IRB Infrastructure (IRBINF) | 212 Target Period : 12 Months Potential Upside : 8% Strong Show Led by Execution, Toll Growth

Result Update August 12, 2016

Rating matrix Rating : Hold Target : | 230 IRB Infrastructure (IRBINF) | 212 Target Period : 12 months Potential Upside : 8% Strong show led by execution, toll growth

What’s changed? • IRB Infrastructure (IRB) posted a robust topline growth of 36.8% YoY Target Changed from | 242 to | 230 to | 1517.3 crore & was above our estimate of | 1293.9 crore mainly EPS FY17E Changed from | 15.3 to | 16.8 on account of better than expected revenue growth in construction EPS FY18E Changed from | 15.2 to | 17.1 division of 54.8% YoY to | 913.1 crore (our estimate of | 700 crore) Rating Unchanged • EBITDA margin contracted 569 bps YoY to 51.0% below our estimate

of 54.7% due to change in revenue mix with higher proportion of Quarterly performance revenues from low margin construction division Q1FY17 Q1FY16 YoY (%) Q4FY16 QoQ (%) • PAT grew 10.4% YoY to | 181.9 crore (our estimate: | 165 crore) due Revenue 1,517.3 1,108.9 36.8 1,536.8 -1.3 EBITDA 774.0 628.7 23.1 739.6 4.6 to better than expected execution in construction division EBITDA (%) 51.0 56.7 -569 bps 48.1 288 bps Construction division shines post strong execution… PAT 181.9 164.7 10.4 151.2 20.3 IRB’s construction division continues to perform well with a revenue Key financials growth of 54.8% YoY to | 913.3 crore in Q1FY17 due to strong execution. | Crore FY15 FY16E FY17E FY18E Currently, IRB’s orderbook is at | 8738.6 crore, 2.6x TTM construction Net Sales 3,847.5 5,130.2 5,985.7 7,024.4 revenues. Further, it has been declared preferred bidder for six laning of EBITDA 2,211.7 2,660.6 2,968.4 3,757.2 Udaipur to Rajasthan border worth | 2100 crore. It has also commenced Net Profit 542.9 635.8 557.0 568.2 construction of Agra Etawah project. The management expects company EPS (|) 16.3 19.1 16.8 17.1 to win ~300-400 km projects in FY17E. Consequently, we expect Valuation summary construction division revenue to grow strongly at 13.3% CAGR to FY15 FY16E FY17E FY18E | 3895.0 crore over FY16-18E. P/E 13.0 11.1 12.7 12.4 Gross toll collection continues to grow robustly… Target P/E 14.1 12.0 13.7 13.5 EV / EBITDA 7.6 7.1 6.8 5.2 IRB’s gross toll collection grew 19.0% YoY to | 675.7 crore in Q1FY17 P/BV 1.6 1.5 1.3 1.2 aided by strong traffic growth (average growth: ~5-6%) across portfolio RoNW (%) 12 13 11 10 with Mumbai-Pune project showing a strong growth of ~11%. However, RoCE (%) 10.2 10.2 10.4 13.4 toll collection at ~| 95 lakh/day in Ahmedabad-Vadodara project is much below our expectation. Further, there was an average tariff hike of ~2.5% Stock data across its major projects. Consequently, we expect IRB’s gross toll Particular Amount collection to grow at 10.0% CAGR in FY16-FY18E to | 8.1 crore/day from Market Capitalization (| Crore) 7,060 Total Debt (| Crore) 14,885 | 6.7 crore/day in FY16. Cash and Investments (| Crore) 1,500 Filing of DRHP for InVIT; near term trigger… EV (| Crore) 20,445 52 week H/L (|) 272 / 197 The company is in an advanced stage of filing DRHP for InVIT. The Equity capital (| Crore) 351.5 management expects enterprise value of its 12-14 SPV assets to be Face value (|) 10.0 ~| 15,000 crore and debt across these projects to be ~| 7000-8000 crore, which implies an equity valuation of ~| 7000-8000 crore. We believe this

