CARE assigns A+ rating to NCD issue Era Infra Engg

October 4, 2007

CARE has assigned a ‘CARE A+ [Single A (Plus)]’ rating to the proposed Non Convertible Debentures (NCDs) aggregating Rs.100cr. of Era Infra Engineering Ltd.(EIEL), formerly known as Era Constructions (India) Ltd. These NCDs would be redeemed in 8 quarterly installments in 2nd and 3rd year from the date of allotment. Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk.

CARE has reaffirmed a ‘CARE A+ [Single A (Plus)]’ rating to the Secured NCDs aggregating Rs.50cr. of Era Infra Engineering Ltd. (EIEL). . Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk.

CARE has reaffirmed a ‘CARE A+ [Single A (Plus)]’ rating to the Unsecured NCDs aggregating Rs.100cr. of Era Infra Engineering Ltd. (EIEL). Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk.

The ratings take into account EIEL’s experience in diversified construction activities, strong pre-qualification credentials, increasing order book position resulting in improved financial performance, reputed clients and positive outlook for the construction sector. However, the rating is constrained by increasing working capital requirements given the aggressive growth, increasing investment requirement for BOT projects, vulnerability to increasing competitive pressures given its relative size and inherent cyclical trends associated with construction sector.

EIEL, the flagship company of Era Group was incorporated in September 1990, promoted by Mr. H.S Bharana, a civil engineer by profession, having more than two decades of experience in construction industry. The company is engaged in construction activities of infrastructure, institutional, industrial, commercial and housing. EIEL has executed 65 projects in the last 16 years valued at Rs.650cr.

Total operational income of the company has increased 99% and 145% in FY’06 and FY’07 respectively due to increase in average contract size and its ability to execute projects as per time schedules.

Consequent to the increase in the total income, profitability of the company has also been rising consistently. PBILDT margin during FY’07 have increased from 15.64% to 18.35% due to increase in ticket size of the contracts and changing project mix towards high value turnkey contracts.

Overall gearing, however, has increased as on Mar 31, 2007 on account of issue of FCCBs and increase in borrowings to meet capex, investment in BOT and working capital requirements. On excluding FCCBs, overall gearing improves to 1.68 as on Mar 31, 2007.

EIEL has raised USD 75 million (Rs. 326 crs) through FCCBs in Jan’07 to fund capex plans and investment in BOT projects. As per FCCB terms, the conversion price will be decided in Jan’08 and conversion process would commence from Mar’08.

EIEL has issued 55 lakh fresh warrants to promoters and associates in May 2007 at a price of Rs.425. Application money equal to 10% (Rs.23cr.) has been received at the time of issue of these warrants. These warrants would be converted to equal number of equity shares in Nov 2008, expected to bring Rs.210cr. Besides, existing warrants issued in Dec 2005 at a price of Rs 135 would contribute Rs.48cr. towards equity in FY’08.

Liquidity as measured by current ratio is satisfactory at 2.78 times as on March 31, 2007. Company’s working capital requirements have been mostly funded from the borrowings during the year. Going forward, the liquidity of the company is likely be under pressure on account of increasing order book position, working capital intensive nature of operations, increasing order book position and increasing investments in BOT projects.

Source: moneycontrol.com

Written by ITW Editor · Filed Under BOT, CARE, Investment and Finance, Projects

IRB Infrastructure to tap market with 5.1 crore share float

October 4, 2007

MUMBAI: Another infrastructure to realty developer has sought the market regulator’s permission to tap the capital markets.

IRB Infrastructure Developers Ltd has lined up 5.1 crore share equity offering of Rs 10 each through 100 per cent book building process.

IRB Infrastructure was formed to fund the capital requirement of the IRB Group’s initiatives in the infrastructure and construction sectors. It has extensive experience in roads and highways and is working on build/own/transfer projects like the Mumbai-Pune Expressway and Bharuch-Surat section of National Highway 8. It has also diversified into real estate development.

As a part of its business strategy, the company now proposes to invest in its subsidiary IDAA and make prepayment and repayment of its existing loans and the subsidiaries through the net proceeds.

