Company Update | Infrastructure
July 22, 2016
IL&FS Transportation Networks
BUY
CMP
`79
Company Update
Target Price
`93
Investment Period
12 Months
Strong revenue & cash flow generation visibility: At 4QFY2016-end, IL&FS
Transportation Networks Ltd (ITNL) reported gross Toll & Annuity income of
Stock Info
`7.8cr/day (Toll Income at `5.4cr/day and Annuity Income at `2.9cr/day). 7 BOT
Sector
Infrastructure
projects (2 Annuity + 5 Toll) are expected to be operational in next few months.
Market Cap (` cr)
2,603
On being fully operational, all 5 Toll projects (BKEL, PSRDCL, BAEL, KNCL, KSEL)
in FY2017E would contribute additional toll of `1.5cr/day. Further, there’s strong
Net debt (` cr)
26,768
visibility on assured revenues from Annuity projects. Of the 3 Annuity projects,
Beta
1.0
JSEL, has already received provisional completion certificate and other 2, CNTL &
52 Week High / Low
148/64
TRDCL P-III are expected to be operational in 1Q/2QFY2017E. Annuity business
Avg. Daily Volume
240,451
insulated from traffic volumes is expected to generate assured gross revenue of
Face Value (`)
10
`2.2cr/day in FY2017E (~58% of incremental revenues in FY2017E would be
BSE Sensex
27,711
from the assured Annuity business).
Nifty
8,510
Profit to grow 13.6% CAGR during FY2016-18E: Commencement of 7 BOT
Reuters Code
ILFT.BO
projects coupled with ongoing strategic initiatives such as asset sales, debt
Bloomberg Code
[email protected]
re-financing (across project levels), listing of InvITs, in our view would help ITNL
PAT report 13.6% CAGR during FY2016-18E, to `915cr.
Shareholding Pattern (%)
Promoters
73.2
Attractive Valuation: In the backdrop of strong surge in profitability, ITNL stock
MF / Banks / Indian Fls
0.7
price looks very attractive from valuation point of view. ITNL stock (on consol.
basis) is trading at FY2018E P/E and P/BV multiple of 8.7x and 0.4x, respectively.
FII / NRIs / OCBs
7.2
Alternatively, we value construction business at EV/EBITDA of 5x FY2018E EBITDA
Indian Public / Others
18.9
and domestic Road BOT projects on FCFE basis at Cost of Equity of 14%. Also,
we value Elsamex, YuHe Expressway, Metro and other Infra Projects (other than
Abs. (%)
3m
1yr
3yr
road projects) using Investment multiple. On adding up all the projects’ value, we
Sensex
(1.2)
(2.8)
37.5
arrive at SOTP-based target price of `93. Given the strong case of improvement
ITNL
7.2
(45.3)
(41.5)
in business outlook, we maintain BUY rating on the stock.
3-Year Daily Price Chart
Key financials (Consolidated)
300
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17E
FY18E
250
Net Sales
6,645
6,587
6,304
7,947
8,946
10,017
200
% chg
(0.9)
(4.3)
26.1
12.6
12.0
150
Net Profit
520
463
444
232
266
299
100
50
% chg
(11.0)
(4.2)
(47.7)
14.5
12.6
0
EBITDA (%)
27.7
28.7
30.8
30.8
31.0
31.6
EPS (`)
29
19
14
7
8
9
P/E (x)
2.7
4.2
5.5
11.2
9.8
8.7
Source: Company, Angel Research
P/BV (x)
0.4
0.4
0.3
0.4
0.4
0.4
RoE (%)
14.9
10.6
7.5
4.3
4.2
5.0
RoCE (%)
9.7
8.3
6.7
6.8
6.8
7.2
Yellapu Santosh
EV/Sales (x)
2.3
3.1
3.9
3.7
3.6
3.4
022 - 3935 7800 Ext: 6828
EV/EBITDA (x)
8.4
10.6
12.6
12.0
11.7
10.6
[email protected]
Source: Company, Angel Research; CMP as of 21 July, 2016
Please refer to important disclosures at the end of this report
1
ITNL | Company Update
Toll & Annuity Income to report strong growth
In 3Q/4QFY2016 ITNL reported gross Toll & Annuity Income of `7.1cr/day/
`7.8cr/day (includes toll income from YuHe Expressway and A4 Autovia). Of this
4Q Toll & Annuity Income, Toll Income was `5.4cr/day (69% of gross Toll &
Annuity Income) and Annuity Income was `2.4cr/day (31% of gross Toll & Annuity
Income).
