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 (`)

`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

ILFT@IN

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. (%)

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

% chg

(11.0)

(4.2)

(47.7)

14.5

12.6

EBITDA (%)

27.7

28.7

30.8

31.0

31.6

EPS (`)

P/E (x)

2.7

4.2

5.5

11.2

9.8

8.7

Source: Company, Angel Research

P/BV (x)

0.4

0.3

0.4

RoE (%)

14.9

10.6

7.5

4.3

4.2

5.0

RoCE (%)

9.7

8.3

6.7

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

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

0.6

0.4

0.2

0.1

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

`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

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

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

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

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

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

Metro Transportation Corp. Project

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

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

ITNL | Company Update

Exhibit 8: Derivation of SOTP-based target price for ITNL

FY18E Std.

Target

Value/

Target

% of

Particulars

Segment

EBITDA

Value

Basis

Multiple

SoTP

(` 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

Basis

Stake

SoTP

(` cr)

(`)

Road BOT projects

Noida Toll Bridge

Toll

728

26%

192

3.1

NPV at CoE of 14%

Gujarat Toll Roads

Toll

603

42%

253

4.1

NPV at CoE of 14%

West Gujarat Expressway

Toll

133

100%

133

2.2

NPV at CoE of 14%

RIDCOR Phase-I & II

Toll

1,249

50%

624

10.1

NPV at CoE of 14%

Beawar-Gomti

Toll

120

100%

120

1.9

NPV at CoE of 14%

Pune Sholapur

Toll

91%

0.8

NPV at CoE of 14%

Moradabad Bareilly

Toll

201

100%

201

3.3

NPV at CoE of 14%

Chandrapur Warora

Toll

118

35%

0.7

NPV at CoE of 14%

Narkatpally Addanki

Toll

613

50%

306

5.0

NPV at CoE of 14%

Kiratpur Ner-Chowk

Toll

1,185

100%

1,185

19.2

NPV at CoE of 14%

Sikar Bikaner

Toll

154

100%

154

2.5

NPV at CoE of 14%

Baleshwar Kharagpur

Toll

143

100%

143

2.3

NPV at CoE of 14%

Khed Sinnar

Toll

311

100%

311

5.0

NPV at CoE of 14%

Barwa Adda Panagarh

Toll

375

100%

375

6.1

NPV at CoE of 14%

North Karnataka Expressway

Annuity

175

94%

164

2.7

NPV at CoE of 14%

Thiruvananthapuram Phase - I & II

Annuity

50%

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%

0.5

NPV at CoE of 14%

East Hyderabad Expressway

Annuity

74%

0.3

NPV at CoE of 14%

Hazaribagh Ranchi Expressway

Annuity

74%

0.5

NPV at CoE of 14%

Jharkhand roads Ph-I & II

Annuity

93%

0.6

NPV at CoE of 14%

Chenani Nashri

Annuity

625

100%

625

10.1

NPV at CoE of 14%

Jorabat Shillong

Annuity

172

50%

1.4

NPV at CoE of 14%

Total

7,208

5,075

154

82.3

Elsamax

272

1.5

408

6.6

Valued at 1.5x its investment

YuHe Expressway

Toll

191

1.5

286

4.6

Valued at 1.5x its Investment

Vansh Nimay Infraprojects

1.0

0.4

Valued at 1.0x its Investment

Metro Rail Gurgaon

385

34%

130

3.2

Valued at 1.0x its Investment

MP Entry Point project

110

51%

1.4

Valued at 1.0x its Investment

Other Investments

1.0

1.6

Valued at 1.0x its Investment

Net Debt

(7,713)

(234)

Standalone Net Debt

Grand Total

9,198

3,063

100.0

No. of shares

Upside

18%

CMP

Source: Company, Angel Research

July 22, 2016

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

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

31.0

31.6

Depreciation

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

160

159

195

% of PBT

29.6

5.5

16.7

37.3

35.0

PAT before Extraordinary item

541

457

400

269

295

362

Extraordinary item

PAT before Minority Interest

541

457

400

269

295

362

MI & Share of

(21)

(44)

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

2.9

3.0

Diluted EPS

% Chg

(36.5)

(23.2)

(50.8)

14.5

12.6

July 22, 2016

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

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

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

Investments

687

469

663

681

786

891

Goodwill

523

575

582

598

Current Assets

Inventories

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

Total Assets

18,599

24,478

29,648

34,912

38,080

39,298

July 22, 2016

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)

(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

746

520

734

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

111

(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

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

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

0.9

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

Book Value

187

203

232

203

220

218

Returns (%)

RoCE (Pre-tax)

9.7

8.3

6.7

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

0.1

(Gross Block) (X)

Inventory / Sales

(days)

Receivables (days)

Payables (days)

119

Leverage Ratios (x)

D/E ratio (x)

3.9

3.8

4.1

4.2

4.4

Interest Coverage

1.6

1.2

1.0

0.9

1.0

Ratio (x)

July 22, 2016

ITNL | Company Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

DISCLAIMER

Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,

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and Portfolio Manager with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Private Limited is a

registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number

INH000000164. Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing

/dealing in securities Market. Angel or its associates/analyst has not received any compensation / managed or co-managed public

offering of securities of the company covered by Analyst during the past twelve months.

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should

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companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine

the merits and risks of such an investment.

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trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the

contrary view, if any.

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document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way

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Disclosure of Interest Statement

ITNL

1. Financial interest of research analyst or Angel or his Associate or his relative

2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives

3. Served as an officer, director or employee of the company covered under Research

4. Broking relationship with company covered under Research

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