could act as a near term trigger for the company as it would free up Price performance equity capital for IRB. Currently, IRB has equity commitment of ~| 1700 Return % 1M 3M 6M 12M crore left for its existing BOT portfolio to be funded over next three years. Ashoka Buildcon (3.6) 15.2 (16.2) (12.8) IRB Infra (1.2) (3.8) (6.1) (16.8) InVIT listing to free up capital; maintain HOLD… PNC Infratech (1.1) 7.1 9.8 18.5 IRB has witnessed strong growth in its toll revenues on the back of robust Sadbhav Engg (1.4) 10.5 (3.1) (13.3) traffic growth across its project portfolio for the past few quarters. [ Construction division revenues have also grown robustly on the back of Research Analyst strong execution. We believe that InVIT listing could also act as a near Deepak Purswani, CFA term trigger for the stock. Furthermore, with competitive intensity deepak,[email protected] reducing in bidding of BOT projects, IRB would be a strong beneficiary of Vaibhav Shah upcoming BOT projects of NHAI. However, we would like to see pick up [email protected] in Ahmedabad-Vadodara project which generated | 87.5 crore in Q1FY17

implying ~| 95 lakh/day, significantly, lower than our expectation. Hence,

we continue to maintain our HOLD recommendation on the stock with a revised SOTP based revised target price of | 230/share. We have now rolled over our valuation to FY18E and now incorporate Agra-Etawah project in our valuation.

ICICI Securities Ltd | Retail Equity Research

Variance analysis Year Q1FY17 Q1FY17E Q1FY16 YoY (%) Q4FY16 QoQ(%) Comments Net Sales 1,517.3 1,293.9 1,108.9 36.8 1,536.8 -1.3 Revenues were boosted on account of 54.8% growth in construction division revenues Other Income 30.8 44.1 28.0 9.7 34.4 -10.6 Contract expenses 553.0 429.4 273.4 102.3 596.7 -7.3 Cost of material consumed 76.0 93.6 125.9 -39.6 51.0 49.2 Other Direct Expenses 50.4 1.0 33.0 52.8 68.3 -26.3 Staff cost 63.9 62.1 47.8 33.6 81.2 -21.3

EBITDA 774.0 707.8 628.7 23.1 739.6 4.6 EBITDA Margin (%) 51.0 54.7 56.7 -569 bps 48.1 288 bps EBITDA margin contracted due to a change in its revenue mix with higher proportion of revenues from lower margin construction division

Depreciation 220.7 225.8 201.7 9.5 222.4 -0.7 Interest 328.2 317.4 235.0 39.7 326.5 0.5

PBT 255.8 208.6 220.1 16.2 225.2 487.6 Taxes 74.0 62.6 55.4 33.5 72.7 1.8 PAT 181.9 146.2 164.7 10.4 151.2 20.3 Bottomline grew on account of better than expected execution in construction division Key Metrics Order book (| crore) 8,739 9,746 12,116 -27.9 9,746 -10.3

Order book to bill ratio (x) 2.6 1.9 3.0 1.9

Source: Company, ICICIdirect.com Research

Change in estimates FY17E FY18E (| Crore) Old New % Change Old New % Change Comments Revenue 5,802.7 5,985.7 3.2 6,471.3 7,024.4 8.5 We have upgraded our earnings esrimates after factoring in execution of Agra Etawah and Udaipur-Rajasthan projects EBITDA 2,986.8 2,968.4 -0.6 3,691.9 3,757.2 1.8 EBITDA Margin (%) 51.5 49.6 -188 bps 57.1 53.5 -356 bps PAT 509.5 557.0 9.3 505.6 568.2 12.4 EPS (|) 15.3 16.8 9.3 15.2 17.1 12.4

Source: Company, ICICIdirect.com Research

Assumptions Current Earlier Current Earlier FY14 FY15 FY16 FY17E FY17E FY18E FY18E Comments Order Inflow (| crore) 6,136.2 2,743.7 144.6 2,000.0 0.0 0.0 0.0 We have not factored any order inflows in FY18E