Traffic growth across already operational projects and commencement of tolling at
(1) Moradabad Bareilly (MBEL), (2) Warora Chandrapur (WCBTL), (3) Baleshwar
Kharagpur (BKEL), (4) Pune Sholapur (PSRDCL, received provisional completion
certificate), and (5) Sikar Bikaner (SBEL) BOT projects helped ITNL report 20% yoy
increase in gross Toll Income in 4QFY2016. On same lines, commencement of
new stretches/phases at (1) Jharkhand Road (JRPICL), (2) Thiruvananthapuram
Roads (TRDCL), and (3) Jorbat Shillong (JSEL), helped ITNL report 26% yoy
increase in gross Annuity Income in 4QFY2016.
Currently, 2 BOT’s are partially operational, namely, (1) Barwa Adda (BAEL), and
(2) BKEL; these are soon expected to be 100% operational. These 2 BOT projects
coupled with PSRDCL getting 100% fully operational, in our view would lead to
increase in toll income by `0.1cr/day (excludes organic toll income growth from
the already operational stretches of these BOT projects).
Further, commencement of new Tolling & Annuity projects, like (1) Chenani Nashri
(CNTL, in 2QFY2017), (2) Thiruvananthapuram Phase III (TRDCL, in 1QFY2017),
(3) Khed Sinnar (KSEL, in 2QFY2017) and (4) Kiratpur-Ner Chowk (KNEL in
2QFY2017) would further add to the toll & annuity income.
Exhibit 1: Incremental Toll & Annuity Income/day from upcoming proj.
1.8
1.7
1.6
1.4
1.2
1.0
0.8
0.7
0.7
0.6
0.4
0.4
0.2
0.1
0.1
0.0
0.0
0.0
BKEL
PSRDCL
BAEL
KNCL
KSEL
TRDICL P-
CNTL
JSEL
III
Source: Company, Angel Research
On being fully operational, all 5 BOT Toll projects (BKEL, PSRDCL, BAEL, KNCL,
KSEL) would contribute toll of `1.5cr/day. Further, there’s strong visibility on
assured revenues from Annuity projects. Annuity business insulated from traffic
volumes is expected to generate assured gross revenue of `2.2cr/day in FY2017E
(~58% of incremental revenues in FY2017E would be from the assured Annuity
business). On a whole, we expect ITNL’s gross Toll & Annuity income to increase
by
`3.7cr/day during FY2017E, from current levels of
`7.8cr/day and this
estimation excludes organic traffic growth from already operational BOT Toll
projects.
July 22, 2016
2
ITNL | Company Update
On a whole, commencement of 7 Toll & Annuity projects coupled with uptick in the
traffic growth of already operational road projects, should lead to strong 34% Toll
& Annuity Income growth during FY2016-18E to `2,819cr.
Incremental projects to enhance overall financials
Over the last few quarters ITNL’s consol. interest coverage ratio has been hovering
at ~0.9x (on excluding profits from the sale of assets/ investments), which tells that
company is undergoing tough phase. But going forward, with 7 BOT projects likely
to commence operations, we expect the scenario to change. We sense that once 7
BOT projects commence operations, overall financials of the company would see
sharp improvement. This when coupled with interest re-financing across SPVs
should help ITNL report strong turn-around in its operating performance, going
forward. We expect ITNL’s consol. interest coverage ratio to improve to 1.4x in
FY2017E and 1.5x in FY2018E, thus projecting favorable operational scenario for
the company than is currently prevalent.
Exhibit 2: Incremental Financials of 8 BOT projects (includes JSEL)
Particulars (` cr)
FY2017E
FY2018E
Inc. Net Revenues
1,177
518
EBITDA/ Cash Profit
1,091
456
Interest
772
339
Interest Coverage Ratio (x)
1.4x
1.5x
Source: Company, Angel Research
Debt raised takes care of the ‘stop-gap’ funding requirements
As of 4QFY2016-end, ITNL had consolidated debt of `27,643cr, reflecting D/E
ratio of 4.13x. With 7 projects at latter stages of the construction cycle and some of
the o/s non-convertible debentures (NCDs) maturing, ITNL has been compelled to
go for short-term stop-gap funding. As a result, the company issued NCDs of
`1,300cr in tranches. Management highlighted that the funds raised would be
used to repay existing loans, towards lowering interest costs and for improving the
short-term loan vs. long-term loans mix in terms of total debt.
