IRB withdraws from Mumbai Trans Harbour Link Project

August 5, 2013

By ET Bureau |


Maharashtra’s ambitious Rs.9630 crore Mumbai Trans Harbour Link (MTHL) project will have one less bidder as IRB infrastructure developers’ ltd has decided to withdraw from the bidding process. IRB has written a letter to the MMRDA and the Chief Minister of Maharashtra saying they have decided to withdraw from the MTHL project because of bad experience on some other infrastructure projects in the state.In the letter Virendra Mhaiskar Chairman IRB has said, “We deeply regret to inform you that we are unable to participate in the bidding process of the project and the reasons are beyond the boundaries of this project. Unfortunately the experience that we have had in one of the infrastructure projects in Maharashtra in the city of Kolhapur has shattered our confidence to invest in the urban infrastructure projects especially in the state of Maharashtra.”

The central government has sanctioned the Viability Gap Funding (VGF) of Rs.1920 crore for the Rs.9630 crore MTHL which will connect South Mumbai to Navi Mumbai directly. Many Indian and international companies participated in the pre-qualification bids for the MTHL. The Mumbai Metropolitan Region Development Authority (MMRDA) had shortlisted 5 consortia M/s. CINTRA – SOMA -SREI, M/s. Gammon-OHL Concessions-G.S. Engineering, M/s. GMR-L & T Ltd-Samsung, M/s.IRB-Hyundai and M/s.Tata Realty and Infrastructure Limited-Autostrade-Vinci Concessions.

The MTHL is expected to carry more than 62,000 passenger car units in the year 2019 and an annual growth of about 5% is estimated. MMRDA has also undertaken a few additional corridors to facilitate the anticipated traffic dispersal.


IRB Infra subsidiary in concession agreement with NHAI for four laning project on DBFOT basis

March 28, 2013

IRB Infra subsidiary in concession agreement with NHAI for four laning project on DBFOT basis



IRB Infrastructure Developers Ltd has informed BSE that Company’s wholly-owned subsidiary Company viz. IRB Westcoast Tollway Pvt. Ltd, (“SPV”) has executed Concession Agreement with NHAI for the project of Four Laning of Goa/Karnataka Border to Kundapur section of NH-17 from Km 93.700 to Km 283.300 in the State of Karnataka under NHDP phase IV on Design, Build, Finance, Operate and Transfer (Toll) Basis (the “Project”).The Project is to be executed on DBFOT pattern with a concession period of 28 years. Scope of work involves upgradation of existing section of NH-17 between Goa/Karnataka Border and Kundapur from existing 2 lane highway to 4 lane highway. Estimated project cost is approx. Rs. 2600 crores and the construction is to be completed within 910 days from the appointed date. The SPV will get tolling rights on NH – 17 upon completion of construction. The grant sought by the SPV from NHAI is Rs. 536.22 crores.Source : BSE

IRB Infra bags order for 4-laning road project, stock gains

March 28, 2013

IRB Infra bags order for 4-laning road project, stock gains

Shares of IRB Infrastructure Developers  gained more than 2 percent on Tuesday after the company’s subsidiary IRB Westcoast Tollway (special purpose vehicle) has executed concession agreement with NHAI for the road project. 
The project includes construction of four laning of Goa/Karnataka border to Kundapur section of NH-17 in the State of Karnataka on design, build, finance, operate and transfer (toll) basis.
“Estimated cost of the project is approximately Rs 2,600 crore and the construction is to be completed within 910 days from the appointed date,” the company said in a release sent to exchanges.
The SPV will get tolling rights on NH-17 upon completion of construction. The grant sought by the SPV from NHAI is Rs 536.22 crore.
At 14:09 hours IST, shares went up 0.72 percent to Rs 112.30 on Bombay Stock Exchange.

Market capitalisation of the company currently stands at Rs 3,732.45 crore.




