road sector update - spark capital
TRANSCRIPT
March 2016
Road Sector Update
Road Sector Update
Road Sector Update
YTD FY16 project award: Target for awarding National Highways road projects in FY16E is ~10,000kms (NHAI –
~5,200kms, MoRTH - ~5,000kms). So far, NHAI has awarded 3,386kms while Ministry has awarded ~3,000kms. Given
that there is only one month left and the fact that price bids for the projects in pipeline are towards the end of March 2016
we expect that NHAI and MoRTH will end the year at ~4,000kms of award each (total~8,000km)
Competition in recent bids: Competition intensity continues to be high as witnessed in the recent bids, resulting in
several projects being bidded-out at EPC value <20% of NHAI’s project cost. Local players with cost advantages and
large players with appetite have had upper hand; APCO Infratech in Uttar Pradesh and Larsen & Toubro are examples
NHAI pipeline: There are 53 projects for which NHAI has invited for price bids (8 projects in BOT, 23 projects in EPC
and 22 projects in Hybrid Annuity Model). These projects amount to ~3,000kms in length (758kms in BOT, 1,346kms in
EPC and 836kms in Hybrid Annuity mode). Of these, 818kms of projects have witnessed postponement in bid
submission date by atleast 3 months; this is likely due to delays in approvals and push-backs from bidders and lenders
for the Hybdrid Annuity projects
Funding: Ministry of Road Transport and Highways saw 24% higher allocation for the year FY17 (Rs. 550bn vs. Rs.
443bn in FY16); NHAI gets 33% lower (Rs. 197bn vs. Rs. 294bn in FY16) and 142% higher allocation to other central
entities like MoRTH, NHIDCL etc (Rs. 194bn vs. Rs. 80bn), also states and union territories Rs. 110bn vs. Rs. 29bn
(288% yoy); projects awarded by the Ministry directly to benefit due to this. Allocation from extra-budgetary resources
have been increased to Rs. 593bn (from Rs. 280bn in FY16), as a result NHAI will be more dependent on borrowings by
way of tax free bonds in FY17E (Rs. 150bn tax free bonds proposed vs. Rs. 190bn in FY16). Totally, road sector’s
allocation stands at Rs. 1,143bn for FY17(vs. Rs. 723bn in FY16, a 58% increase). On top of this, the Pradhan Mantri
Gram Sadak Yojna Scheme got an allocation of Rs. 270bn vs Rs. 190bn in FY16
Company Section
All the Companies in our coverage have witnessed a strong order inflow in YTDFY16 due to sectoral tailwinds. Sadbhav
has won the most (Rs. 26,789mn) in YTDFY16 followed by KNR (Rs. 26,304mn), IRB (Rs. 26,500mn), Ashoka Buildcon
(Rs. 22,237mn) and PNC Infratech (Rs. 20,021mn). Almost all of this order-inflow has come in the road sector, even for
a diversified EPC contractor like Sadbhav
With the recent correction in stock prices we like Sadbhav the most followed by PNC Infratech and then Ashoka Buildcon
in the EPC & Asset Owners space. Sadbhav is likely to win another Rs. 40bn of road projects in the near term (BOT and
Hybrid Annuity model); with its asset business no longer required to be funded by parent Sadbhav can comfortably fund
equity for the Rs. 40bn CAPEX
We like KNR Constructions in the pure road EPC contractors followed by PNC Infratech; geographical strength and
conservative management and good balance sheet quality are other reasons why we remain positive on these names
Find Spark Research on Bloomberg (SPAK <go>),
Thomson First Call, Reuters Knowledge and Factset
VIJAYARAGHAVAN SWAMINATHAN [email protected] +91 44 4344 0022
BHARANIDHAR VIJAYAKUMAR [email protected] +91 44 4344 0038
Spotlight on Road sector continues; Ministry and States get higher allocation this time
Sector Update
March 4, 2016
Market Data
NIFTY 7476
SENSEX 24607
Market Performance
1m 3m 12m
NIFTY 0.7% -5.2% -15.0%
SENSEX 1.1% -4.0% -16.2%
Rating Summary
Stock CMP TP Rating
Rs. Rs.
