July 30, 2014
In Dive-Anjur village, a 1.5-km-long road (with 22m width and 7m height) has been laid on the wetland off the busy Thane-Bhiwandi Road, cutting off the flow of tidal water to 300 hectares of wetlands. “It is noticeable from the highway and shows the audacity of the perpetrators of this environmental outrage. Real estate developers have already put up signboards announcing their intention to take up building projects,” states the report. In Mumbra “the scale of destruction is outrageous,” the report says, pointing out that reclamation of nearly 20 hectares of wetlands by multiple agencies is currently underway.
Vasudevan’s team visited eight sites at Dahisar Link Road, Bhuigaon village in Vasai taluka, Owala village in Bhayander, Ghodbunder Road, Dive-Anjur village, Diva village and Diva Sabegaon village, Vikhroli-Mulund Road and Targhar village in Uran.
At Dahisar Link Road, close to the slum Ganpat Patil Nagar that is settled on a CRZ area, the wetland abutting the road has been reclaimed and converted into a parking lot for private tourist vehicles. When the court-appointed team visited the site, illegal sand mining was in full swing. Scores of trucks were lined up to transport the loot away and the water from the wetland was being drained using diesel pumps.
At Targhar village in Uran, the team discovered reclamation of the privately-owned wetland being carried out despite the HC ban. The owners told the team that they wanted to develop garages, container godowns and parking lots on the site.
At Diva village, a 4-hectare site was first ravaged by sand mining. Then to fill the pit the Thane municipal corporation converted it into a dumping ground. And now the soil is being filled and the land levelled for other purposes, said the report. Similarly, at Diva-Sabegaon village, the wetland has been become the site of waste-dumping and construction of slums and chawls. Near Owala village, a 6-storey residential building has come up on the wetland. A housing finance company is offering loans for 1BHK flats, which are being sold for Rs 35 lakh, and 2BHK flats, which cost Rs 50 lakh.
Vasudevan points out in the report that wetlands are of tremendous ecological significance. They are rich repositories of bio-diversity and storehouses of water.
July 30, 2014
MUMBAI: The traffic police intends to slow down speedsters in the city with advanced cameras which will be equipped with the ability to read number plates of vehicles. Traffic police have identified dangerous stretches in the city that are used for speeding or racing and have written to the agencies concerned to install cameras equipped with ANPR (automatic number plate recognition) technology.
The Bandra-Worli Sea Link (BWSL) is likely to get the technology by the end of this year. The other locations identified for the advanced cameras are Bandra-Kurla Complex (BKC), Godrej Junction at Vikhroli, Marine Drive and JJ flyover in south Mumbai.
ANPR rules out manual intervention and is used in most developed countries to detect traffic violations. “We conducted a study of locations across the city where cameras equipped with ANPR are becoming a necessity. Godrej Junction at Vikhroli is a cause of concern due to maximum fatalities. We have been in talks with a company to join hands with the agency which maintains the stretch,” said Quaiser Khalid, additional commissioner (traffic).
Instances of speeding are witnessed frequently on the iconic BWSL. “Motorists tend to speed after reaching the centre of the bridge. In September last year, a 54-year-old businessman from Kemps Corner had a narrow escape when his car hit the divider and turned turtle. It disrupted traffic for over half an hour,” said a traffic police official.
“A work order has been given out for cameras equipped with ANPR technology and they should be installed by the end of this year. One lane going towards Bandra and the other towards Worli will be fitted with the cameras. They will be positioned in such a manner that they cover maximum lanes. We have also asked for data on the Mumbai-Pune Expressway to study the feasibility of having advanced cameras there,” said a senior MSRDC official.
Two-wheelers are banned on both the BWSL and JJ Flyover. “Between 2002 and 2010, JJ Flyover witnessed 254 accidents, among which 183 involved two-wheelers. Of the 33 people killed in this period, 31 were motorcyclists. This prompted the ban but motorcyclists tend to flout it at night when traffic personnel aren’t around,” said a traffic official. “Several instances of racing were observed at BKC, a business district deserted after office hours,” he added.