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

Conference call highlights

• NHAI awarding details: NHAI has awarded projects encompassing 4168 km in FY16. Out of this, 3001 km worth were in EPC mode while remainder were under BOT and Hybrid Annuity mode • FY17E Outlook: The company is keen on participating only in BOT projects and is pre-qualified in projects worth ~| 16600 crore. The company targets to win another ~300-400 km projects (including 115 km Udaipur project in which the company is preferred bidder) • Equity requirement: The company will have to infuse equity of ~| 1800 crore. The equity requirement will be ~| 700 crore in FY17E, ~| 700 crore in FY18E and | 300 crore in FY19E for the existing BOT portfolio. Project wise split is as follows:- Karwar-Kundapur: ~| 125 crore; Solapur-Yedeshi:~| 70 crore; Yedeshi-Aurangabad: ~| 350 crore; Kaithal-Rajasthan:~| 225 crore; Agra-Etawah:~| 870 crore • InvIT Update: For InvIT, the company is in advanced stage of filing DRHP • Other income: The other income of ~| 31 crore comprises of ~| 24 crore from construction division and ~7 crore from BOT division • Debt details: Consolidated net debt stands at | 14885 crore with cash of ~| 1500 crore with debt-equity ratio of 2.78x. Further, the cost of debt stands at ~10.75% • Tariff hikes: Average tariff hike across major projects was 2.5% while for Bharuch-Surat it was at 2%. However, for Surat-Dahisar project, there was a 2% downward revision in toll rates due to negative WPI. Strong traffic growth was witnessed across projects with Mumbai- Pune and Surat-Dahisar projects witnessing ~11% & 7% traffic growth, respectively. Strong traffic growth in Mumbai-Pune project could be attributed to shift of traffic from the Goa highway where some construction activity is going on and is expected to carry on for next 2-3 years • Projects Update: The company has been declared preferred bidder for the project of 6 laning from Udaipur to Rajasthan/Gujarat border worth | 2100 crore. The company has offered a premium of | 163.8 crore while the L2 bidder Tata Realty had offered a premium of ~| 142 crore. Further, for Ahmedabad-Vadodara project, the company is tolling on ~94% of patch and expects to collect toll in next 2-3 months • Extension of concession period: The company will seek extension of concession agreement for Jaipur-Deoli, Talegaon-Amravati and Amritsar-Pathankot projects and a partial extension for Surat-Dahisar project

ICICI Securities Ltd | Retail Equity Research Page 3

Company Analysis Toll revenues continue to grow… The growth in gross toll revenues for the quarter stood at 19.0% YoY to | 675.7 crore mainly aided by strong traffic on Mumbai Pune (~11%) & Surat-Dahisar project (~7%) while projects like Tumkur- Chitradurga and Ahmedabad-Vadodara projects witnessed ~5% and ~6% traffic growth, respectively