ASBL IN 185 235 Buy
IRB IN 225 237 Add
PNCL IN 480 650 Buy
KNRC IN 508 560 Buy
SADE IN 252 315 Buy
Market Performance
1m 3m 12m
ASBL IN -1.1% -4.4% 4.8%
IRB IN -2.5% -6.9% -11.2%
PNCL IN -3.0% -10.2% NM
KNRC IN 1.7% -17.9% 16.5%
SADE IN -18.5% -29.9% -26.5%
Road Sector Update
Page 3
Abbreviations Used
Acronym Detail
BOT Build Operate Transfer
CRF Central Road Fund
EPC Engineering Procurement Construction
IEBR Internal and Extra Budgetary Resources
MoRTH Ministry of Road Transport & Highways
NHAI National Highways Authority of India
NHIDCL National Highways Infrastructure and Development Corp
PPP Public Private Partnership
SARDP-NE Special Accelerated Road Development Programme North East
TPC Total Project Cost
Road Sector Update
Page 4
Road Projects awarded in YTDFY16
YTD FY16 NHAI project awards
Type No. of projects Length, kms % of length
BOT 7 874 26%
EPC 47 2,420 71%
Hybrid Annuity 3 92 5%
Total 57 3,386 100%
• 57 projects have been awarded in YTDFY16 (7 projects in BOT, 47 projects in EPC and 3 projects in
Hybrid Annuity Model)
• These projects amount to ~3,386kms in length (874kms in BOT, 2420kms in EPC and 92kms in
Hybrid Annuity mode)
• Projects that were awarded in December 2015 and January 2016 have seen aggressive bidding
5,160 5,000
10,160
3,386 3,000
6,386
4,200 4,000
8,200
NHAI (kms) MoRTH (kms) Total (kms)
Target FY16 YTDFY16 FY16E
Road Sector Update
Trend in NHAI PPP an EPC project awards
Source: NHAI, MoRTH, Spark Capital Research
455
1,686 1,395 1,234 643
3,367
5,059
6,491
1,116
223 734 874 874 1,200 1,200
825
3,283
335 74
0
188
528
0
0 1,215
2,292 2,512
3,312 2,800 2,800
1,281
4,969
1,730 1,308
643
3,555
5,587
6,491
1,116 1,438
3,026 3,386
4,186 4,000 4,000
0
2,000
4,000
6,000
8,000
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 YTD FY16 FY16E FY17E FY18E
km
s
BOT Projects Awarded
EPC Projects Awarded
NHAI project awards - 3,386km projects awarded in YTDFY16; likely to end the year at ~4,200kms
~9,000 7,300 5,000 4,000 5,000NHAI Project
Award PlanNA NA NA NA NA NA
5,587 6,491 1,116 1,438 3,026Achievement 1,281 4,969 1,730 1,308 643 3,555
Page 5
5,160
~4,200
• At its peak, NHAI awarded 6491kms in FY12 – all in the PPP/ BOT mode; with a sectoral downturn from FY13 due to poor financial health of
contractors, tepid economy and high interest rates, PPP project awards declined significantly resulting in abysmal project awards in FY13
and FY14. New government revived the sector’s fortunes from beginning of FY15 with more focus on EPC mode of project awards
• Against a target of 5,000kms for FY15 actual award has been 3,026kms (734kms in BOT mode and 2,292kms in EPC). This compares
favourably with the subdued award activity witnessed in FY13 and FY14 (2,554kms combined). Target for FY16E is ~5,000kms of which
already 3,386kms have been awarded so far; with just another month to go we expect NHAI to award another 800-1,000kms max
Road Sector Update
Page 6
NHAI Projects awarded in YTDFY16
EPC/ Hybrid Annuity
# Project kms State
Project Cost
(TPC)
Winning
Cost
% Bid on
TPC Winning Bidder
8 Kerala/TamilNadu-Villikuri-Kanyakumari NH- 47 70 Tamil Nadu 13,480 10,780 -20% L&T
9 4 laning of Vijayawada - Machlipatnam 65 Andra Pradesh 11,350 7,410 -35% Dilip Buildcon
10 Delhi - Meerut Expreeway (PKG-2)* 22 Delhi & UP 10,816 10,570 -2% APCO Infratech
11 Delhi - Meerut Expreeway (PKG-1)* 9 Delhi & UP 7,014 7,360 5% Welspun Enterprises
12 Meerut – Bulandshahar* 61 Uttar Pradesh 6,832 8,690 27% APCO Infratech
13 Four / Six laning of Raipur - Simga ( PKG-1) 49 Chhattisgarh 7,267 5,130 -29% Punj Lloyd
14 Construction of Flyover at Nagpur -Raipur road 7 Maharashtra 6,495 NA Gannon Dunkerley
15 4 laning of Saragaon - Bilaspur 35 Chhattisgarh 5,091 3,680 -28% Dilip Buildcon
16 4 laning Simaria - Khagaria section of NH-31 60 Bihar 10,411 5,670 -46% Punj Lloyd
17 4 laning of Simga - Saragaon 42 Chhattisgarh 5,967 3,850 -35% L&T
18 4 laning of Yadgiri - Warangal 99 Telangana 14,240 13,760 -3% L&T
19 4 laning of Bakhtiyarpur - Mokama section of NH-31 45 Bihar 11,675 NA BSCPL Infra
20 4 laning with PS Talebani -Sambalpur 51 Odisha 7,523 3,920 -48% Punj Lloyd
21 4 Laning of Baharagora - Singhara 112 Odisha 12,829 9,087 -29% L&T