ANPR technology uses optical character recognition on images for reading vehicle registration plates. Some can even be configured to store a photograph of the motorist. The information will be stored at the traffic police headquarters and using the RTO’s database, challans will be sent to the speeding motorist’s address. Earlier this month, the MMRDA announced plans to install 12 ANPR-equipped CCTVs on the Eastern Freeway.
Source:Times of India
October 19, 2013
Hemali Chhapia & Bhavika Jain, TNN
MUMBAI: An internal audit by the BMC of its road and traffic department has revealed that in many road projects standard procedures were not followed, rules ignored and costs escalated beyond permissible limits.In one instance, the civic corporation paid Rs 9.7 crore above the contract cost of Rs 121.7 crore for the construction of a road overbridge in Jogeshwari. The contractor argued the fatter bill by claiming price escalations. But why the civic body consented is unknown given that, as per rules, the maximum price variation can be 5% of the contract cost-—which in this case comes to Rs 6.1 crore.
RTI activist Vihar Durve demanded strict action against errant officers. “Compliance with earlier inspection reports is pending. For 1996-97 and 2000-01 periods, no explanation has been furnished on why undue benefit accrued to contractors. In many cases, final bills have not been submitted. Such tardiness is unacceptable,” said Durve. Some officials conceded that departments ignore auditors’ remarks and do not take corrective action. Additional municipal commissioner S V R Srinivas, who is in charge of the roads department , said on Friday that he cannot comment on the inspection report until he reads it.
Others, however, argued against the specific points in the audit. They said that contractors are paid extra for transportation of debris, despite the job being part of their contracts, if the distance from the work site to the dumping ground is high. Also, they said, roads dug up by multiple utility agencies can be rebuilt within their guarantee period.
November 28, 2011
Chief minister Prithviraj Chavan has urged the Centre to allocate funds under the Pradhan Mantri Sadak Yojna to enable Maharashtra to fix state roads.
Chavan indicated that large funds which were allocated to other states under the scheme was not availed by the state for several years leading to a disadvantage. The state was denied the funds as it had already declared 100% connectivity and good conditions using state funds.
However, in the last 15 years, the state had managed to make little investments in the road sector. A majority of the new projects which were envisaged and implemented related to built-operate and transfer basis (BoT).
An official in the ministry of planning and finance said, “If we compare the funds allocated to states like Andhra Pradesh, then we lost almost Rs3,000 crore per year. Between 1999 and 2009, the state should have pressed for at least Rs15,000 crore from the Centre to be undertaken in phases.”
The poor allocation of funds from the Centre was also on account of lack of political will to pursue the matter with the Planning Commission. In the 1990s, having attained almost maximum connectivity, the state focused on new projects but the investments required formaintenance was overlooked.
Now the senior NCP minister for public works department (PWD), Chhagan Bhujbal has decided to mobilise resources through public and private partnerships to fix state road infrastructure. The PWD has already undertaken major projects worth Rs33,000 crore through private-public partnership in phases.
August 29, 2011
Maharashtra Chief Minister Prithviraj Chavan on Thursday said the state government would have to spend Rs 2,70,000 crore to beef up Mumbai’s transport infrastructure over the next 20 years to keep pace with rising demand.
The state government’s 2031 plan based on a feasibility study by the Mumbai Metropolitan Region Development Authority (MMRDA) includes metrorail, mono rail, sea link and water transport. Chavan was addressing a gathering at a conference on “Infrastructure Development in Mumbai Region” organised by the Indian Merchant’s Chamber here.
“The estimated investment of $50 billion ( Rs 2,70,000 crore) is based on a comprehensive transportation study conducted by MMRDA. The total cost of the infrastructure projects comprising metrorail and monorail, currently undertaken by MMRDA is over Rs 26,000 crore,” said Chavan.
The study focuses on infrastructure in the Mumbai Metropolitan Region (MMR). Out of the total projects planned, 80 per cent will be used for transportation that includes 450 km of road, 250 km of suburban railway and another 1,700 km of roads. Chavan said the Coastal Road Project, one of the most ambitious project in Maharashtra, is also on the anvil.
Chavan said Relief and Rehabilitation (R&R) was the most important challenge for infrastructure projects. He said 40,000 families had been rehabilitated under various projects of MMRDA. Apart from environment issues, Chavan said financial restructuring was a problem, especially with issues like Viability Gap Funding (VGP) involved. “The strength of the city is its human resources. For maintaining their quality of life, a good transportation system is of utmost necessity.”