The road ahead for Virendra Mhaiskar and IRB India

December 10, 2012

Virendra Mhaiskar has made IRB India’s largest and most profitable toll-road operator. In a sector that has most companies reeling under debt, he seems to be the rare animal with enough cash on hand

Name:  Virendra Mhaiskar
Profile:  Chairman and managing director, IRB Infrastructure
Rank in Rich List 2012: 96
Net Worth:  USD560 mln
The Big Hairy Challenge faced in the last one year:  Slowdown in the infrastructure business, public protests against toll payments, and allegations of political links
The Way Forward:  Focusing on project execution, particularly on the Ahmedabad-Vadodara BOT project

Virendra Mhaiskar must be incredibly crazy. There is nothing else that explains the kind of risks the 41-year-old chairman and managing director of IRB Infrastructure takes, and his rise as India’s largest and most profitable toll-road operator. He deals with problems of the kind that could drive most people around the bend.

Consider, for instance, the episode this July when the Maharashtra Navnirman Sena (MNS), one of Maharashtra’s most raucous political parties, thought up an idea: Galvanise supporters to go past toll booths across the state without paying to use the roads. Egged on by exhortations made by their leader Raj Thackeray, they complied, and men tolling the booths could do nothing. Thackeray claimed it was to protest against the obscene profits the “toll mafia” was raking in from the dense traffic that used these roads.

Toll booth staff manning the Mumbai-Pune Expressway, the crown jewel in IRB Infrastructure’s portfolio, came in for special treatment. (The company is responsible for its upkeep until 2019.) Ironically, Mhaiskar says, “Raj is a friend at a personal level.” But that said, he argues, “To those who say traffic has grown more than projected, I ask, what if it had been otherwise? Would we get our money back?”

I ask if he has tried explaining this to Mr Thackeray and how they continue to be friends. “Enforcing agreements signed with developers, and explaining the rationale to stakeholders is the government’s job,’’ he says, as a matter of fact. I can’t help but think it ironical. But I guess there is a method to the irony.

How else could he have grown the company into India’s largest in the sector, and manage 12 roads across west and south India? So, I probe him a bit deeper. “The government’s policy on road construction and toll through the build-operate-transfer (BOT) model has been the most successful and transparent of all public-private partnerships in the country. But it is also the most poorly understood,” he says.

The problem, Mhaiskar says, is no politician or bureaucrat has bothered to explain to the public how it works. By way of explanation, he offers an analogy. “If you borrow Rs 70 lakh to buy a home, and agree to repay it over 15 years, you return several times the amount to the bank by the end of the tenure, and nobody complains. Going by that same logic, how can you argue if a road developer has invested Rs 1,500 crore [over 20 years], returns ought to be limited to the original investment? What about our borrowing cost, maintenance costs and our returns?”

That is why, he says, public anger manufactured against toll-road operators by politicians have badly impacted investors in the business. Caught between policy changes and the unwillingness (or inability) of users to pay, they are stuck with millions of dollars in debt.

For instance, he’s still trying to extricate himself from a situation in Kolhapur, where IRB won a 30-year contract in 2008 to maintain all of the city’s inner roads. Back then, it was hailed as a pilot project that would lead the way for municipalities across the country to liberate themselves from the responsibility of maintaining roads.

People in the city, though, simply refused to pay, and earlier, in January, they organised rallies to protest against the tolls. Collections had to be stopped after the state government thought the protests impossible to ignore. All attempts to find a solution continue to hang in abeyance.

Problems like these find participants in the Indian infrastructure business under huge amounts of debt, and are compelling many to get out of the projects they had bid for. Mhaiskar, though, seems the rare animal with enough cash on  hand. His revenues almost doubled from Rs 1,753 crore in 2009-10 to Rs 3,255 crore in 2011-12. His profit margins are a little over 15 percent. And, early in October, he signed on to buy out MVR Infra’s road project in Andhra Pradesh for an undisclosed amount. “A lot of such projects are now on sale, mostly by promoters under stress. We are looking at those that can give us an internal rate of return [IRR] of at least 20 percent,” Mhaiskar says.

You must be wondering if Mhaiskar is counting his chickens before they hatch, but Parikshit Kandpal, a senior analyst at Karvy Insitutional Equities, shares his optimism and is putting a ‘buy’ rating on the stock.

Most of the projects IRB is involved with are either in the west or south of India, he says. These are parts of the country that have demonstrated most growth. Of these, projects in Maharashtra and Gujarat account for 74 percent of IRB’s portfolio. “Understanding risks in traffic growth is a big part of our project evaluation,” says Mhaiskar.

When the government opened up projects for private participation in the late 1990s, many businessmen bid aggressively. They followed up later by raising equity from the public at super-normal valuations. Mhaiskar, too, capitalised on the market’s appetite for infrastructure companies. He raised Rs 944 crore through an initial public offering (IPO) in 2008.