Exhibit 1: Quarterly toll trend

| crore Q3FY15 Q4FY15 FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY16 Q1FY17 YoY(%) QoQ(%) Surat - Dahisar 145.3 146.6 554.9 150.6 144.6 156.3 161.9 613.4 160.9 6.8 -0.6 Mumbai - Pune 147.4 148.5 567.2 159.8 146.4 162.1 164.9 633.2 188.0 17.6 14.0 Thane - Bhiwandi 18.8 19.4 73.3 19.6 18.9 20.1 20.9 79.5 20.2 3.1 -3.3 Thane - Ghorbunder 11.1 11.2 39.6 9.9 7.4 7.7 7.9 32.9 9.0 -9.1 13.9 Pune Nashik 6.2 6.3 24.3 6.5 6.7 6.7 6.9 26.8 7.0 7.7 1.4 Pune Solapur 5.5 5.5 21.6 6.0 5.4 5.9 6.0 23.3 6.3 5.0 5.0 Ahmednagar - Karmala 3.7 3.9 14.8 2.7 0.0 0.0 0.0 2.7 0.0 - - Mohol - Mandrup 1.6 1.6 6.3 1.1 0.0 0.0 0.0 1.1 0.0 - - Kharpada Bridge 2.1 2.2 8.5 2.3 1.1 0.0 0.0 3.4 0.0 - - Bharuch - Surat 48.7 48.3 185.7 48.7 45.4 49.2 50.2 193.5 49.3 1.2 -1.8 Tumkur Chitradurga 46.7 47.7 184.1 51.9 48.8 51.4 51.4 203.5 52.9 1.9 2.9 Ommalur Salem Namakkal 20.7 19.2 75.5 18.6 18.4 16.6 21.3 74.9 20.4 9.7 -4.2 Ahmedabad Vadodara 42.3 43.4 156.7 43.5 36.8 52.7 85.6 218.6 87.5 101.1 2.2 Talegaon Amravati 11.0 11.8 46.2 12.1 10.2 12.0 12.9 47.2 12.7 5.0 -1.6 Jaipur Deoli 26.8 28.8 101.4 32.9 26.3 29.5 31.9 120.6 32.1 -2.4 0.6 IRDP Kolhapur 1.5 1.3 4.2 1.7 0.6 0.0 0.0 2.3 0.0 - - Pathankot Amritsar 0.0 0.0 0.0 0.0 7.5 -0.5 27.2 98.6 29.4 - 8.1 Total 539.4 545.7 2064.3 567.9 517.0 570.2 649.0 2375.5 675.7 19.0 13.8 Source: Company, ICICIdirect.com Research

We anticipate IRB’s toll revenue per day will grow at a CAGR OF 10.0% over FY16-18E to | 8.1 crore from | 6.7 crore in FY16.

Exhibit 2: Toll revenue/day to inch up to | 8.1 crore by FY18E

10.0 8.1 7.6 8.0 6.7 5.7 6.0 4.7 3.9 4.0 (| crore)

2.0

0.0 FY13 FY14 FY15 FY16 FY17E FY18E

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 4

Orderbook at | 8739 crore… With the cancellation of Zozila Tunnel project, IRB’s order book slumped to | 8738.6 crore, 2.6x TTM construction revenues, providing strong visibility over construction revenues. In Q1FY17, IRB’s revenues from construction division grew 54.8% YoY to | 913.3 crore on account of strong execution with EBITDA margin of 29.0%. The major contributors to construction revenues were Rajasthan-Kaithal (| 270 crore), Solapur- Yedeshi (| 173 crore) and Yedeshi-Aurangabad (| 296 crore). Overall, in FY16, IRB’s construction revenues grew robustly at 45.9% YoY to | 3030 crore. Furthermore, the company has been declared preferred bidder for the project of 6 laning from Udaipur to Rajasthan/Gujarat border worth | 2100 crore, the execution of which could begun in FY18. Consequently, we expect construction division’s revenues to grow strongly at 13.3% CAGR to | 3895.4 crore during FY16-18E.

Exhibit 3: Construction order book trend 20000 17321 17500 IRB’s current order book stands at | 8738.6 crore 15000 12631.2 12116 11587.3 12500 11348 11081.8 11468.4

(| crore)(| 9746 10000 8738.6

7500

5000 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17

Source: Company, ICICIdirect.com Research

Exhibit 4: Order book break-up Exhibit 5: Project wise order book break-up

24% 8% 17% 24.4% 10% 55.1% 20.5% 19% 20% 5%

Ongoing BOT projects BOT projects in O&M phase Kaithal Rajasthan Yedeshi Aurangabad Sindhudurg Airport BOT projects - under development Solapur Yedeshi O&M Contracts Goa Kundapur Mumbai-Pune Phase II Agra Etawah

Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research

ICICI Securities Ltd | Retail Equity Research Page 5

Revenues to grow robustly at 17.0% CAGR during FY16-18E… Revenue is expected to grow at 17.0% CAGR in FY16-18E mainly due to 22.1% CAGR in the revenues of BOT division We expect IRB to register a strong consolidated revenue growth of 17.0% during FY16-18E CAGR on account of strong growth of 22.1% CAGR in the BOT division revenues over FY16-18E, respectively.