Throwing light on some of the prominent infrastructure projects, Metropolitan Commissioner of Mumbai Rahul Asthana said the Mumbai Trans Harbour Link (MTHL) flagship project, which was bid unsuccessfully twice, would be put for bid again in May 2012. The contract would be awarded by a estimated cost of Rs 10,000 crore.
“MMRDA plans to compensate the build operate transfer (BOT) operator of the proposed MTHL project in case of low toll collection against the projections. However, in case of higher toll collection, the BOT operator needs to share benefits with MMRDA. Besides, MMRDA proposes to provide long tenure soft loan to BOT operator and also compensate L2 and L3 bidders for the cost of bidding. This is to encourage more players to participate in the bidding process.”
Chavan said the Mumbai Metro Rail project, having nine lines will be implemented in three phases at a cost of Rs 47,000 crore. The first phase of the project in he Versova-Andheri-Ghatkopar corridor, is expected to be completed by the third quarter of 2012, at a cost of Rs 2,356 crore. The Metro Line 2, Charkop-Bandra-Mankhurd, which entails an investment of Rs 7,660 crore, has achieved financial closure on March 14. The civil work is expected to begin from October. Metro III is now extended upto airport from Colaba where the entire stretch will be underground and would cost Rs 18,000 crore.
March 10, 2008
March 3, 2008
Though its four-year rule in Maharashtra is yet to bring a visible change in the state, the Democratic Front (DF) government now wishes to make amends during its final year in office.
For the 2008-09 fiscal, the state will witness large-scale road construction works, senior officials of the Maharashtra State Road Development Corporation (MSRDC) and Public Works Department (PWD) told ET. The two agencies, which have been keeping a low-profile during the DF rule, compared to the 1995-1999 Shiv Sena-BJP government’s period, want to make up for the lost time. “We will have many more projects to showcase before the people,” Maharashtra chief minister Vilasrao Deshmukh had said earlier.
Road works amounting to more than Rs 3,000 crore have been initiated by these two agencies across the state. All projects are being undertaken on build, operate and transfer (BOT) basis and the state agencies are collaborating with the National Highway Authority of India (NHAI). Such is the project’s volume that the PWD, MSRDC and NHAI would upgrade around 900 km of roads across Maharashtra.
“Most of the roads under construction would be completed in a year or so. We are following a strategy of aggressive development in the road sector, which is one of the main drivers of socio-economic growth. Roads not only connect but also bring investment,” PWD secretary DB Deshpande told ET.
The state is using the Rs 2,000-crore grant sanctioned by the Union government to upgrade the corridors of national highways, which pass through Maharashtra. This allocation has to be used in the 2008-2009 fiscal. The work includes six-laning of the 90-km corridor between Dahisar-Talasari on Mumbai-Ahmedabad National Highway, the 275-km corridor between Satara-Karad-Kagal, which leads to Bangalore, the 86-km stretch between Igatpuri and Pimpalgaon and construction of an elevated 5.5 km long corridor bypassing the Nashik city.
“Maharashtra has always been regarded as the leading state as far as quality of road is concerned. But good roads have utility beyond the obvious connectivity point of view. The World Bank has estimated that an investment of Rs 20 lakh in road works creates one perpetual job.
We are looking at employment generation and economic potential of roads, which would be give an edge to Maharashtra in these industrially competitive times,” an MSRDC official said. Lot of action is also visible on the state highways. The PWD has got Cabinet approval for the Rs 800-crore four-laning of Shirur-Nagar-Pune-Aurangabad state highway, which is 300-km long. “Work has started on this project and should be completed by May 2009,” Mr Deshpande added.
February 23, 2008
Reliance Energy has quoted a concession period that has taken even MSRDC by surprise.
The Reliance Energy-led consortium’s ambitious bid, which helped it emerge the preferred bidder for the Rs 6,000-crore Mumbai Trans Harbour Link, has set a new performance benchmark in the infrastructure business.
The consortium has offered to build the 22-km six-lane bridge, which will connect Sewri and Nhava Sheva (see map), by 2013, recover the costs from revenues and hand it back to the nodal agency, the Maharashtra State Road Development Corporation (MSRDC), in just nine years and 11 months.
