautious approach.
q Rising rates will impact project economics for the operational projects somewhat
but rates may yet soften over the medium term offsetting some of the impact.
Developers will factor in higher rates in new bids, though, minimising any impact.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CEO speak
In our recent meeting, ITNLs MD Mr. K. Ramchand reiterated that India’s highway
sector presents a large opportunity to infra developers. He notes that project
award momentum from NHAI has picked up and several states are also planning to
develop highways on a PPP model. While it is too early to gauge the profitability of
recent project wins, competitive intensity has increased, with ~100 players
qualified for NHAI projects and 20-40 bids placed for most projects. Debt funding
has not been a constraint so far but stresses in projects becoming operational over
the next few quarters could lead to banks adopting a more cautious approach.
An attractive infra development opportunity
q India’s highway sector is a significant infra development opportunity for the private
sector, with ~24,000km pending for award under NHAI administered NHDP; most
of these would get awarded on BOT basis. Several states are also planning projects.
q Even beyond the stated NHDP programme, further project expansions and
greenfield opportunities will come up for development over the next few years.
Order awards have picked up
q Project awards from NHAI have picked up since Dec-10, following a near-hiatus in
the preceding six months. Since May-11, nearly 600km are being awarded monthly.
At this run-rate, NHAI could meet its ~7,300km project award target for FY12.
q In order to streamline the functioning of NHAI, improve transparency and speed-up
project awards, the new minister has introduced several measures like annual prequalification,
month-wise award targets and e-tendering for new projects.
q The lack of a permanent NHAI Chairman and land acquisition issues remain the two
main obstacles. There is hope, though, with the Prime Minister instructing the
selection panel to appoint the Chairman within the next three months and NHAI
setting up zonal offices with state governments to reduce delays in land acquisition.
Competitive intensity has also increased
q It is too early to gauge the profitability of recent project wins, given the difficulty in
estimating traffic over the long tenure of concession periods (20-30 years).
q That said, competitive intensity has increased, with ~100 players pre-qualified for
NHAI projects, 20-40 bids placed for most projects and difference in bids widening.
q Difference in traffic estimates can partly explain the wide variations in bids but
different return expectations may be the most important factor. Some players with
in-house EPC arms may also be bidding aggressively to ensure a steady backlog.
q India’s largest highway operator, ITNL adopts strict bidding criteria (traffic Cagr
<8%, min-DSCR >1.2x; project IRR >14% for toll and >12% for annuity projects).
Debt funding is not a constraint as of now
q Bank lending to India’s road sector has trebled in the last three years to ~Rs1tr
(2.4% of total bank loans). Most new projects are also achieving financial closure.
the 90% debt guarantee by NHAI under the concession agreement is a comfort.
q Nevertheless, with many projects becoming operational over the next few quarters,
stresses in a few of them could lead to banks adopting a more cautious approach.
q Rising rates will impact project economics for the operational projects somewhat
but rates may yet soften over the medium term offsetting some of the impact.
Developers will factor in higher rates in new bids, though, minimising any impact.
No comments:
Post a Comment