22 2 laning Jowai -Mehalaya /Assam border 103 Mehalaya 4,792 4,680 -2% GR Infra
23 2 laning Chhapra -Rewaghat - Muzaffarpur 73 Bihar 5,161 3,970 -23% GR Infra
24 2 laning Biharaharif -Barbigha - Mokama 55 Bihar 3,995 2,972 -26% GR Infra
25 4 laning of Bhojpur to Buxar 48 Bihar 6,424 6,820 6% PNC Infratech
26 4 laning of Koilwar to Bhojpur 44 Bihar 8,140 8,250 1% PNC Infratech
27 4 laning of Patna to Koilwar 33 Bihar 5,561 NA Madhucon Projects
BOT
# Project kms State Rs. mn - - Winning Bidder
1 4 Laning of Guna to Biaora 94 Madhya Pradesh 10,129 - - Dilip Buildcon
2 4 laning of Biaora - Dewas 141 Madhya Pradesh 15,838 - - Oriental Structural
3 4 Laning of Fagne - Mah-Guj Border 141 Maharashtra 18,857 - - IL&FS Transportation
4 8 Laning of Mukarba Chowk to Panipat 70 Haryana 21,287 - - Essel Infraprojects
5 Four Laning of Solapur - Bijapur 109 Maharashtra 13,775 - - Uniquest Infra
6 6 laning of Agra - Etawah bypass 125 Uttarpradesh 26,500 - - IRB Infra
7 4 Laning of Amravati - Chikhli 194 Maharashtra 22,882 IL&FS Transportation
Total 874 129,268
* Hybrid Annuity Projects
Road Sector Update
Page 7
NHAI Projects awarded in YTDFY16
EPC/ Hybrid Annuity
# Project kms State
Project Cost
(TPC)
Winning
Cost
% Bid on
TPC Winning Bidder
28 2 laning Chhapra -Gopalganj 94 Bihar 8,548 6,440 -25% GR Infra
29 Improvement of Amritsar bypass 25 2,731 NA Varsha Infra
30 4 laning Udhambur - Ramban 40 Jammu Kashmir 21,370 17,100 -20% Gammon India
31 4 laning Ramban - Banihal 32 Jammu Kashmir 21,687 17,830 -18% HCC
32 4 laning of Gorakpur -Gopalganj 41 Bihar 5,818 5,420 -7% Punj Lloyd
33 4 Laning of Madurai - Ramanathapuram 115 Tamil Nadu 13,871 9,370 -32% KNR Construction
34 4 laning of Kharar - Kurali section of NH-21 14 Punjab 2,392 NA M.G Contractors
35 4 Laning of Forbesganj - Jogbani 9 Bihar 3,221 NA JKM Infraprojects
36 6 lane Eastern Peripheral Expressway ( PKG-II) 25 Uttar Pradesh 7,858 7,560 -4% Sadbhav Engineering
37 UP/Haryana border - Yamuna Nagar - Panchkula 45 Haryana 6,009 4,680 -22% Sadbhav Engineering
38 4 laning of Kazhakkottam to Mukkola NH-47 27 Kerala 8,452 6,690 -21% KNR Construction
39 6 lane Eastern Peripheral Expressway ( PKG-VI) 22 Uttar Pradesh 7,686 6,750 -12% Gayatri Projects
40 6 lane Eastern Peripheral Expressway ( PKG-V) 21 Uttar Pradesh 6,645 NA Oriental Structural
41 4 Laning of Ghaghra Bridge to Varanasi (PKG-II) 60 Uttar Pradesh 6,670 7,410 11% Gayatri Projects
42 6 lane Eastern Peripheral Expressway ( PKG-III) 25 Haryana/UP 7,885 NA Jaiprakash Associates
43 4 Laning of Ghaghra Bridge to Varanasi (PKG-III) 59 Uttar Pradesh 6,869 7,850 14% Gayatri Projects
44 6 lane Eastern Peripheral Expressway ( PKG-I) 21 Haryana/UP 7,712 7,920 3% Sadbhav Engineering
45 2 Laning Uncha Nagla-Khanuwara-Roppas-Dholpur 75 Rajasthan 2,759 NA H G Infra Engineering
46 4 laning of Sultanpur to Varanasi (PKG-II) 63 Uttar Pradesh 8,153 8,060 -1% Gayatri Projects
47 4 laning of Sultanpur to Varanasi (PKG-I) 75 Uttar Pradesh 10,275 9,860 -4% Gayatri Projects
48 2 Laning Gulabpura - Uniara 204 Rajasthan 5,970 NA Dilip Buildcon
49 4 Laning Ghoshpukur - Salsalabari 84 West Bengal 10,830 NA L&T
50 UP/Haryana border - Yamuna Nagar - Panchkula 42 Haryana 5,623 4,360 -22% Sadbhav Engineering
51 6 lane Eastern Peripheral Expressway ( PKG-IV) 22 Uttar Pradesh 7,893 7,890 0% Ashoka Buildcon
52 Port connectivity at JNPT phase II PKG3 11 Maharashtra 5,050 NA J.Kumar Infra
53 Port connectivity at JNPT phase II PKG4 11 Maharashtra 4,140 NA Ashoka Buildcon
54 New Mangalore Port Road Connectivity Project Karnataka 260 NA RPP Infra Projects
55 6-lane elevated corridor Chandigarh to Kharar 11 Punjab 7,320 7,320 L&T
56 2 laning Aligarh-Moradabad 146 Uttar Pradesh 6,440 6,440 PNC Infratech
57 4-laning Islampur Bypass 10 West Bengal 2,770 2,770 Ashoka Buildcon
Total EPC/ Hybrid Annuity 2,512 387,969
Road Sector Update
Page 8
Upcoming NHAI projects
Upcoming NHAI opportunity
Type No. of projects Length, kms % of length
BOT 8 758 26%
EPC 23 1,346 46%
Hybrid Annuity 22 836 28%
Total 53 2,939 100%
• There are 53 projects for which NHAI has invited for price bids (8 projects in BOT, 23 projects in
EPC and 22 projects in Hybrid Annuity Model)
• These projects amount to ~3,000kms in length (758kms in BOT, 1,346kms in EPC and 836kms in