In technical parlance, this is known as the concession period.
To put this in context, the Mukesh Ambani-controlled Sea King Infrastructure, which was the only other bidder, quoted a concession period of 75 years.
Significantly, in 2004, MSRDC itself estimated a 35-year concession period for the sea link project. For the Mumbai-Pune expressway, the period was 30 years.
Indeed, Parvez Umrigar, managing director of Gammon, said his construction engineering company had decided to opt out of the sea link project because of the “frightening equation of risk and return”. Umrigar declined, however, to comment on the Reliance Energy bid.
So what made the Anil Ambani-controlled Reliance Energy quote a concession period that has taken even MSRDC by surprise?
Reliance Energy declined to comment on the issue.
In its 2004 study, the MSRDC had projected a traffic of 50,000 passenger car units (PCUs) a day when the bridge was completed.
But back-of-the-envelope calculations show just to break even, the Reliance Energy consortium would need a minimum of 1,09,589 PCUs a day paying an average toll of Rs150 for around 10 years.
A passenger car unit considers one truck as 2.5 passenger cars to calculate the overall traffic.
An industry expert said the operational cost for the project will be at least Rs 500 crore over 10 years.
Besides, the usual debt-equity ratio for such infrastructure projects is 70:30. Assuming a conservative 5 per cent interest rate on the debt, the interest cost for a 15-year loan would be around Rs 3,000 crore.
If the consortium wants just a 10 per cent return on its investment, the traffic requirement on the bridge would easily be around 250,000 PCUs a day — five times the MSRDC’s traffic estimate.
MSRDC, however, said the traffic demand has changed a lot since 2004 and the figure is expected to be much higher in 2013, when the bridge is operational.
“The construction of the special economic zones (SEZs) by Reliance and the new airport in New Mumbai will increase traffic demand hugely,” said Vijay Garva, chief engineer for the link at the MSRDC. He, however, did not give any fresh traffic estimates.
The MSRDC officials added that a lot of traffic on the Mumbai-Pune route would also be diverted to the bridge. The sea link will also ease pressure on the Mumbai-Pune Expressway, National Highway-4 and Mumbai-Goa Highway, where traffic is expected to increase.
The MSRDC is asking for a Rs130-crore performance guarantee to be kept with MSRDC so that the bidder sticks to the construction time schedule of five years.
Nitin Gadkare, state BJP president and former public works minister, said Reliance Energy is obviously banking heavily on the new airport at Panvel and the SEZ.
However, the calculations may go awry if any of these projects gets delayed, he said.
Gammon India, however, is not expecting an exponential rise in the traffic from south Mumbai to Nhava Sheva, which is the gateway to traffic from Mumbai to Goa and Pune. Besides, there is already a link bridge in Vashi connecting south Mumbai to New Mumbai.
February 20, 2008
A consortium led by Anil Ambani group company Reliance Energy Ltd (REL) has emerged top bidder for the Rs6,000 crore Mumbai trans-harbour link project.Maharashtra State Road Development Corporation (MSRDC) today opened financial bids for the 25-km six-lane project. However, no confirmation could be obtained from either MSRDC or REL.
Mukesh Ambani-led Reliance Industries group was also in the race for the project to build a trans-habour link between Sewri in Mumbai and Nava-Sheva across the creek in Navi Mumbai.
Sources said the REL-Hyundai combine quoted a lower concession period for the build-operate-transfer (BOT) project of nine years and 11 months as against 75 years quoted by the Mukesh Ambani-controlled Sea King Infrastructure.
Phase-I of the project will comprise a six-lane dual carriageway linking Nhava to Sewri and Phase-II, which is expected to be added in 2015 -18, will consist of a double track rail link that will run parallel to the road link on the north side.
The Rs6,000 crore project is slated for completion in five years. The REL-led consortium can charge Rs250 per heavy vehicle and Rs120 for cars and light commercial vehicles as toll charges.
February 18, 2008
Mega investments in infrastructure and the recent market correction offers an exciting investment opportunity in construction stocks.