Exhibit 6: Revenue to grow at 17.0% CAGR over FY16-18E

8000 7,024

5,986 6000 5,130

3,732 3,847 4000 (| crore)

2000

0 FY14 FY15 FY16E FY17E FY18E

Source: Company, ICICIdirect.com Research

We expect IRB’s toll revenues to grow at a CAGR of 22.1% during FY16- 18E on with increment toll contribution from Ahmedabad Vadodara project and strong traffic growth in existing projects. Furthermore, the hike in toll rate at various projects would also aid topline growth.

Exhibit 7: Construction revenue trend Exhibit 8: BOT revenue trend

4500 3,895 3,471 4,000 3600 3,033 3,129 2,555 3,000 2,515 2700 2,097 2,012 1,836 2,000

(| crore) 1800 1,177 ( | crore) 1,000 900 - 0 FY14 FY15E FY16E FY17E FY18E FY14 FY15 FY16E FY17E FY18E

Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research

ICICI Securities Ltd | Retail Equity Research Page 6

EBITDA margins to remain healthy…

The overall EBITDA margin is expected to expand 160 bps The overall EBITDA margin is expected to expand 160 bps to 53.5% over to 53.5% over FY16-18E FY16-18E due to change in revenue mix with increase in proportion of relatively higher margin BOT division revenues. Consequently, the EBITDA is expected to grow at 15.9% CAGR to | 3757.2 crore during FY16-18E.

Exhibit 9: Margins to remain healthy

4100 57.5% 60.0%

3500 53.5% 56.0% 51.9% 2900 47.0% 49.6% 52.0% 2300 44.3% 48.0% (| crore) 1700

1100 44.0% 2,968.4 1,633.3 1,753.7 2,211.7 3,757.2 2,207.5 2,207.5 500 40.0% FY13 FY14 FY15E FY16E FY17E FY18E EBITDA EBITDA Margin

Source: Company, ICICIdirect.com Research

Earnings to see a dip…

The bottomline is expected to decline to | 568.2 crore over FY16-18E owing to higher interest and depreciation expenses mainly on account of commissioning of BOT projects. However, we expect IRB’s cash profit to grow at 4.9% CAGR to | 1637.4 crore over FY16-18E.

Exhibit 10: PAT trend… Exhibit 11: Cash profit to grow at 4.9% CAGR during FY16-18E

700.0 1800.0 635.8 1637.4 1489.2 1460.3 600.0 568.2 1500.0 556.7 542.9 557.0 1250.0 500.0 459.1 1200.0 998.2

(| crore) (| crore) (| 936.2 400.0 900.0

300.0 600.0 FY13 FY14E FY15 FY16E FY17E FY18E FY13 FY14E FY15 FY16E FY17E FY18E

Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research

ICICI Securities Ltd | Retail Equity Research Page 7

Outlook and valuation

We value the stock at | 230/share (BOT valuation - | IRB has witnessed strong growth in its toll revenues on the back of robust 183.9/share and construction- | 103.8/share). traffic growth across its project portfolio for the past few quarters. The construction division revenues have also grown robustly on the back of strong execution. We believe that InvIT listing could also act as a near term trigger for the stock. Furthermore, with competitive intensity reducing in bidding of BOT projects, IRB would be a strong beneficiary of upcoming BOT projects of NHAI. However, we would like to see pick up in Ahmedabad-Vadodara project which generated | 87.5 crore in Q1FY17 implying ~ | 95 lakh/day, which is significantly, lower than our expectation. Hence, we continue to maintain our HOLD recommendation on the stock with a revised SOTP based revised target price of | 230/share (BOT valuation - | 183.9/share and construction- | 103.8/share). We have now rolled over our valuation to FY18E and have now incorporated Agra-Etawah project in our valuation.