Hybrid Annuity mode)
• Of this, 818kms of projects have witnessed postponement in bid submission date by atleast 3
months
Road Sector Update
Page 9
NHAI Projects in pipeline
NHAI bid pipeline
# Project Type kms State
Original Bid
Date
Revised
Bid Date
1 Four Laning of Banjhabahal to Telebani BOT 77 Orissa NA NA
2 Four Laning from Singhara to Binjabahal Section BOT 104 Orissa NA 29-Mar-16
3 Construction of Dhalkola Bypass EPC 6 West Bengal 9-Dec-15 NA
4 Jharpokharia Baripada Baleshwar EPC 81 Orissa 9-Dec-15 NA
5 Development of Delhi-Meerut Expressway - pkg 2 Hybrid 20 UP 15-Dec-15 15-Mar-16
6 Four Laning of Nagina-Kashipur section EPC 102 UP 16-Dec-15 3-Apr-16
7 Four laning of Haridwar Nagina section EPC 73 UP 16-Dec-15 3-Mar-16
8 Six Laning of Aurangabad to Bihar - Jharkhand Border BOT 70 Bihar 17-Dec-15 NA
9 Six Laning of Bihar- Jharkhand Border (Chordaha) to Barwa Adda BOT 150 Bihar 17-Dec-15 NA
10 Four Laning of Mahulia-Baharagora- JH/WB Border Section EPC 72 Jharkhand 17-Dec-15 NA
11 Four laning of Varanasi Gorakhpur section EPC 60 UP 17-Dec-15 NA
12 Rehabilitation and Upgradation to Four laning of NH-31D EPC 71 West Bengal 18-Dec-15 18-Mar-16
13 4 Laning Nh-6 From Chichra To Kharagpur EPC 51 West Bengal 18-Dec-15 18-Mar-16
14 4-Laning Of Varanasi Gorakhpur Section EPC 76 UP 19-Dec-15 NA
15 Four Laning Of From Addahole (Near Gundya) To Bantwal Cross EPC 65 Karnataka 22-Dec-15 NA
16 Four Laning Of Hassan To Maranahally EPC 48 Karnataka 22-Dec-15 NA
17 Four Laning of Hospet-Bellary-Karnataka/AP Border EPC 95 Karnataka 22-Dec-15 10-Mar-16
18 Four Laning of Solan Kaithalighat Section Hybrid 23 Himachal Pradesh 28-Dec-15 21-Mar-16
19 Upgradation Of Kullu-Manali Section EPC 37 Himachal Pradesh 28-Dec-15 NA
20 RFQ for Four/six Laning of Aurangabad to Telwadi BOT 86 Maharashtra 4-Jan-16 NA
21 RFQ for Four/Six Laning of Bodare to Dhule BOT 67 Maharashtra 4-Jan-16 NA
22 Six laning of Kamrej - Chalthan Section EPC 16 Gujarat 5-Jan-16 29-Mar-16
23 Four Laning Tuljapur – Ausa (including Tuljapur Bypass) Section Hybrid 56 Maharashtra 15-Jan-16 15-Mar-16
24 Construction of new link (NH-133B) from Sahibganj Bypass) Hybrid 6 Bihar 15-Jan-16 10-Mar-16
25 4Lane Stand Alone Ring Road / Bypass for The Nagpur City Hybrid 34 Maharashtra 20-Jan-16 11-Mar-16
26 4 Lane Stand Alone Ring Road/Bypasses for Nagpur City Hybrid 28 Maharashtra 20-Jan-16 11-Mar-16
27 Four Laning of Hubli - Hospet Section EPC 139 Karnataka 28-Jan-16 22-Mar-16
28 RFP forDelhi-Ludhiana-Amritsar- Katra Expressway NA NA Delhi/ Punjab 7-Mar-16
29 4-Laning of Chutmalpur-Ganeshpur section of NH-72A Hybrid 49 Uttarakhand/ UP 7-Mar-16
30 4-Laning of Rampur-Kathgodam section of NH-87 Hybrid 46 Uttarakhand 7-Mar-16
Road Sector Update
Page 10
NHAI Projects in pipeline
NHAI bid pipeline
# Project Type kms State
Original Bid
Date
Revised
Bid Date
31 4-laning of Rampur-Kathgodam section of NH-87 Hybrid 42 Uttarakhand NM 7-Mar-16
32 Construction of Flyover/Underpass at IFFCO Chowk EPC - Haryana NM 9-Mar-16
33 Construction of Flyover/Underpass on NH-8 EPC - Haryana NM 9-Mar-16
34 Construction of Flyover/Underpass on NH-8 EPC - Haryana NM 9-Mar-16
35 6 laning of Udaipur to Rajasthan/ Gujarat Border section of NH-8 BOT 100 Rajasthan NM 10-Mar-16
36 Four Laning of Gagalheri-Saharanpur-Yamunanagar of NH-73 Hybrid 36 UP NM 10-Mar-16
37 Construction and Upgradation of NH-131A near Narenpur Hybrid 49 Bihar NM 10-Mar-16
38 4/6 laning Kharar to Ludhiana of NH-95 Hybrid 76 Punjab NM 18-Mar-16
39 Four Laning of Lucknow-Sultanpur Section of NH-56 EPC 127 UP NM 18-Mar-16
40 6 laning Vijayawada-Gundugolanu of NH-5 BOT 104 AP NM 22-Mar-16
41 Four Laning of Kodinar to Veraval Section of NH-8E Hybrid 42 Gujarat NM 23-Mar-16
42 Four Laning of Una to Kodinar of NH-8E Hybrid 41 Gujarat NM 23-Mar-16
43 Four Laning of Kagavadar - Una section of NH-8E Hybrid 41 Gujarat NM 23-Mar-16
44 Four Laning of Mahuva to Kagavadar of NH-8E Hybrid 39 Gujarat NM 23-Mar-16
45 4 laning Talaja – Mahuva of NH – 8E Hybrid 47 Gujarat NM 23-Mar-16
46 4 laning Barhi-Hazaribagh of NH-33 EPC 40 Jharkhand NM 23-Mar-16
47 RFP for 4 – laning of Phagwara- Rupnagar Section of NH- 344A Hybrid 81 Punjab NM 28-Mar-16