On the whole, we expect ITNL to raise further debt to fund its ongoing BOT
projects, in addition to addressing aforementioned debt constraints currently being
faced. As a result, we expect the consol. debt to further increase by ~`3,780cr.
Given that majority of the company’s ongoing projects would get commissioned in
FY2017 itself, we are optimistic of debt repayment at SPV level to start from
FY2018E itself (where full year impact for most of the SPVs would be seen).
Accordingly, we sense that this balance sheet stress is bottoming out and it is a
near-term phenomenon for the company. We expect the pain to gradually start
subsiding from FY2018E onwards.
Strategic initiatives to help ITNL get back its growth momentum
Given that ITNL is currently having a consol. D/E ratio of 4.13x, in our view it’s left
with no option but to pursue strategic initiatives as there would be higher equity
and debt requirements towards financing projects in pipeline. Media reports as
well as, management’s quarterly concalls have highlighted that it is pursuing
July 22, 2016
3
ITNL | Company Update
strategic initiatives such as stake sales, securitization of projects, InvIt listing and
equity issuances.
ITNL has already done 2 rounds of Rights Issue; it raised `524cr in Apr-2014 and
`740cr in Oct-2015. We now sense the company would not go for further rounds
of Rights Issue in the near-term.
In the last few quarters, ITNL has sold stake in Gujarat Toll Roads (includes
Ahmedabad-Mehsana and Vadodara Halol Road BOT projects) & in Rapid Metro
in tranches, intending to utilize proceeds towards equity infusion in upcoming
projects as it needs `1,407cr of incremental equity towards implementation of
existing projects.
Further, in-line with management commentary, we expect ITNL to report sale of its
Road Assets in FY2017E. Also, ITNL is expected to transfer some of its Infra assets
under new SPV and get the SPV listed as an InvIt. Our view gets substantiated from
recent media articles, suggesting that ITNL’s Management has already started
working on $400-500mn (`2,600-3,250cr) InvIt and many of the operational BOT
projects would get transferred to this trust with the same being listed. We sense that
an InvIt listing would release much required funds for ITNL, which could be utilized
towards equity requirements of new projects, which would also lower the D/E ratio.
Given that we are still at least few quarters away from any such listing; till then,
ITNL’s levered balance sheet should continue to put pressure on its profitability,
mainly owing to higher interest expenses. Till then, we expect ITNL to explore asset
sales and debt re-financing alternatives.
Low Interest rates to lead to improved cash flow cycle
Between Jan-2015 to Apr-2016, RBI has cut interest rates by a cumulative ~150bp
and the same has not yet been commensurately passed on to borrowers. With the
ongoing rate cut cycle, we expect debt dependent companies like ITNL and its SPV
subsidiaries to avail the benefits of rate re-sets.
Recently ITNL raised NCDs worth `1,300cr in tranches, with one tranche carrying
coupon rate of 9.4%, which is lower than the company’s consol. borrowing rate of
11-12%. Recently, GRICL (in which ITNL has 42% stake) announced issuance of
`300cr of NCDs where the high cost debt carrying 15.5% interest rate has been
re-financed by lower cost debt carrying 9% interest rate.
Accordingly, we see potential for further refinancing of high cost debt. For an o/s
debt of `27,643cr (as of 4QFY2016) for the company, for every 100bp decline in
the interest rate, the interest expenses of the company would decline by `276cr on
an annualized basis. Savings on interest expenses (on account of rate re-sets), in
our view would be mitigated up to certain extent by further increase in near-term
funding requirements towards the 4 upcoming BOT projects, as a result consol.
income statement would not majorly benefit from interest savings. However, these
interest rate re-sets should lead to improved SPV level cash flows.
Strong Order backlog of `14,625cr gives better revenue visibility
ITNL, as of 4QFY2016-end, reported an order backlog of `14,625cr, which gives
revenue visibility for the Construction segment for over the next 36 months.