Exhibit 12: Valuation summary Valuation Cost of Total Equity IRB's stake Value per Name of Project Basis Equity (%) Value (| cr) IRB Stake(%) value (| cr) share (|) Operational projects 5730.7 5730.7 163.1 Mumbai - Pune FCFE 12.0 2362.4 100 2362.4 67.2 Bharuch - Surat FCFE 12.0 805.0 100 805.0 22.9 Dahisar - Surat FCFE 12.0 703.6 100 703.6 20.0 Thane - Ghodbunder FCFE 12.0 293.4 100 293.4 8.3 Thane Bhiwandi FCFE 12.0 591.5 100 591.5 16.8 Pune - Nashik FCFE 12.0 378.0 100 378.0 10.8 Pune - Solapur FCFE 12.0 133.7 100 133.7 3.8 NKT project FCFE 12.0 121.7 100 121.7 3.5 Mohol Mundurup FCFE 12.0 55.9 100 55.9 1.6 Kharpada FCFE 12.0 25.0 100 25.0 0.7 MVR Infra FCFE 12.0 260.6 100 260.6 7.4 Under construction/Partial Tolling 1121.5 732.3 20.8 Amritsar Pathankot FCFE 13.0 222.9 100 222.9 6.3 Jaipur - Tonk - Deoli FCFE 13.0 261.9 100 261.9 7.5 Talegaon Amravati FCFE 13.0 44.6 100 44.6 1.3 Tumkur Chitradurga FCFE 13.0 -7.0 100 -7.0 -0.2 Ahmedabad Vadodara FCFE 14.0 -867.9 100 -867.9 -24.7 Goa Kundapur FCFE 14.0 379.2 100 379.2 10.8 Sholapur Yadeshi FCFE 14.0 65.0 100 65.0 1.9 Yadeshi Aurangabad FCFE 14.0 814.0 100 814.0 23.2 Kaithal Rajasthan Border FCFE 14.0 208.9 100 208.9 5.9 Agra Etawah FCFE 14.0 -389.2 100 -389.2 -11.1 Total BOT projects 6852.3 6463.1 183.9 Construction business PE 7 3646.4 100 3646.4 103.8 Real Estate P/BV 0.00 130.0 66 0.0 0.0 Total Valuation 10628.7 10109.5 287.6 Less: Standalone Net Debt -2000.0 -56.9 Target Equity Valuation 8109.5 229.4 Rounded Off Target Price 230.0 Source: Company, ICICIdirect.com Research

Exhibit 13: Valuation Sales Growth EPS Growth PE P/B RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%) FY15 3,847.5 3.1 16.3 18.3 13.0 1.6 12.4 10.2 FY16E 5,130.2 33.3 19.1 17.1 11.1 1.5 13.1 10.2 FY17E 5,985.7 16.7 16.8 (12.4) 12.7 1.3 10.6 10.4 FY18E 7,024.4 17.4 17.1 2.0 12.4 1.2 10.0 13.4 Source: Company, ICICIdirect.com Research

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Recommendation History vs. Consensus Chart

400 100.0 90.0 80.0 300 70.0 60.0 (|) 50.0 (%) 40.0 200 30.0 20.0 10.0 100 0.0 Jul-14 Sep-14 Dec-14 Feb-15 Apr-15 Jul-15 Sep-15 Dec-15 Feb-16 May-16 Jul-16

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date Event Mar-15 Yedeshi Aurangabad Tollway Pvt Ltd, a wholly-owned subsidiary of IRB Infrastructure achieves financial closure (FC) in terms of the concession agreement executed with NHAI by tying up of project finance of | 1,756 crore Sep-15 Executes a concession agreement with NHAI for 124 km Agra-Etawah Bypass section on NH-2 under the BOT mode. The estimated project cost is | 2650 crore & concession period is 24 years including construction period of 910 days Dec-15 IRB Ahmedabad Vadodara Super Express Tollway Pvt Ltd - wholly owned subsidiary of the company, issued provisional completion certificate by NHAI Jan-16 Receives LoA from MoRTH for construction, operation and maintenance of Zozila tunnel in J&K spanning a length of 14.08 km at cost of ~| 10500 crore Jan-16 Media sources indicate that activist Sajag Nagrik Manch, has demanded the suspension of the toll collection on the Pune-Mumbai Expressway after they came up with data, which purportedly shows IRB had under-reported the average daily traffic (ADT) at the Mumbai Pune Expressway by a margin of over 50% for July, 2015