48 2 laning Shimla Bypass NH – 22 Hybrid 27 HP NM 28-Mar-16
49 4-lane (Partial Access Controlled) Laddowal Bypass Hybrid 17 Punjab NM 28-Mar-16
50 Four lane Elevated Highway between Samrala Chowk to Ludhiana Hybrid 12 Punjab NM 28-Mar-16
51 RFP for Four laning of Bar- Bilara- Jodhpur section of NH-112 EPC 111 Rajasthan NM 29-Mar-16
52 Two/Four laning of Govindpur (Rajgunj)- West Bengal Border EPC 57 Jharkhand NM 30-Mar-16
53 Six lane of Greenfield Proposed Udaipur bypas Hybrid 24 Rajasthan NM 31-Mar-16
54 4 laning UP/Haryana border-Yamunanagar-Panchkula EPC 19 Rajasthan NM 31-Mar-16
Road Sector Update
Road sector funding
Budget Allocation – Ministry of Road Transport & Highways (MoRTH)
Rs. mn FY16 (budget) FY16 (revised) FY17 (budget) yoy, %
Allocation to Centre
To NHAI 294,201 294,201 196,530 -33%
To Other Central Entities 65,826 80,019 193,540 142%
To SARDP-NE 40,000 40,000 50,000 25%
Allocation to States 28,680 28,090 108,330 286%
Allocation to Union Territories 420 420 1,600 281%
Sub Total 429,127 442,730 550,000 24%
Internal & Extra Budgetary Resources (IEBR) 426,945 280,000 592,790 112%
*IEBR includes NHAI Tax free bonds and 54-EC bonds, against FY16’s target of Rs. 280,000mn, bonds worth Rs. 230,000mn was issued
Total 856,072 722,730 1,142,790 58%
1
2
3
4
In the current budget, allocation to NHAI has been reduced by 33%
While, allocation to other central entities like MoRTH, NHIDCL etc. has been increased to 142%
Similarly, allocation to states and union territories have gone up significantly for FY17
Allocation from IEBR has been increased by 112%; however we expect this to be revised down as was witnessed in FY16
Road Sector Update
Funding for NHAI – NHAI tax bonds and 54-EC capital gains bonds are key monitorables
NHAI funding sources
Rs. mn FY16 (revised) FY17 (budget) yoy, %
From Central Road Fund 229,201 121,530 -47%
Toll Collection/ Premiums 65,000 75,000 15%
Total Budget Allocation 294,201 196,530 -33%
IEBR 280,000 592,790 112%
-of which NHAI bonds 190,000 150,000
-of which 50-EC bonds 40,000 NA
Total to NHAI 574,201 789,320 37%
Source: Union Budget 2016-17, Spark Capital Research
Land Acquisition
expense ~Rs. 150bn
We expect this
expense to be lower
FY16 FY17
Tax free bonds of Rs.
190bn issued
Proposed to issue
bonds for Rs. 150bn
54-EC Capital Gains
bonds of Rs. 40bn
issued
NA
Funding for NHAI:
Budgetary Allocation - ~Rs. 197bn for FY17E:
NHAI collects toll (on ~6,600kms/ 104 toll plazas of NH constructed by NHAI), and receives money from revenue share and negative grant/premium; it
deposits this in the Consolidated Fund of India. Against this, MoRTH releases money to NHAI as ‘Additional Budgetary Support’ through Permanent
Bridge Fee Fund (PBFF) as plough back of Toll Remittance made to CFI, the split of these amounts expected for FY17 are:
− Toll collections: ~Rs. 40bn for FY17E
− Revenue share, negative grant/ premium: ~Rs.35bn for FY17E
Government of India introduced a Cess on both Petrol and Diesel sales in the country (Rs. 6/ litre at present); the cess collected were to be put aside in a
Central Road Fund (CRF) for exclusive utilization for the development and maintenance of state and national highways. For FY17E Rs. 121bn has been
allocated from the Cess Fund (this was Rs. 229bn in FY16)
NHAI has been given borrowing power for ~Rs. 593bn for FY17E:
Comprises of Capital Gain Tax free Bonds under Section 54-EC of the Income Tax Act, 1961 and Tax Free bonds
Tax Free bonds – Rs. 150bn
Given a large expected funding from these bonds, it is key to monitor them (as only Rs. 230bn was issued against initial target of Rs. 427bn)
Company Section
Road Sector Update
Orderbook as at Dec’15Orderbook as at Dec’15
Ashoka – Order Inflow, Rs. mn IRB – Order Inflow, Rs. mn
EPC Business - Order inflow and Orderbook
Road EPC
Total: Rs. 41,864mn Total: Rs. 173,210mn
Road Captive Power T&D
12.5% 13.0% 11.0%
EPC Margins, %
Road EPC for Captive projects
25% - 35%
EPC Margins, %
Page 14
18,132
24,009 23,570
16,570
0
26,851
12,486
22,237
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
YT
D F
Y1
6
Road BOT projects won Road EPC projects won
Roads73%
Power T&D27%
45,360
11,420
48,800
26,390
14,900
76,900
26,500
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