July 22, 2016
4
ITNL | Company Update
Exhibit 3: Order Book
Exhibit 4: Order Book Split as of 4QFY2016-end (in %)
18,000
(` in cr)
Non-Road
16,000
Projects, 7%
14,000
12,000
10,000
8,000
Non-NHAI
6,000
Road , 33%
4,000
NHAI, 60%
2,000
0
Source: Company, Angel Research
Source: Company, Angel Research
ITNL to-date has reported 6 Infrastructure project wins since FY2016 beginning.
Details of these projects are as follows:
4-laning of 141kms stretch between Fagne-Gujarat/ Maharashtra Border
(Package-III, NH-6) on BOT (Toll) basis.
4-laning of 194kms stretch between Amravati-Chikhli (Package-I, NH-6) on
BOT (Toll) basis.
6-laning of 23.5kms stretch between Ranchi Ring Road, section VII from
Kathitanr to Karma on BOT basis.
Upgrading of 2 road projects, (i) Bandri-Jaruwakheda, Nirtala-Mandi-Bamora
and Damoh-Hindoriya-Patera section covering 76.23 kms, (ii) Pachawali-
Rannod, Rannod-Pichhore, Bhasula-Chainpur, Vijaypur-Dhanrawad and
Ashok Nagar-Thubon section on performance based contract.
Development of Commercial Area and Automated Car Park of approx. 1200
car spaces on DBFOT Basis including right to collect revenue from the Project
for a period of 30 years in the Middle East.
Ethiopian Roads Authority has awarded ITNL and Elsamex (a wholly owned
subsidiary of ITNL) joint venture Design, Improvement Works and
Management and Maintenance Services of (i) Nekempte - Anger Gutin-
Andhode Road Section (86.10 km) and (ii) Agamsa-Bure Road Section (84.56
km) on an Output and Performance Based Road Contract (OPRC) for approx.
contract value of `1,524.76cr. This project is for a period of 8 years.
ITNL indicated a healthy bid-pipeline of ~`35,867cr, with a major ~`18,563cr of
it being at the RFP stage. Notably, ~68% of the bid pipeline highlighted by the
company is from NHAI.
July 22, 2016
5
ITNL | Company Update
Exhibit 5: 4QFY2016 bid-pipeline details
Particular (` cr)
RFP Stage
RFQ Stage
NHAI Projects
17,253
7,248
State Highway Projects
749
9,350
MoRTH Projects
561
706
NHAI EPC Projects
0
0
Metro Transportation Corp. Project
0
0
Total Bid Pipeline
18,563
17,304
Source: Company, Angel Research
Update on BOT projects
ITNL to-date has reported receipt of Provisional Completion Certificate (CC)/
Commercial Operations Date (CoD) for 2 Central Control facilities at Gwalior and
18 stretches of the Madhya Pradesh border check post project, including
(1) Agra-Mumbai, (2) Indore-Ahmedabad, (3) Shivpuri-Kota, (4) Betul-Nagpur,
(5) Indore-Icchapur, (6) Mhow-Neemuch, (7) Jabalpur-Jaipur, (8) Seoni-Nagpur,
(9) Chindwara-Nagpur, (10) Kabir-Chabtura, (11) Sagar-Kanpur, (12) Ujjain-
Jhalapur,
(13) Sendhwa-Khetiya,
(14) Venkatnagar,
(15) Naugaon-Jhansi,
(16) Sagar-Lalitpur, (17) Balaghat-Gondia, and (18) Rewa-Mirazpur. Works on the
remaining check posts is expected to get completed in FY2017E.
SBHL has received provisional completion certificate as on Oct-2015. ITNL
reported receipt of Provisional Completion Certificate for JSEL in Jan-2016 and
Certificate of Commercial Operations for PSRDCL in Feb-2016. Also, ITNL
announced receipt of Completion Certificate for BKEL in Mar-2016.
Exhibit 6: BOT Projects Scheduled CoD
BOT Projects
Scheduled CoD
TRDCL P-III
1QFY2017
MPBCDCL
1QFY2017
CNTL
2QFY2017
RIDCOR III
2QFY2017
KSEL
2QFY2017
BAEL
2QFY2017
KNCL
2QFY2017
Source: Company, Angel Research
We expect all the above-mentioned BOT projects to be fully operational in next few
months and full benefits of these new road projects to be seen in FY2018E on a
full year basis.