In January 2007 it formed a consortium with Deutsche Bank AG Singapore Branch to jointly bid for certain road infrastructure projects.

The Hong Kong branch of Deutsche Bank, Jade Dragon (Mauritius)-a subsidiary of Goldman Sachs, and CPI Ballpark Investments of Merrill Lynch each hold 3.85 per cent stake in IRB Infrastructure.

Deutsche Equities India and Kotak Mahindra Capital are book running lead managers to the issue.

Written by ITW Editor · Filed Under BOT, Expressway, Infrastructure, Investment and Finance

IRB Infrastructure files DRHP with SEBI

October 3, 2007

IRB Infrastructure Developers Limited, an integrated infrastructure development and construction company in India with significant experience in the roads and highways sector, proposes to enter the capital markets with a public issue of 51,057,666 Equity shares of Rs 10 each through 100% book building process.

It has also diversified into the business of real estate development sector. It has filed DRHP for this purpose with SEBI. Deutsche Equities India Private Limited is the Sole Global Coordinator and BRLM for the Issue and Kotak Mahindra Capital Company Limited is the Co-BRLM for the Issue.

IRB Infrastructure Developers Limited is the holding company of the IRB Group. The Company was formed to fund the capital requirement of the IRB Group’s initiatives in the infrastructure and construction sectors. Its infrastructure development portfolio includes several large BOT projects in the road sector, including the Mumbai-Pune Express Highway and NH.4 BOT project and the BOT project for the Bharuch to Surat section of NH.8. In January 2007.

It has formed a consortium with Deutsche Bank AG Singapore Branch to jointly bid for certain road infrastructure projects.
As a part of its business strategy, the company now proposes to invest in its subsidiary IDAA and make prepayment and repayment of existing loans of the Company and the Subsidiaries through the net proceeds of the Issue.

Deutsche Bank Hong Kong Branch, Jade Dragon (Mauritius) Limited (a subsidiary of Goldman Sachs) and CPI Ballpark Investments Limited (a subsidiary of Merrill Lynch) each hold 3.85% stake, and Somerset Emerging Opportunities Fund hold 0.54% stake in the equity share capital of the company.

The Company’s infrastructure development business involves construction, development and operation of infrastructure development projects. It is an established infrastructure company in the roads sector in India and has a large portfolio of completed and operational BOT projects in the Indian road infrastructure sector.

The Company’s construction business complements its infrastructure development business and involves engineering, procurement and construction work for construction project on a contractual basis, including in the roads sector.

Source: indiainfoline.com

Written by ITW Editor · Filed Under BOT, Infrastructure, Investment and Finance, Projects

Subscribe to Maytas Infra, looks reasonable: India Infoline

October 3, 2007

Maytas Infra, a construction and infrastructure development company, is open for subscription with an initial public offering of 88.5 lakh equity shares of Rs 10 each for cash at a price to be decided through a 100 per cent book building process.

The issue will close for subscription on October 4, 2007. The company has fixed the price band between Rs 320 and Rs 370 per equity share.

India Infoline report on Maytas Infra IPO

Investment rationale

Diversified portfolio with pan India presence

MIL construction portfolio is diversified across six sectors including irrigation, roads and bridges, buildings and structures, power, oil and gas, and railways. Their infrastructure development projects are into power, road and port sectors. These 11 BOT projects are geographically widespread through 12 states in India.

Along with national presence they are exploring international opportunities in construction space; they have established a joint venture with Dhabi Contracting Est. in Dubai in December 2006.

Investment in infrastructure to witness a CAGR of 13.8%

India is the fourth largest economy in the world in GDP terms on the basis of purchasing power parity. Over the last decade, India has been one of the fastest growing economies in the world with a real GDP of 9.2% in FY07. Infrastructure has been a big contributor. This growth is visible in roads, bridges, airports, commercial buildings, townships, power systems, rural and urban development.

According to the Pre-Budget Memo 2006- 07 prepared by the Construction Federation of India, construction is the second largest employer after the agriculture sector. Currently, the construction industry in India, directly or indirectly, employs approximately 32mn workers, accounts for 40% of gross investment and 60% of infrastructure costs.