YT
D F
Y1
6
IRB Infrastructure
Ongoing BOT
projects39%
BOT projects - yet to
start construc
tion…
BOT Projects - O&M10%
Road Sector Update
Orderbook as at Sept’15 Orderbook as at Dec’15
KNR – Order Inflow, Rs. mn Sadbhav – Order Inflow, Rs. mn
EPC Business - Order inflow and Orderbook
Total: Rs. 82,719mnTotal: Rs. 34,701mn
Road EPCRoad projects on sub-
contract
14% 11%
EPC Margins, %
Road EPC, Captive
Mining Irrigation
11%, 13% 18% - 22% 6%
EPC Margins, %
Page 15
Orderbook as at Dec’15
PNC – Order Inflow, Rs. mn
Total: Rs. 30,600mn
Road EPC
14%
EPC Margins, %
5,764
10,330 11,580 11,161
7,905
2,927
5,879
26,304
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
YT
D F
Y1
6
KNR Constructions
Mining25%
Irrigation
20%
Transportation55%
Roads98%
Irrigation
2%
21970
18310
115009610
13810
1857020021
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
YT
D F
Y1
6
Roads
Roads100%
Airport Runway
0%
5,876 10,023
28,142
9,848
30,038
23,174
38,192
26,789
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
YT
D F
Y1
6
Mining Irrigation Transportation
Road Sector Update
IRB – Standalone Revenues and EBITDA margin
Ashoka – Standalone PAT
Ashoka – Standalone Revenues and EBITDA margin
EPC Business – Revenues and Profitability
Page 16
11
,94
8
13
,38
0
16
,37
6
15
,56
6
19
,66
7
20
,73
1
23
,38
2
26
,60
7
14%14%
12% 13% 13% 13%12%
12%
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Revenue EBITDA
84
7
1,0
45
1,0
22
1,0
34
1,4
22
1,5
87
1,6
91
2,0
48
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Sandalone PAT
16
,70
4
22
,75
9
27
,28
9
26
,57
9
21
,08
4
21
,84
7
33
,24
7
30
,60
1
26%28%
30%32%
34%36% 29%
30%
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Revenue EBITDA
IRB – Standalone PAT
2,2
43
2,9
86
3,5
20
3,3
42
1,9
25
2,0
22
2,8
68
2,3
60
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Sandalone PAT
Road Sector Update
EPC Business – Revenues and Profitability
KNR – Standalone Revenues and EBITDA Sadbhav – Standalone Revenues and EBITDAPNC – Standalone Revenues and EBITDA
KNR – Standalone PAT Sadbhav – Standalone PATPNC – Standalone PAT
71
1
78
4
76
5
70
1
1,0
04
1,2
43
1,5
95
1,9
48
Sandalone PAT
56
8
52
8
52
1
61
0
73
0
1,3
08
74
6
1,0
23
Sandalone PAT
11
,39
1
12
,73
3
13
,03
6
11
,52
1
15
,61
0
19
,23
8
22
,62
6
27
,23
2
11%12% 12% 12%
14%13% 13%
13%
Revenue EBITDA
7,9
30
7,5
05
6,9
21
8,3
48
8,7
61
8,6
94
11
,24
5
13
,52
6
16%18%
17%15% 14%
17%
13%
13%
Revenue EBITDA
22
,09
4
26
,75
5
18
,11
0
23
,58
1
29
,69
8
31
,79
5
36
,33
5
41
,32
1
11% 11%
9%
11% 10%11% 11%
12%
Revenue EBITDA
1,1
96
1,4
06
74
1
1,0
62
1,1
37
1,2
12
1,5
42
2,1
83
Sandalone PAT
Road Sector Update
Ashoka Buildcon – SoTP Valuation
Page 18
SoTP Valuation of Ashoka Buildcon Stake Valuation Method
Total
Equity
Value
ACL's
Value
ASBL's
Value
per
share
ProjectsACL's
Stake
ASBL's
StakeRs. mn Rs. mn Rs. mn Rs.
Indore – Edalabad Road 100% FCFE using 13% CoE 1,576 1,571 8
Ahmednagar – Aurangabad Road 100% FCFE using 13% CoE 377 377 2
Wainganga Bridge 50% FCFE using 13% CoE 343 172 1
Nashirabad Railway-Over Bridge 100% FCFE using 13% CoE 213 213 1
KSHIP WAP-2 51% FCFE using 13% CoE 706 360 2
Total Value for ABL's Road Assets 3,214 2,692 14
NH-6 Bhandara Road 51% 31% FCFE using 14% CoE 1,354 691 421 2
NH-6 Durg Bypass - Maharashtra Border Road 51% 31% FCFE using 14% CoE 3,030 1,545 943 5
Jaora – Nayagaon Road 73% 45% FCFE using 14% CoE 6,620 4,846 2,956 16
NH-3 Pimpalgaon – Nashik – Gonde road 26% 16% FCFE using 13% CoE 1,332 346 211 1
NH-4 Belgaum-Dharwad Road 100% 61% FCFE using 13% CoE 3,333 3,333 2,033 11
NH-6 Sambalpur-Baragarh Road 100% 61% FCFE using 14% CoE (139) (139) (85) (0)
NH-6 Dhankuni to Kharagpur Section 100% 61% FCFE using 14% CoE 4,220 4,220 2,574 14
Chennai ORR 50% 31% FCFE using 13% CoE 5,232 2,616 1,596 9
Total Value for ACL's Road Assets 24,983 17,459 10,650 57
Construction & RMC Business 100% 15x FY18E EPS 30,624 30,624 164
Total Value for Construction Business 30,624 30,624 164
Ashoka Buildcon 58,821 17,459 43,966 235
Road Sector Update
IRB Infrastructure Developers – SoTP Valuation
Page 19
SoTP Valuation of IRB Infra Developers IRB's Stake Valuation MethodEquity
ValueValue to IRB per share %
Projects % Rs. mn Rs. mn Rs.