Outlook & Valuation
A major part of the `1,300cr raised through NCDs recently would be used to
repay high cost debt and replace it with low cost debt. We expect similar type of
debt re-financing initiatives to be seen across SPVs, going forward. As a result, we
July 22, 2016
6
ITNL | Company Update
expect the company to potentially save interest expenses of ~`276cr for every
100bp of re-financing on the consol. balance sheet debt.
On revising our 2017E estimates and rolling FY2018E estimates, and considering
the benefit from sale of assets, PAT is expected to report 13.6% CAGR during
FY2016-18E.
Exhibit 7: Earnings Revision
FY2017E
FY2018E
Y/E March (` cr)
Old
New
Change (%)
Net Sales
8,825
8,946
1.4
10,017
EBITDA
3,168
2,769
(12.6)
3,169
EBITDA Margins (%)
35.9
31.0
31.6
PAT
301
266
(11.6)
311
PAT Margins (%)
3.4
3.0
3.1
Source: Angel Research
Maintain BUY with price target of `93
Despite ITNL’s robust order backlog and strong execution capabilities, we had
remained concerned about its high consol. D/E ratio, which was eating into its
profits. Recent fund raising initiatives in our view would be majorly used towards
debt repayment. With 7 projects expected to commence tolling/annuity in the next
few months, we expect debt repayment cycle at the SPV level for these 7 projects to
commence, which should further ease consol. Balance Sheet and cash flow cycles.
Till then we expect some near-term pain from the Balance Sheet perspective.
In addition to the 4 BOT project wins in FY2016, ITNL recently reported Ethiopian
& Dubai based O&M Road & Car parking projects on BOT basis, respectively. In
the backdrop of strong visibility on the order book front, any news flow on
commencement of new BOT projects, re-financing of BOT projects and outcome of
any strategic initiatives should lead to further re-rating from here-on. Thus, with
better visibility on these initiatives, we expect the stock to get re-rated from
here-on.
To arrive at a target price for ITNL, we have used the sum-of-the-parts (SOTP)
valuation method. Considering high leverage and stronger execution capabilities,
we have valued the construction business at an EV/EBITDA of 5x FY2018E EBITDA,
and the domestic Road BOT projects on FCFE basis at a Cost of Equity of 14%.
Also, we have valued Elsamex, YuHe Expressway, Metro and other infrastructure
projects (other than road projects) using the P/BV multiple. On adding up all the
projects’ values, we arrive at a SOTP-based target price of `93. Given the strong
case of improvement in the business outlook, we upgrade our rating on the stock
to BUY.
July 22, 2016
7
ITNL | Company Update
Exhibit 8: Derivation of SOTP-based target price for ITNL
FY18E Std.
Target
Value/
Target
% of
Particulars
Segment
EBITDA
Value
share
Basis
Multiple
SoTP
(` cr)
(` cr)
(`)
ITNL's construction business
Construction
942
5.0
4,708
143
77.8
EV/EBITDA of 5x
Total
4,708
143
77.8
Discounted
Adj. FCFE
Value/
Project
% of
Particulars
Proj. Type
FCFE
Value
share
Basis
Stake
SoTP
(` cr)
(` cr)
(`)
Road BOT projects
Noida Toll Bridge
Toll
728
26%
192
6
3.1
NPV at CoE of 14%
Gujarat Toll Roads
Toll
603
42%
253
8
4.1
NPV at CoE of 14%
West Gujarat Expressway
Toll
133
100%
133
4
2.2
NPV at CoE of 14%
RIDCOR Phase-I & II
Toll
1,249
50%
624
19
10.1
NPV at CoE of 14%
Beawar-Gomti
Toll
120
100%
120
4
1.9
NPV at CoE of 14%
Pune Sholapur
Toll
56
91%
51
2
0.8
NPV at CoE of 14%
Moradabad Bareilly
Toll
201
100%
201
6
3.3
NPV at CoE of 14%
Chandrapur Warora
Toll
118
35%
41
1
0.7
NPV at CoE of 14%
Narkatpally Addanki
Toll
613
50%
306
9
5.0
NPV at CoE of 14%
Kiratpur Ner-Chowk