According to CRIS INFAC, investment in construction is expected to grow to approximately Rs 6,129 billion in 11th five year plan from Rs 3,213 billion in 10th five year plan at a CAGR of 13.8%. The construction segment constitutes a significant part of infrastructure development in the economy.

The infrastructure boom is also likely to help construction companies. Government initiatives in the form of developing national highways, golden quadrilateral, and setting up public –private partnerships and BOT models are likely to attract strong investment in the infrastructure sector.

Healthy order book position of 5.6x FY07 revenue

MIL has a healthy order book of Rs 35.8 billion, 5.6x FY07 revenues as of June 30, 2007, inclusive of its joint venture projects. On a standalone basis, the order book stands at Rs 26.9 billion, 4.2x FY07. It also includes higher-margin construction contracts in the power, oil and gas, infrastructure and railway sectors. MIL has also placed a bid for lift irrigation projects rather than for purely irrigation contracts. Irrigation construction contracts account for maximum contribution to the revenue.

Risk and concerns

Price fluctuations

MIL has contracts on fixed-price, lump-sum or item-rate basis, the company is exposed to price escalation in construction materials, fuel and equipment.

Controlling interest

MIL holds less than 50% of controlling interest in most of its SPV projects.

Single supplier

The Gautami power station and the KVK Nilachal power station rely on a single supplier, GAIL and Mahanandi Coal Fields respectively, for fuel as well as external operators for their operation and maintenance. Any disturbance in supply would affect their operations.

New entrance in infrastructure

MIL is very new in the infrastructure sector. It has completed only one road project till date in this vertical.

Government policies

A substantial part of MIL’s revenue has been from government projects. Any change in the political or financial policies will directly affect the company’s operating margins.

Recommendation

Based on an order book position of Rs 35.8 billion and an aggressive foray into the infrastructure sector with 11 BOT projects, MIL seems to be fundamentally strong. On a post issue basis, considering the EPS of Rs.9.4, the issue is available at P/E at 34.2x lower price band and 39.6x upper price band. The issue looks reasonable at both the ends compared with its peers. We recommend Subscribe.

Written by ITW Editor · Filed Under BOT, Infrastructure, Investment and Finance

D.S.Constructions to Deploy SAP

October 1, 2007

D.S.Constructions, a part of the D S Group, through its innovative and selective strategy has established itself in the infrastructure development sector. The company is a pioneer in BOT infrastructure development and engineering with projects under execution in the highways, expressways and railway, and hydro power. It’s now pursuing privatization of airports and ultra mega power projects, Special Economic Zones (SEZs), etc., in a short span of 5 years.

The company growing at a fast rate felt that it would be possible to keep pace with growth only with the introduction and use of good IT tools. The technology selection parameters of D.S.Constructions are investment protection, past history, future roadmap, and support.

“We’re little late in IT deployment, however, we’re now doing overtime to catch up. As a first step, we’ve started our SAP implementation for ERP along with creating a good IT infrastructure,” stated C.R.Narayanan, vice president (IT) of D.S.Constructions.

Commenting on the deployment, he further added, “We evaluated various vendors like SISL and Wipro before zeroing in on SAP. IBM is our implementation partner for this. The deployment starts on October 3, 2007. In addition, for our WAN bandwidth, TULIP IT is our partner and for WAN equipments, Fortinet is partnering us.”

The company is taking all measures beforehand so that it doesn’t land into any problems later on. “There aren’t many IT deployments in infrastructure development phase in India. We need to suitably modify the global best practices to the Indian environment,” said Narayanan.

With businesses spread across, the centralized system would help the company in gathering data and will also enable it to connect anytime, anywhere, thereby helping it to determine the status of materials at the various project sites. The cycle time would be reduced and the implementation would determine availability of information, alerts, and knowledge repository.

The company predominantly deploys packaged applications and only for very specific applications it develops bolt ons.

D.S.Constructions believes that HR and IT work very close. “A HR portal is under deployment which would address induction, appraisal, helpdesk, MIS, and staffing. This is a hosted solution, which is from HR Mantra of Mumbai. The deployment will start in 15 days from now,” said Narayanan.