The robust GDP growth rate experienced by the country in the last few years is indeed commendable and was aided by investment in infrastructure. To sustain growth rates, it is imperative for India to make higher investments towards setting up world-class infrastructure. As per the planning commission estimates, investments in infrastructure is set to go up by a whopping 130 per cent to $520 billion for the eleventh Five Year Plan (FY 2008-12) as against the $226 billion made during the tenth plan (FY 2003-2007).
Construction companies will be among the first beneficiaries of these investments and will deliver good and sustainable long-term growth.
Since the investment plans for each of the sub-segments in infrastructure space varies, based on priorities, there is reason to believe that not all the segments or companies will grow at all times. For instance, regional players or less diversified ones may experience volatility in revenues. For companies, faster project execution capabilities and access to key construction machinery (equipment) are equally critical, which in turn will determine the growth rates and profitability margins, respectively for any company. For example some companies are looking at purchasing their own equipment to tackle rising hiring costs and protect margins.
Thankfully, despite issues, the huge opportunity dwarfs concerns. Says Satish Ramanathan, head equities, Sundaram BNP Paribas, “While the future is promising, earnings could be volatile. Choose companies on valuations, order book and services portfolio.”
Last, but not the least, the recent correction in stock markets provides an opportunity to buy good companies in the space at reasonable valuations. Among many stocks, we have picked 10 stocks—four large caps (Read: Bigger the better) and six mid-caps, which are likely to emerge as key beneficiaries of the ongoing investments in the infrastructure sector. Bigger companies are well-established, diversified and less risky. Investors with low risk appetite can consider them. The smaller ones are efficiently managed and are on the growth path with good earnings visibility. Notably, they may also grow faster, given the size of the opportunity and their individual strengths. But, small size also means that there is an element of risk and hence, investors need to review them on a quarterly basis and look at the flow of new business and financial performance.
|ON THE HIGHWAY|
Era Infra Engineering
Era Infra Engineering, which was earlier into the construction of industrial and commercial space, has diversified into verticals such as railways, roads and highways, airport, urban infrastructure and oil and gas. The company now commands a sizeable order book of Rs 4,100 crore, which is thrice its FY08 estimated revenue.
The company is also developing commercial and residential buildings on its 500 acre land in and around Delhi and Jaipur. Though some of these projects will only be completed by FY10 and FY11, four of them will be completed in FY09 thus providing significant revenue growth.
Besides, the company is also investing about Rs 200 crore in growing the building structure segment. Building structures, which includes the construction of metal structures used at public and private places, is a high growth and high margin business accounting for 21-22 per cent operating margins. The company is currently having total capacity of 45,000 tonne per year of structure, which will be expanded to 185,000 tonne per annum by September 2008. The contribution from new capacity will reflect partially in FY09 and fully by FY10. The expanded capacity at current realisation of Rs 58,000 per tonne can get additional revenue of Rs 750-850 crore per year, assuming 70-80 per cent capacity utilisation.
Additionally, the company is also investing in plant and equipment to scale up its in-house capabilities; currently, 75 per cent of its equipment requirement is met in-house (gross assets at Rs 500 crore). The company will further spend about Rs 200-250 crore over the next year towards purchase of equipment. This will help cut costs and generate additional revenues by way of renting out to third parties.
That apart, Era also plans to increase its Ready Mix Concrete (RMC) capacity 10-fold by installing about 50 new RMC plants over the next 2-3 years, at an estimated cost of Rs 350-400 crore. About 90 per cent of the new RMC production will be sold to third parties. Expect this business to contribute a large chunk to revenues.
Given its in-house equipment and RMC facilities, Era enjoys healthy operating margins of about 20 per cent and RoNW (return on net-worth) of 30 per cent, among the best in the industry. The company’s core business is growing at robust pace, which along with the strong order book and investments will drive growth.
Sadbhav Engineering, with a focus on the road segment, would be a key beneficiary of the ongoing investments in this segment. Of the company’s current order book of Rs 2,300 crore, road projects account for over 70 per cent, including 32 per cent from BOT projects. Enhanced focus on BOT projects has seen the company win four BOT road projects in consortium with other players over the last six months; Sadhbav’s equity contribution is pegged at Rs 92 crore. Going forward, the BOT projects are expected to contribute significantly to revenues as the company has achieved financial closure of Aurangabad-Jalna and Nagpur-Shinoi project during Q3FY08. It expects the Mumbai-Nasik expressway project to achieve closure by December 2008.