Toll
1,185
100%
1,185
36
19.2
NPV at CoE of 14%
Sikar Bikaner
Toll
154
100%
154
5
2.5
NPV at CoE of 14%
Baleshwar Kharagpur
Toll
143
100%
143
4
2.3
NPV at CoE of 14%
Khed Sinnar
Toll
311
100%
311
9
5.0
NPV at CoE of 14%
Barwa Adda Panagarh
Toll
375
100%
375
11
6.1
NPV at CoE of 14%
North Karnataka Expressway
Annuity
175
94%
164
5
2.7
NPV at CoE of 14%
Thiruvananthapuram Phase - I & II
Annuity
54
50%
27
1
0.4
NPV at CoE of 14%
AP Expressway
Annuity
(35)
100%
(35)
(1)
(0.6)
NPV at CoE of 14%
Hyderabad Ring Road
Annuity
123
26%
32
1
0.5
NPV at CoE of 14%
East Hyderabad Expressway
Annuity
22
74%
16
0
0.3
NPV at CoE of 14%
Hazaribagh Ranchi Expressway
Annuity
44
74%
32
1
0.5
NPV at CoE of 14%
Jharkhand roads Ph-I & II
Annuity
40
93%
37
1
0.6
NPV at CoE of 14%
Chenani Nashri
Annuity
625
100%
625
19
10.1
NPV at CoE of 14%
Jorabat Shillong
Annuity
172
50%
86
3
1.4
NPV at CoE of 14%
Total
7,208
5,075
154
82.3
Elsamax
272
1.5
408
12
6.6
Valued at 1.5x its investment
YuHe Expressway
Toll
191
1.5
286
9
4.6
Valued at 1.5x its Investment
Vansh Nimay Infraprojects
15
1.0
15
0
0.4
Valued at 1.0x its Investment
Metro Rail Gurgaon
385
34%
130
4
3.2
Valued at 1.0x its Investment
MP Entry Point project
110
51%
56
2
1.4
Valued at 1.0x its Investment
Other Investments
98
1.0
98
3
1.6
Valued at 1.0x its Investment
Net Debt
(7,713)
(234)
Standalone Net Debt
Grand Total
9,198
3,063
93
100.0
No. of shares
33
Upside
18%
CMP
79
Source: Company, Angel Research
July 22, 2016
8
ITNL | Company Update
Investment arguments
Market leader in the growing BOT space: ITNL is a surface transport player with an
established track record of successfully bidding, developing and operating road
BOT projects on a commercial basis. It was one of the first movers in the road
development segment. The company bagged the Noida Toll Bridge project in
1998. Since then, it has come a long way and has built a sizeable portfolio. The
company has one of the largest BOT portfolios in India, encompassing 31 road
projects covering 14,680 lane kms spread across 16 states. Their 4QFY2016
order book at `14,625cr gives the Construction segment revenue visibility for over the
next 36 months.
Pan-India presence: ITNL has 31 BOT Road projects well spread across 16 states
in India. The company has decent exposure to state highways, which differentiates
it from peers. The one major advantage that state highway projects enjoy over
national highways is that they can be bundled with land, making the projects
viable. Such diversification strategy prevents the company from any fluctuation in
the revenue stream given its limited exposure to any one region or project.
Hedged revenue stream: We believe ITNL has a hedged road BOT asset portfolio
currently, as it is bifurcated into toll and annuity projects in revenue terms, thereby
reducing its dependence on traffic-related revenue inflow. The recent project win of
Ethopian & Dubai based project strengthens our view that going forward too, ITNL
would continue to have a balanced revenue mix of annuity and toll.
ITNL’s strategic initiatives to lead to Balance Sheet de-leveraging: ITNL is currently
sitting on consol. D/E ratio of 4.1x (reflecting debt of `27,643cr). On considering,
(1) equity requirement of `1,407cr towards its BOT projects, (2) 7 BOT projects
expected to commence operations in the next few months, and (3) levered Balance
Sheet status, we are of view that profitability growth is restricted due to high interest
expenses. We expect their strategic initiatives to materialize in next few quarters,
which should lead to the stock getting re-rated.