Mumbai – Pune BOT, MPEW & NH4 100% FCFE using 14% CoE 25,210 25,210 72 40%
Surat – Dahisar Road, NH 8 90% FCFE using 14% CoE 5,290 4,761 14 5%
Bharuch – Surat BOT, NH 4 100% FCFE using 14% CoE 1,709 1,709 5 2%
Thane Ghodbunder Toll Road BOT 100% FCFE using 14% CoE 293 293 1 0%
Tumkur Chitradurg, NH 4 100% FCFE using 14% CoE 1,040 1,040 3 1%
Talegaon Amravati, NH 6 100% FCFE using 14% CoE 2,434 2,434 7 3%
Thane Bhiwandi Bypass BOT 100% FCFE using 14% CoE 3,903 3,903 11 4%
Pune – Nashik BOT, NH 50 100% FCFE using 14% CoE 2,248 2,248 6 2%
Pune – Sholapur BOT 100% FCFE using 14% CoE 1,043 1,043 3 1%
Pathankot Amritsar, NH 15 100% FCFE using 14% CoE 5,492 5,492 16 6%
Jaipur Deoli, NH 12 100% FCFE using 14% CoE 5,505 5,505 16 6%
Ahmedabad Vadodara -NH 8 & Ahmedabad Vadodara
Expressway100% FCFE using 14% CoE 3,107 3,107 9 3%
Goa/ Karnataka Border to Kundapur, NH- 17 100% FCFE using 14% CoE 8,674 8,674 25 9%
Omallur -Salem – Namakkal Section of NH-7 74% at investment value 1,300 962 3 1%
Solapur -Yedeshi section of NH-211 100% FCFE using 14% CoE 4,689 4,689 13 5%
Yedeshi Aurangabad section of NH-211 100% FCFE using 14% CoE 3,020 3,020 9 3%
Kaithal–Rajasthan Border section of NH 152/65 100% FCFE using 14% CoE 4,838 4,838 14 5%
Agra - Etawah 100% FCFE using 14% CoE 3,911 3,911 11 4%
Total Value Road Assets 83,706 82,839 236 99%
Other investments - Airports, Real Estate 100% at investment value 586 586 2 1%
IRB Infrastructure Developers 95,807 94,940 237 100%
Road Sector Update
PNC Infratech – SoTP Valuation
Page 20
SoTP Valuation of PNC Infratech PNC's Stake Valuation Methodology Equity Value PNC's Share per share value %
Projects % Rs. mn Rs. mn Rs/ Share
Standalone EPC Business (a) 100.0% 15x FY18E EPS 29,222 29,222 570 88%
Road Assets
Gwalior Bhind Road 100.0% FCFE using 14% CoE 490 490 10 1%
Kanpur Kabrai Road 100.0% FCFE using 14% CoE 903 903 18 3%
Ghaziabad Aligarh Road 35.0% FCFE using 14% CoE 2,407 842 16 3%
Rae Bareli Jaunpur Road 100.0% FCFE using 14% CoE 536 536 10 2%
Bareilly Almora Road 100.0% FCFE using 14% CoE 412 412 8 1%
Industrial Estate Asset
PNC Delhi Industrialinfra Pvt Ltd 100.0% FCFE using 14% CoE 392 392 8 1%
Road Toll Collection Concession
PNC Kanpur Ayodhya Tollways Pvt Ltd 100.0% FCFE using 14% CoE 568 568 11 2%
Total Value for Assets (b) 5,708 4,143 81 12%
Total PNC Infratech (a) + (b) 34,929 33,365 650 100%
Road Sector Update
KNR Construction – SoTP Valuation
Page 21
KNR Constructions - SoTP Valuation
Stake Method Project Equity Value Value for KNR per share %
BoT Projects
Patel KNR Infrastructures Ltd 40% FCFE with 14% CoE 363 145 5 1%
Patel KNR Heavy Infrastructures Ltd 40% FCFE with 14% CoE 290 116 4 1%
KNR Walayar Tollways Private Ltd 100% FCFE with 14% CoE (28) (28) (1) 0%
KNR Muzaffarpur Barauni Tollway Private Ltd 51% FCFE with 14% CoE 310 158 6 1%
Standalone/ EPC Business 100% 15x FY18E EPS 15,351 15,351 546 98%
Total Value for KNR Constructions 15,742 560 100%
Road Sector Update
Sadbhav Engineering – SoTP Valuation
Page 22
SoTP Valuation Stake Valuation Method
Total
Equity
Value
SIPL ValueValue to
SELper share %
ProjectsSIPL's
stake
SEL's
stakeRs. mn Rs. mn Rs. mn Rs.