From Q4FY08 onwards, its projects in the relatively higher margin mining segment (9 per cent net margin) would be a positive trigger, and will help in improving its bottom line. The revenue will accrue from its ongoing project with GHCL and the recent Rs 245.24 crore order from the Northern Coalfields. Sadbhav Engineering currently has 15 per cent of its current order book from mining. However, the mix is expected to go up as domestic companies are allotted more mines and thus, reflects huge potential for excavation work.
Considering its current order book, which is over three times its FY08 estimated revenue, the company is expected to maintain revenue growth of over 50 per cent for the next two years. Also, with the increasing share of mining and the captive resources, the operating margins are expected to improve from 11.9 per cent in the FY07 to 12.5 per cent in FY08 and 13 per cent in FY09. The expansion in margins will also lead to the higher earnings growth. While these positives are partly reflecting in the higher valuations, the stock has good potential.
Pratibha Industries is emerging from being a small player handling projects with an average size of Rs 10-20 crore to a bigger player. The most recent order bagged by the company is as big as Rs 300 crore. The company, which was primarily into the water projects (about 70 per cent), has diversified into other construction segments such as industrial projects, roads, urban infrastructure, airports, railways, pipeline and tunneling. The company has a strong focus and expertise in handling water-related projects, accounting for 60 per cent of its total order book.
Further, to grab the growing opportunities in the water segment, micro tunneling and piping projects, the company has formed a JV with Ostu Stettin of Austria, the world’s third largest tunneling company. It will help getting complex projects involving tunneling for laying pipes in high density urban areas for underground tunneling.
Besides, the company is also integrating backwards into manufacturing of SAW spiral pipes, with a capacity of 90,000 tonnes per annum. These pipes will be used for captive consumption as well as commercial sales to other companies for use in water transmission, oil and gas, sewerage and other industrial usage.
Within construction, the company has also diversified into some of the high potential segments, having undertaken (either independently or jointly) construction of complexes, buildings, airports and roads.
A strong order book of almost 4.5 times its FY08 estimated revenue and better outlook for urban infrastructure and water-related projects, indicates a robust future for the company. Besides, growth would be driven by the increasing revenue share of pipe manufacturing business in FY09. According to estimates, the SAW pipe segment alone can add about Rs 240 crore of revenue in FY09 at 60 per cent capacity. Overall, the stock is attractive from a long-term perspective.
Ahluwalia Contracts, primarily into construction of residential and commercial projects, is now diversifying into the urban infrastructure space. Although urban infrastructure still contributes just 3 per cent of its revenues, the company plans to increase its share to 20-25 per cent over the next three years.
On these lines, the company will bid for select BOT projects, especially multi-level car parking and bus terminus. The company has already been awarded a BOT project in Rajasthan for constructing a bus terminus, which also includes a commercial complex, wherein the targeted IRR (internal rate of return) is a sound 20 per cent. There is huge opportunity in the multi-level car parking segment, as over 30 projects are likely to be awarded in Delhi alone.
The company being an established player in the National Capital Region (NCR) is expected to gain from the residential and commercial projects consequent to the 2010 Commonwealth Games, to be held in Delhi and also the all round infrastructural development in the NCR region. It has already won some of these projects, including the recently bagged Rs 688 crore Commonwealth Games 2010 village residential project.
Considering its growth plans and projects in hand, the company is incurring a capital expenditure of around Rs 55 crore in FY08 and Rs 110 crore in FY09. This will also include the expansion of its RMC capacity from 210 cubic meter per hour currently to 300 cubic meter per hour in FY09. The RMC division, which contributed over 18 per cent to revenues in FY07 (Rs 81.40 crore), should see its revenues grow at a healthy pace over the next two years.
The healthy order book (3.24 times of FY08 estimated revenues) provides earnings visibility over next two years. Over the long-term, growth will be aided by the company’s diversification.
North East and eastern India are considered to be underdeveloped. Investments are required towards construction of roads, ports, power and other infrastructure facilities. The Centre has already indicated that it intends to spend Rs 50,000 crore towards construction of roads and another Rs 2,000 crore for rail connectivity in the North-East over the next five years.