Key concerns
Even though expectations are high for allocation towards Roads and Highways
vertical in the upcoming budget, any slowdown in the award activity from NHAI
could affect road-focused players such as ITNL.
ITNL faced execution delays across few of its projects. Prolonged delays in project
execution beyond the time schedule could act as risk to our estimates.
BOT projects are inherently highly-levered projects. Hence, delays in the correction
of interest rates than our expectations could be a risk to our assumptions.
The Management has highlighted plans to pursue fund raising / strategic initiatives
which should materialize in the next few quarters. Any delays beyond that could act
as a risk to our estimates.
July 22, 2016
9
ITNL | Company Update
Company background
ITNL, promoted by IL&FS, was incorporated in Nov-2000. Over the years, ITNL
emerged as the largest surface transportation infrastructure company in India.
ITNL is involved in the development, operation and maintenance of surface
transportation infrastructure projects encompassing national and state highways,
roads, tunnels, flyovers and bridges. The company performs a range of project
development activities from project conceptualization to commissioning and
commencement of commercial operations. ITNL has presence in various surface
transportation sub-sectors, such as urban transportation, railways, border check
posts and parking complexes.
July 22, 2016
10
ITNL | Company Update
Profit & Loss Statement (Consolidated)
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17E
FY18E
Net Sales
6,645
6,587
6,304
7,947
8,946
10,017
% Chg
(0.9)
(4.3)
26.1
12.6
12.0
Total Expenditure
4,807
4,697
4,362
5,497
6,177
6,847
Cost of Materials Consumed
156
227
242
282
300
332
Construction Contract Cost
3,423
2,984
2,599
3,501
3,932
4,287
Employee benefits Expense
382
414
459
510
581
661
Other Expenses
846
1,072
1,063
1,203
1,364
1,568
EBITDA
1,838
1,890
1,941
2,451
2,769
3,169
% Chg
2.8
2.7
26.2
13.0
14.5
EBIDTA %
27.7
28.7
30.8
30.8
31.0
31.6
Depreciation
94
151
152
275
343
413
EBIT
1,743
1,739
1,789
2,175
2,426
2,757
% Chg
(0.3)
2.9
21.6
11.5
13.6
Interest and Financial Charges
1,119
1,471
1,833
2,531
2,796
2,859
Other Income
144
215
525
785
824
659
PBT
768
483
481
429
454
556
Tax
227
27
80
160
159
195
% of PBT
29.6
5.5
16.7
37.3
35.0
35.0
PAT before Extraordinary item
541
457
400
269
295
362
Extraordinary item
0
0
0
0
0
0
PAT before Minority Interest
541
457
400
269
295
362
MI & Share of
(21)
6
(44)
37
30
63
Profit/(Loss) of Asso.
PAT after MI, profit sh.
520
463
444
232
266
299
from Asso.
% Chg
(11.0)
(4.2)
(47.7)
14.5
12.6
PAT %
7.8
7.0
7.0
2.9
3.0
3.0
Diluted EPS
29
19
14
7
8
9
% Chg
(36.5)
(23.2)
(50.8)
14.5
12.6
July 22, 2016
11
ITNL | Company Update
Balance Sheet (Consolidated)
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17E
FY18E
Sources of Funds
Equity Capital
194
571
623
705
705
705
Reserves Total
3,446
4,433
5,096
5,988
6,528
6,480
Networth
3,640
5,004
5,719
6,693
7,234
7,185
Minority Interest
358
459
291
474
521
588
Total Debt
14,359
18,817
23,513
27,643
30,223
31,423
Deferred Tax Liability
243
199
125
102
102
102
Total Liabilities
18,599
24,478
29,648
34,912
38,080
39,298
Application of Funds
Gross Block
10,190
14,282
17,393
21,593
24,503
25,793
Accumulated Depreciation
580
795
827
1,140
1,483
1,896
Net Block
9,610
13,487
16,566
20,453
23,020
23,897
Capital WIP
48
50
19
66
56
56
Investments
687
469
663
681
786
891
Goodwill
523
575
582
598
598
598
Current Assets
Inventories
17
17
14
87
51
47
Sundry Debtors
752
988
1,046
1,298
1,446
1,564
Cash and Bank Balance
420
671
939
875
461
370
Loans & Advances
1,417
2,076
2,579
2,461
2,747
2,796
Other Current Asset
7,105
8,782
9,472
11,302
12,173
12,522
Current Liabilities
1,991
2,655
2,246
2,933
3,284
3,469
Net Current Assets
7,720
9,879
11,803
13,090
13,594
13,830
Deferred Tax Asset
11
18
16
23
25
25
Total Assets
18,599
24,478
29,648
34,912
38,080
39,298
July 22, 2016
12
ITNL | Company Update
Cash Flow Statement (Consolidated)
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17E FY18E
Profit before tax
768
483
481
429
454
556
Dep. & Amortization Exp.