For many, fat order books were a measure of success, irrespective of the cost at which they were acquired.  But soon the regulatory environment changed, and returns from ventures dropped below expectations. As banks cut down on lending, larger companies like GMR declared they were taking ‘investment holidays’.



IRB acquires MVR Infrastructure & Tollways

October 15, 2012

Pic for representation only.IRB Infrastructure Developers (IRB) has completed the acquisition of 74 per cent stake of MVR Infrastructure & Tollways. IRB had earlier entered into a definitive agreement with the shareholders of MVR Infra to acquire their entire holding. As per this agreement, acquisition of remaining 26 per cent holding of MVR Infra will be completed once NHAI approves the share transfer.

Virendra Mhaiskar, CMD, IRB said, “Inorganic growth through acquisition of BOT projects in the secondary market has been an integral part of our evolving growth strategy. We will continue to evaluate such opportunities in future which can be value accretive.”

MVR Infra is the concessionaire for Omallur Salem–Namakkal BOT road project in Tamil Nadu. The company was formed for the purpose of widening of existing two-lane road to four-lanes from Km 207.050 (Salem) – Km 248.625 covering 41.55 Kms, on NH-7 in the State of Tamil Nadu. This also involved improvement, operations and maintenance of Km 199.200 (start of Salem Bypass) Km 207.050 (Salem) on NH-7. The concession agreement for this project was executed in February 2006 for a 20 year period (commencing from the appointed date) including construction period of 2.5 years. Toll collection started in August 2009.

The project stretch of 68.7 kms is located on the busy Bangalore–Kanyakumari section of NH 7. This project constitutes a 68.625 km four-lane highways between Omallur and Namakkal in the state of Tamil Nadu. Also, Salem is surrounded by steel and mining industry. The project stretch connects Hyderabad, Bangalore in the North to Salem, Namakkal, Karur, and Kanyakumari in the South.



IRB Infra acquires MVR Tollways for Rs 130 crore

May 14, 2012

IRB Infrastructure said it acquired 100 percent stake in road BOT firm MVR Infrastructure and Tollways in Tamil Nadu for about Rs 130 crore.

“This is the first time that any company has acquired a road BOT company. Going forward, we will continue to look at such opportunities,” IRB Infrastructure Chief Financial Officer Anil Yadav told PTI here.



ITNL, IRB: Strong project pipeline enhances visibility

May 14, 2012

With ongoing projects getting commissioned and the road ministry setting higher targets, the two companies should be able to deliver robust growth India’s top two road infrastructure companies, IRB Infrastructure Developers Ltd (IRB) and IL&FS Transportation Networks Ltd (ITNL), reported better-than-expected results for the period ending on March 31. Unlike in the other infrastructure segments, companies in the road space have benefited largely from a strong inflow of new orders and improving execution skills. On the flip side, they have seen a drop in profitability due to higher input costs and increase in interest burden.


Analysts are hopeful both IRB and ITNL will stand out in the infra space, given that valuations are attractive and the project pipeline strong. For 2011-12, the Ministry of Road Transport and Highways had set a target of awarding contracts to build 7,300 km of roads. Though the ministry awarded projects for only 6,500 km in 2011-12, it was still a commendable job compared with the 5,083 km of projects awarded the year before. For 2012-13, the ministry has set an ambitious target of 8,800 km, which shows that the project pipeline is strong.

Rs crore IRB Infra ITNL
Q4′ FY12 FY12 Q4′ FY12 FY12
Net sales 848.0 3130.7 1988.7 5605.6
% change y-o-y 10.6 28.4 19.9 38.5
Ebitda 380.9 1373.5 457.1 1465.6
% change y-o-y 21.0 25.6 10.5 27.0
Ebitda (%) 44.9 43.9 23.0 26.1
Bps change y-o-y 390.0 -100.0 -196.0 -236.0
Interest costs 150.0 550.5 230.8 728.2
% change y-o-y 7.3 54.1 28.9 46.2
Adjusted PAT 120.4 496.0 177.3 497.0
% change y-o-y 17.1 9.6 11.4 14.8
Source: Capitaline