Tantia, which generates about 96 per cent of its revenue from the eastern and north eastern region by undertaking roads and railway projects, will be the key beneficiary.
To further capitalise on this, the company is foraying into other segments of infrastructure and BOT projects. Its relatively smaller size and limited presence is reflecting in the lower valuation it enjoys vis-à-vis its peers, which should hopefully correct as the market gains confidence in the company. What is currently playing in its favour are opportunities and relatively less competition in the North East.
Considering the industry outlook and healthy order book to be executed over the next 30 months, the company may maintain revenue growth of over 50 per cent in the next two years.
In a recent development, Gayatri Projects signed an MoU with DLF to jointly undertake construction of road projects on BOT basis. The new entity will leverage the capabilities of the two companies and, is expected to develop projects worth over Rs 1,000 crore every year. The tie-up with DLF is also expected to provide Gayatri Projects an entry into the real estate business; it would be developing properties along with DLF. Gayatri Projects is a focused player in the construction of roads and irrigation segment, which account for about 98 per cent of its order book. The company is now venturing into urban infrastructure and the water treatment segments, which will not only help diversify revenue streams but also improve margins; these are already high at over 15 per cent compared with the industry average. That’s because, the company owns nearly 100 per cent of the project related equipments.
Apart from constructing infrastructure, like other companies, the company is looking at capitalising on the growing opportunities in the BOT segment. It currently has five BOT road projects, which have already achieved financial closure. Of this, revenue from three projects is expected to start flowing from March 2010. Analysts value the BOT projects at Rs 120-170 per share, based on the discounted cash flow method. The BOT projects will provide a sustainable or steady cash flow in the long run and help in improving its profitability on the back of higher margins.
Given the high opportunities in the infrastructure sector and diversification into other geographies and segments, the cash contract (non-BOT) business will continue to grow at a robust rate, over the longer term. For the next two years though, earnings will grow on a sustainable basis, backed by the strong order book of Rs 3,400 crore (almost 4.5 times its FY08 estimated revenue) executable over the next 30 months. At current price levels, the stock is trading at a relatively lower valuation, compared with its peers and, is capable of delivering good returns.
Bigger the better
Bigger companies score heavily on size, services portfolio, strong execution capabilities and have a proven track record, all of which provide great comfort and hence justify premium valuations.
IVRCL Infrastructures & Projects
The increasing allocation towards water-related projects augurs well for IVRCL, which generates 57 per cent of its revenue from it. Besides, IVRCL is also present in other growing segments such as roads, building & structures and power. Its order book of Rs 11,000 crore provides strong revenue visibility. Analyst value the company at Rs 550-650 per share on a sum-of-parts valuation of its different businesses and investments in subsidiaries like Hindustan Dorr Oliver and IVR Prime.
Hindustan Construction Company
A dominant player in transport segment, Hindustan Construction is now focusing more on profitable segments such as water and power. Of its order book of Rs 9,050 crore, power projects accounts for 44 per cent and water projects 22 per cent. This diversification will not only help it grow faster but also improve margins. Long-term growth will be aided by improving revenue mix, strong order book and its real estate business (12,500 acre Lavasa project, valued at Rs 60-100 per share. On a sum-of-parts basis, analysts value its share between Rs 210-260.
Nagarjuna Construction has been growing at 58 per cent annually over the last four years and is expected to grow at about 40-45 per cent during FY08-10. The growth will be driven by robust order book coupled with expansion of volumes and margins, led by diversification into segments like metal, oil & gas and real estate development. Nagarjuna is investing in BOT projects; has five road projects, two hydro power and two sea port projects. Its businesses are valued at Rs 315-395 per share.
After acquiring Singapore-based Sembawang in FY07, Punj Lloyd tapped the growing global energy market with extended services portfolio. In the domestic market, it has forayed into onshore drilling, real estate and ship building business with 25.1 per cent stake in Pipavav Shipyard. Its consolidated order book of Rs 18,500 crore, provides reasonable comfort. Going forward, net profit is expected to grow faster on the back of turnaround of Sembawang; consolidated operating margins are expected to improve to 10 per cent by FY09 (8 per cent in FY07).
Source: Jitendra Kumar Gupta : business-standard.com