Recommendations From Infrastructure Sector

IRB Infrastructure Developers - RIDE THE HIGHWAY TO GROWTH

HERE IS WHY
Filed DRHP for infrastructure trust 
Strong geographic presence 
Attractive valuations

IRB Infrastructure Developers has a strong order book, favourable interest rate regime and the possibility of debt reduction on its side. The company will also list its Infrastructure Investment Trust on the bourses. IRB Infrastructure Developers is expected to complete construction of four out of five under-construction projects by the end of FY18, which will improve its toll revenue.

IRB Infrastructure Developers has filed a draft red herring prospectus (DRHP) to publicly list Infrastructure Investment Trust (InvIT) and is waiting for Securities Exchange Board of India (SEBI) approval. The company would use the proceeds from InvIT to bring down debt. The lower interest rate cycle will also help in reducing the debt servicing cost, thereby swelling its net profit in the coming quarters.

IRB Infrastructure Developers’ order book stood at Rs.12,011 crore up to Q3FY17. Out of this, the company’s 40.18 per cent order book comprises ongoing BOT projects, 14.57 per cent projects are in O&M phase, while on 45.26 per cent projects construction yet to commence.

IRB Infrastructure Developers’ revenue increased 17.16 per cent to Rs.4,313 crore in 9MFY17 as compared to the same period in the previous financial year. The company’s EBITDA too rose 15.37 per cent to Rs.2,321 crore in 9MFY17 on a yearly basis. Its net profit also increased 6.28 per cent to Rs.488 crore in 9MFY17, as compared to the same period in the previous financial year. IRB Infrastructure Developers’ net debt-to-equity ratio was 2.79x till Q3FY17. 

Its state-wise BOT portfolio stood at 31 per cent from Maharashtra, 22 per cent from Rajasthan, 18 per cent from Gujarat, 12 per cent from Karnataka, 6 per cent from Uttar Pradesh, 6 per cent from Haryana, 3 per cent from Punjab and 2 per cent from Tamil Nadu in Q3FY17. 

The Company has proposed real estate development alongside the Mumbai Pune Expressway. The company owns certain parcels of land situated at Mouje Taje and Mouje Pimploli in Pune. It has also proposed development of greenfield airport project in Sindhudurg district, Maharahstra. It has given consistent financial performance in the past five financial years. Its topline increased at a CAGR of 10.37 per cent in the last five financial years ending with FY16. The company’s EBITDA too rose by CAGR of 14.21 per cent in FY12-FY16. 

IRB Infrastructure Developers’ bottomline also increased at a CAGR of 5.09 per cent in last five financial years. It has interest coverage ratio of 1.81x in FY16. The company’s ROE and ROCE stood at 13.86 per cent and 10.54 per cent, respectively, in FY16. On the valuation front, the share price of IRB Infrastructure Developers is trading at trailing 12-month PE of 5.38x, as against Simplex Infrastructures (7.53x) and industry PE of 18.77x. The company has given attractive dividend yield of 1.73 per cent to its shareholders. IRB Infrastructure Developers book value stood at Rs.151.22.