IRB Infrastructure
IRB has benefited from its improving execution skills in the construction business and higher revenues from the toll business as a large number of projects went on stream. For 2011-12, revenue from the engineering, procurement and construction (EPC) business grew 36 per cent, followed by 18 per cent growth in revenue from the build-operate-transfer (BOT) segment. However, in the March quarter, the trend shifted with the BOT segment reporting a stronger 21 per cent year-on-year revenue growth, while the EPC sector clocked just eight per cent growth. During the quarter, IRB also announced acquisition of MVR Infrastructure and Tollways for Rs 128 crore, which, it believes, could generate an internal rate of return (IRR) of about 21 per cent (on equity investment). This is far better than the expected IRR in some of the new or upcoming projects. Analysts believe this will directly add to the profitability of the company from 2012-13.

In the current year, analysts expect IRB’s revenue to grow about 20 per cent, led by a strong jump in BOT revenue as about 1,000-1,100 lane km of projects are expected to be operational. Also, the full impact of the 114-km Tumkur project (commissioned in June 2011) will be felt in the current year. In the construction segment, too, growth in revenue could be in the region of 14-18 per cent, backed by a strong order book of Rs 8,500 crore (3.7 times its revenue from the construction business).

In the near term, analysts believe the issue related to a murder investigation, in which chairman and managing director Virendra Mhaiskar has consented to undertake a polygraph test, could keep the share prices under pressure. IRB’s stock, which outperformed the Sensex in the last 12 months (till April 18 when the investigation news broke), has tanked 39 per cent since then to Rs 121.65 currently. Clarity on this issue could be a big boost for the stock as fundamentally the company is well placed to leverage the opportunities in the road segment, say analysts.

“There is a corporate governance issue, given the ongoing investigations. But if one can take that risk, this is a good opportunity to invest given that the company on a fundamental basis is on a strong footing and valuations are attractive,” says Manish Kumar of SBICAP Securities. Its strong balance sheet, strong project profile and leading positioning in the industry make its case strong. Meanwhile, Citi Investment Research in its post-results report has valued IRB’s stock at Rs 238 on a sum of parts basis, including the value of BOT assets at Rs 149 and construction business at Rs 84 a share.

IL&FS Transportation Networks 
ITNL, too, reported a good set of numbers for 2011-12, with 39 per cent growth in revenue. Improvement in execution of some ongoing projects led to higher revenues in the EPC business, which led to the better-than-expected performance. However, net profit grew just 15 per cent, largely affected by a 200-basis point drop in operating profit margins and higher interest cost, which grew 46 per cent in 2011-12 due to debt drawn for projects under construction.

Meanwhile, in the two months of the current year, ITNL secured projects worth Rs 3,269 crore, taking its total order book to Rs 12,057 crore, which provides strong revenue visibility. Importantly, a large part of these projects is under construction and expected to be commissioned over two years.

With new projects getting commissioned, the company’s operational base will increase from 4,300 km to 5,900 km (an increase of 1,600 km) in 2012-13. This also means that in 2012-13, ITNL will report a good increase in revenues in the EPC business, leading to strong growth in overall revenues. In terms of earnings, analysts estimate it to grow by 23 per cent each in FY13 and FY14. “We believe the company is poised for a significant re-rating, as the number of operational road projects double over the next 24 to 30 months, raising per day toll or annuity income to Rs 4.73 crore a day from the existing Rs 1.38 crore a day,” says Abhinav Bhandari of Elara Capital. Most analysts have a ‘buy’ rating on ITNL, which at Rs 169 is trading at six times its FY13 estimated earnings.



IRB Infrastructure Developers Ltd. – Initiating Coverage – Antique Stock Broking

February 20, 2012

On the right path

Investment rationale

Robust order book provides visibility

IRB Infrastructure Developers Ltd. (IRB) has an order-book of INR91.3bn as on Dec 2011, executable over the next 3-4 years. The order-book comprises INR33.9bn worth of EPC contracts on ongoing BOT projects, INR36.8bn on BOT projects where construction is yet to commence, and INR20.6bn on projects in O&M phase. High order-book coverage (~4.1x TTM EPC revenues) provides enough visibility for the next few years.

Largest operational BOT portfolio

IRB has the largest operational road BOT portfolio in the country at 4,097 lane kms. It also has some of the most commercially remunerative projects like the Mumbai-Pune expressway, Surat-Dahisar, etc. In FY11, IRB earned a daily gross toll collection of INR26m, which we expect to go up to INR36m in FY13e and INR50m in FY15e.