Sadbhav Engineering Standalone 100% 15x FY18E EPS 32,746 32,746 191 61%
Sadbhav Infrastructure Project Ltd (SIPL)
Aurangabad Jalna 100% 68% FCFE using 12% CoE 2,831 2,831 1,935 11 3%
Ahmedabad Ring Road 100% 68% FCFE using 13% CoE 4,232 4,232 2,892 17 4%
NH-7 Nagpur - Seoni 100% 68% FCFE using 13% CoE 128 128 87 1 0%
Maharashtra Border Checkpost 78% 53% FCFE using 13% CoE 12,636 9,856 6,737 39 10%
NH-13 Bijapur - Hungund 77% 53% FCFE using 13% CoE 10,188 7,844 5,362 31 8%
NH-202 Hyderabad Yadgiri 100% 68% FCFE using 13% CoE 3,841 3,841 2,625 15 4%
NH-3 Dhule - Palesnar 100% 68% FCFE using 13% CoE 2,171 2,171 1,484 9 2%
NH-71A Rohtak Panipat 100% 68% FCFE using 13% CoE 4,155 4,155 2,840 17 4%
Total Value for Operational Road Assets 40,181 35,058 23,962 140 36%
0%
NH-8 Shreenathji - Udaipur 100% 68% FCFE using 13% CoE 9,895 9,895 6,764 39 10%
NH-758 Bhilwara - Rajsamand 100% 68% FCFE using 13% CoE 4,924 4,924 3,365 20 5%
NH-7 Rohtak - Hissar 100% 68% FCFE using 13% CoE (263) (263) (179) (1) 0%
SH-3 Mysore Bellary 74% 51% FCFE using 13% CoE 1,512 1,119 765 4 1%
Total Value for Under Construction Road Assets 16,069 15,676 10,714 62 16%
0%
Less: Net Debt at SIPL standalone in FY16E 68% 9,369 9,369 6,404 37 9%
Total Value for SIPL 46,881 41,364 28,273 165 52%
Value of SIPL after giving holdco discount 25% holdco discount 35,160 31,023 21,205 124 39%
Total Value for Sadbhav Engineering 67,906 53,950 315 100%
Road Sector Update
Page 23
Valuation Matrix
Company Revenues, Rs.mn EBITDA, Rs.mn PAT, Rs.mn RoE
Standalone Numbers FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E
Ashoka Buildcon 19,667 20,731 23,382 26,607 2,498 2,614 2,806 3,251 1,422 1,587 1,691 2,048 14% 12% 10% 11%
IRB 21,084 21,847 33,247 30,601 2,301 1,894 2,436 2,310 1,925 2,022 2,868 2,360 7% 7% 9% 7%
KNR Constructions 8,761 8,694 11,245 13,526 1,262 1,480 1,508 1,811 730 1,308 746 1,023 13% 21% 10% 13%
PNC Infratech 15,610 19,238 22,626 27,232 2,166 2,542 3,009 3,559 1,004 1,243 1,595 1,948 15% 13% 12% 13%
Sadbhav Engineering 29,698 31,795 36,335 41,321 3,002 3,514 4,081 5,112 1,137 1,212 1,541 2,183 10% 9% 11% 14%
Company Revenues, Rs.mn EBITDA, Rs.mn PAT, Rs.mn RoE
Consolidated Numbers FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E
Ashoka Buildcon 23,197 23,197 23,197 23,197 5,110 6,833 7,316 8,828 815 887 1,085 1,886 6% 5% 5% 9%
IRB 38,475 45,026 59,107 63,052 22,117 28,067 32,155 36,680 5,429 6,729 6,122 4,142 13% 14% 14% 11%
KNR Constructions 9,312 8,844 12,095 14,461 1,268 1,481 2,202 2,585 697 1,025 265 601 10% 12% 3% 7%
PNC Infratech 18,609 23,104 28,500 33,213 2,799 3,864 5,820 6,376 912 646 980 1,345 12% 6% 7% 9%
Sadbhav Engineering 34,480 37,467 44,891 53,116 5,867 6,992 9,973 13,833 (1,758) (599) 573 1,835 -13% -3% 3% 9%
Company CMP Shares M.Cap Net Debt to Equity (x) P/E (x) Price / BV (x)Target
PriceRating
Consolidated Numbers Rs. (mn) Rs. bn FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18EPrice
(Rs.)
Ashoka Buildcon 186 187 34.8 2.0 1.3 1.3 1.1 44.5 40.9 33.4 19.2 1.9 1.5 1.5 1.4 235 Buy
IRB 225 351 79.0 2.8 2.6 3.0 3.1 14.8 12.6 13.9 20.6 1.8 1.7 1.5 1.4 237 Add
KNR Constructions 508 28 14.2 0.8 0.6 0.6 0.4 18.2 12.4 48.1 21.1 1.6 1.4 1.4 1.3 560 Buy
PNC Infratech 481 51 24.7 1.9 1.4 1.3 1.1 29.2 41.3 27.2 19.8 3.1 1.9 1.8 1.7 650 Buy
Sadbhav Engineering 252 171 43.1 3.8 3.1 3.3 2.7 NM NM 89.7 28.0 3.0 2.5 2.4 2.2 315 Buy
Road Sector Update
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Page 24
Road Sector Update
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Page 25