109
161
162
293
343
413
Other non-Cash Expenses
(91)
(119)
1,358
1,883
2,050
2,350
Change in WC & Oth. Adj.
1,320
1,522
(754)
440
(1,651)
(1,553)
Cash Generated from Opera.
2,106
2,048
1,246
3,045
1,196
1,766
Direct taxes paid
(158)
(251)
(178)
(261)
(285)
(225)
Net Cash Flow from Operations
1,947
1,797
1,068
2,784
911
1,541
(Inc)/ Dec in Fixed Assets
(3,057)
(3,196)
(2,848)
(3,970)
(2,900)
(1,290)
(Inc)/ Dec in Investments
(234)
(60)
(43)
(3)
(105)
(105)
(Inc)/ Dec in Other Investing
(1,806)
(868)
(723)
(725)
(811)
(878)
Cash Flows
Cash Flow from Investing
(5,097)
(4,123)
(3,613)
(4,698)
(3,816)
(2,273)
Issue/ (Buy Back) of Equity
0
746
520
734
0
0
Inc./ (Dec.) in Loans
2,813
1,509
4,730
4,481
2,580
1,200
Dividend Paid (Incl. Tax)
(91)
(94)
(160)
(220)
(255)
(275)
Other Financing Cash Flows
507
276
(2,450)
(3,190)
150
(244)
Cash Flow from Financing
3,230
2,437
2,639
1,805
2,475
681
Inc./(Dec.) in Cash
80
111
94
(109)
(430)
(51)
Opening Cash balance & Oth. Adj.
278
500
596
700
591
161
Closing Cash balances
358
611
690
591
161
110
July 22, 2016
13
ITNL | Company Update
Key Ratios (Consolidated)
Y/E March
FY13
FY14
FY15
FY16
FY17E
FY18E
Valuation Ratio (x)
P/E (on FDEPS)
2.7
4.2
5.5
11.2
9.8
8.7
P/CEPS
2.4
3.2
3.5
4.8
4.1
3.4
Dividend yield (%)
2.1
2.7
2.4
2.1
2.5
2.5
EV/Sales
2.3
3.1
3.9
3.7
3.6
3.4
EV/EBITDA
8.4
10.6
12.6
12.0
11.7
10.6
EV / Total Assets
0.8
0.8
0.8
0.8
0.8
0.9
Per Share Data (`)
EPS (fully diluted)
29.4
18.7
14.3
7.1
8.1
9.1
Cash EPS
32.7
24.6
22.4
16.6
19.4
23.5
DPS
4.0
5.1
4.0
3.5
4.0
4.0
Book Value
187
203
232
203
220
218
Returns (%)
RoCE (Pre-tax)
9.7
8.3
6.7
6.8
6.8
7.2
Angel RoIC (Pre-tax)
9.7
7.3
6.1
6.3
6.5
7.1
RoE
14.9
10.6
7.5
4.3
4.2
5.0
Turnover ratios (x)
Asset Turnover
0.2
0.2
0.1
0.1
0.1
0.1
(Gross Block) (X)
Inventory / Sales
1
1
1
2
3
2
(days)
Receivables (days)
41
48
59
54
56
55
Payables (days)
84
119
91
92
93
91
Leverage Ratios (x)
D/E ratio (x)
3.9
3.8
4.1
4.1
4.2
4.4
Interest Coverage
1.6
1.2
1.0
0.9
0.9
1.0
Ratio (x)
July 22, 2016
14
ITNL | Company Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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offering of securities of the company covered by Analyst during the past twelve months.
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Disclosure of Interest Statement
ITNL
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
July 22, 2016
15