Robust revenue mix

On a consolidated basis, while EPC operations will drive the revenue growth for the next 2-3 years, BOT operations will start contributing significantly to revenues post that with the commissioning of Jaipur-Tonk-Deoli, Amristar-Pathankot, Talegaon – Amravati and NH-8 section of Ahmedabad-Vadodara (from FY16e).

Integrated and efficient project execution capabilities

IRB has an in-house construction business under its wholly-owned subsidiary Modern Road Makers (MRM) which undertakes EPC work for its BOT projects. In-house execution of the entire project with minimal subcontracting and ownership of aggregate mines has enabled MRM to enjoy high margins (9MFY12 margins stood at 26.8%).

Valuation and outlook

At the CMP of INR170, the stock trades at a P/E and EV/EBIDTA of 12.4x and 7.3x, discounting its FY13e numbers respectively. Given the size, scale and ability to bid for large projects, IRB is well placed to capitalise on the potential robust order awarding by NHAI going forward. We initiate coverage on the stock with a BUY recommendation and arrive at an SOTP based target price of INR217.



IRB`s Ahmedabad Vadodara Project achieves financial closure

February 20, 2012

IRB Infrastructure Developers (IRB) one of the largest Road BOT developers in India, has declared that its Ahmedabad Vadodara Project has achieved financial Closure.

IRB Ahmedabad Vadodara Super Express Tollway, SPV for Ahmedabad Vadodara Project has tied up Project finance of Rs 33 billion. The total cost of this project is Rs 4.88 billion, out of which equity contribution by the Company will be approx. Rs. 1.58 billion and remaining will be funded through Project finance of Rs 33 billion. Out of thisProject finance, approx. Rs 11 billion can be drawn as ECB and remaining Rs 22 billion as Rupee Term Loan. The weighted average blended cost of this Project finance is approx. 10.5% p.a.

A Consortium of Lenders comprising of Infrastructure Development Finance Company (IDFC) – Lead Institution, India Infrastructure Finance Company (IIFCL), Andhra Bank, PunjabNational Bank, Indian Overseas Bank, Bank of India, Union Bank of India and ICICI Bank have financed this project.

Announcing this, Virendra D. Mhaiskar, Chairman & Managing Director of IRB said, “This is the largest debt tie-up in the Highway Infrastructure Sector till date in a pure play toll based BOT project. With this, IRB has achieved financial closure for all the projects awarded to it by NHAI and there is no project pending financial closure.“

Shares of the company declined Rs 2.25, or 1.31%, to settle at Rs 169.05. The total volume of shares traded was 269,294 at the BSE (Monday)


NHAI terminates Goa contract to IRB Infrastructure

December 27, 2011

IRB Goa Tollway Pvt. Ltd. will claim compensation as per Termination payment provisions of the Concession Agreement.

IRB Infrastructure Developers Ltd has announced that the National Highways Authority of India (“NHAI”) had issued Letter of Award (“LOA”) on January 05, 2010 to the Company for the Project of Four Laning of Goa/ Karnataka Border to Panaji – Goa stretch of NH-4A from Km 84.000 to Km 153.070 in the State of Goa on BOT Toll Basis on DBFO pattern (the “Project”). The Company had subsequently incorporated Special Purpose Vehicle (SPV) i.e. IRB Goa Tollway Pvt. Ltd. – wholly-owned Subsidiaries of the Company for implementation of this Project. IRB Goa Tollway Pvt. Ltd. had executed Concession agreement with the NHAI in February 2010 and subsequently the Project had also achieved financial closure in March 2010. Construction period of the Project was 30 months.

However, NHAI could not provide necessary Land for implementation of the Project. Considering substantial delay in providing the Land, the Company had removed the Project from its Consolidated Order Book as on September 30, 2011 as a measure of Good Corporate Governance and accordingly modified Order book was represented in the presentation uploaded on the Company’s website.

Now, the Company have received a formal letter from NHAI informing the Company, termination of this concession agreement of the Project due to their inability to provide necessary Land for implementation of the Project. In this regard, IRB Goa Tollway Pvt. Ltd. will claim compensation as per Termination payment provisions of the Concession Agreement.


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