IL&FS Transportation ties up with Japanese expressway company

September 19, 2013

SHANKAR SUBRAMANIAM

IL&FS Transportation Network Ltd has said that it has signed a memorandum of understanding with East Nippon Expressway Company (NEXCO East), a Japanese expressway development company, to work together on PPP (public-private-partnership) projects.

The ITNL Group currently manages over 34,000 lane km of highways, of which about 12,000 km are in India.

NEXCO East manages and constructs expressways in eastern Japan. Currently, it manages 3,720 km of expressways, which are used by about 2.7 million customers each day. Toll revenues for 2012 were about $7 billion. The company also has about 280 km under construction.

Both the companies believe that the market for expressways in India is on the verge of a take-off and would become a large programme.

An IL&FS Transportation communiqué to the stock exchanges said the two companies aim to use Japanese technology and finance. The alliance intends to jointly carry out technical and feasibility studies and related work on potential road projects in India for implementation.

 

IL&FS secures major highway widening contract in India

June 20, 2013

 

India-based transportation infrastructure company IL&FS Transportation Networks (ITNL) has signed a new concession agreement with the National Highways Authority of India (NHAI) for a Rs16.65bn ($304.3m) road widening project in the states of Jharkhand and West Bengal.

To be executed under the National Highways Development Project (NHDP) Phase V on design, build, finance, operate and transfer (DBOFT) basis, the latest project includes six-laning the Barwa-Adda-Panagarh stretch of National Highway 2 (NH-2) from km 398.240 to km 521.120, including the Panagarh Bypass.

The project is set to be implemented on a toll basis, and has a concession period of 20 years, including a 910-day period for construction. ITNL had quoted a premium of Rs420m ($7.68m) for the project.

 {“The project is set to be implemented on a toll basis, and has a

concession period of 20 years,

including a 910-day period for construction.”}

Established in 2000, IL&FS Transportation Networks is a surface transportation infrastructure company and a private sector BOT road operator in India.

The company is involved in the development, operation and maintenance of national and state highways, roads, flyovers and bridges in various states across the country.

IL&FS has also signed a concession agreement with NHAI for Rs13.48bn ($246.48m) four-laning of the Khed-Sinnar section of National Highway 50 (NH-50) in the state of Maharashtra.

The programme will carried out under Phase IV B on DBFOT basis and has a concession period of 20 years, including construction period of 910 days.

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.

INTEREST COST BITES
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.

 

Source: http://www.business-standard.com