Spending around 2-3% of its revenue, the IT expenditure estimated by the company for this year is about Rs.4 crores. With the growth of its business in the coming years, it expects this expenditure to grow further.

The company has presently taken a pilot project of SAP implementation, which is expected to go on till end of 2008. Hence, all other extended IT iniatives of ERP would be considered for deployment by mid-June or -July, 2009.

Written by ITW Editor · Filed Under BOT, Construction, Infrastructure, Investment and Finance

Infrastructure companies — Stack up with discretion

October 14, 2006

Driven by infrastructure spending, the demand side for construction companies remains robust. The key to success will lie in their ability to ramp up resources and capitalise on order flow.

Compound Annual Growth over 3 Years (%)
Indicative OPM across segments (%)

Click on the image to enlarge

Infrastructure has been the new market mantra the past two years. While private equity investors showed keen interest in infrastructure/construction companies, a number of mutual funds also jumped on to this booming bandwagon, investing a chunk of their assets in the sector. An annualised revenue growth of 30-40 per cent over the past three years and an average order size of three-four times the revenues also seem to justify this newfound enthusiasm.

Written by ITW Editor · Filed Under BOT, Infrastructure, NHAI

4-laning of Amritsar to Wagah road okayed

October 14, 2006

With elections to the Punjab Assembly due early next year, the Union Cabinet today cleared the long-pending demand of four-laning of the Amritsar-Wagah section of National Highway 1 on built-operate-transfer (BOT) basis at an estimated cost of Rs 207 crore.

Written by ITW Editor · Filed Under BOT, Investment and Finance, NHAI, Toll Management System, Tolling

Jharkhand hoping PPPs will attract investors

July 28, 2006

Jharkhand is yet to see the concept of public-private partnership (PPP) take off in any form, especially on its 7,000-odd km network of roads and bridges. The state has not itself tried out the concept; it has seen the National Highways Authority of India (NHAI) thrice floating tenders for the Ranchi-Barhi road on a build-operate-transfer (BOT) basis without evoking any response from the private sector. And the Barhi-Ranchi stretch is said to be the state’s highest traffic corridor!

“Let’s see what happens here (at the PWD level), as we are going to launch the concept in the state soon,” said an apprehensive senior road construction department bureaucrat. Says DK Tiwari, secretary of the department: “We are now seeking to get some roads on that (PPP) basis.”

Written by ITW Editor · Filed Under BOT, Default, Infrastructure, Investment and Finance, NHAI, PPP, PWD

Madhucon bags Rs 820cr NHAI project

July 12, 2006

Madhucon Projects has signed a concession agreement with the National Highways Authority of India (NHAI) for laying over 126 km stretch of road between Madurai and Tuticorin on build, operate and transfer (BOT) basis.

Written by ITW Editor · Filed Under BOT, Construction, Default, Highway, Infrastructure, Investment and Finance, NHAI, Projects

IVRCL achieves financial closure for road project

June 25, 2006

IVRCL Infrastructures & Projects Ltd has announced that it has achieved financial closure for its Jalandhar-Amritsar road project awarded by National Highways Authority of India (NHAI).

The company said the project involves improvement, operation and maintenance including strengthening and widening of the existing two-lane road to four-lane duel carriageway from km 407.100 to km 456.100 of NH-1 (Jalandhar-Amritsar section) in Punjab on build, operate and transfer (BOT) basis.

IVRCL is executing this project through special purpose vehicle (SPV) called Jalandhar Amritsar Tollways Ltd, a wholly owned subsidiary of the company.

The estimated project cost is Rs 237.75 crore, of which the loan component is Rs 157 crore. Canara Bank is financing it to the extent of Rs 60 crore, llahabad Bank Rs 50 crore and State Bank of Bikaner and Jaipur Rs 47 crore with Canara Bank as the lead lender of the consortium.

Written by ITW Editor · Filed Under BOT, Construction, Default, Investment and Finance, IVRCL, NHAI, Projects

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