Mar-16 MoRTH decides to cancel the bid process for Zozila Tunnel annuity project worth | 10050 crore contributing to ~| 6700 crore to IRB's orderbook in Q3FY16 and cancels the said LoA without giving any reasons Mar-16 Receives Sebi approval to launch an infrastructure investment trust (InvIT), which will allow it to unlock value from operational assets. The company will act as a sponsor to IRB InvIT Fund to carry out the activities as an InvIT Apr-16 CBI arrests a former inspector of Maharashtra Police Crime branch in its ongoing probe into the murder of Pune based RTI activist Satish Shetty. Based on Shetty's findings a complaint was lodged against the chairman and managing director of IRB Infrastructure Co, Virendra Mhaiskar on October 15, 2009 Aug-16 IRB has emerged preferred bidder for the project of 6 laning from Udaipur to Rajasthan/Gujarat border on DBFOT basis with length of 113.8 kms. The estimated project cost of the company is ~| 2100 crore and the company has offered an premium of | 163.8 crore to NHAI. The concession period of the project is 21 years including construction period of 910 days. Aug-16 AE Tollway Pvt. Ltd. - wholly-owned Subsidiary of the Company, incorporated for implementation of Agra Etawah Bypass project has received the Appointed Date. Accordingly, the SPV has started construction on the Project and also toll collection from August 01, 2016.

Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Dec-15 Mar-16 Mar-16 1 Mhaiskar (Deepali Virendra & Virendra Dattatraya) 31-Mar-16 32.3% 113.6 0.0 Promoter 57.65 57.54 57.43 2 Mhaiskar (Virendra Dattatraya) HUF 31-Mar-16 23.8% 83.7 0.0 Public 42.35 42.46 42.57 3 Platinum Investment Management Ltd. 31-Mar-16 4.2% 14.9 0.6 Others 0.00 0.00 0.00 4 UTI Asset Management Co. Ltd. 30-Jun-16 4.0% 13.9 -0.2 Total 100.00 100.00 100.00 5 AllianceBernstein L.P. 30-Jun-16 2.4% 8.5 0.0 6 GIC Private Limited 31-Mar-16 2.2% 7.8 1.4 7 Birla Sun Life Asset Management Company Ltd. 31-Mar-16 1.4% 4.8 0.8 8 AllianceBernstein Hong Kong Ltd. 31-Mar-16 1.1% 3.9 -0.4 9 Ideal Soft Tech Park Pvt. Ltd. 31-Mar-16 1.1% 3.7 0.0 10 Dimensional Fund Advisors, L.P. 31-May-16 1.0% 3.5 0.0 [ Source: Reuters, ICICIdirect.com Research

Recent Activity Buys Sells Investor name Value (m) Shares (m) Investor name Value (m) Shares (m) GIC Private Limited 5.0 1.4 Norges Bank Investment Management (NBIM) -7.5 -2.0 Birla Sun Life Asset Management Company Ltd. 2.9 0.8 HSBC Global Asset Management (Taiwan) Limited -6.5 -1.8 SEI Investments Management Corporation 2.4 0.7 Mirae Asset Global Investments Co., Ltd. -3.6 -1.0 Platinum Investment Management Ltd. 2.1 0.6 Mirae Asset Global Investments (India) Pvt. Ltd. -2.5 -0.7 ICICI Prudential Asset Management Co. Ltd. 1.6 0.5 Mhaiskar (Dattatray Pandurang) -1.8 -0.5

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 9

Financial summary

Profit and loss statement | Crore Cash flow statement | Crore (| Crore) FY15 FY16E FY17E FY18E (| Crore) FY15 FY16E FY17E FY18E Net Sales 3,847.5 5,130.2 5,985.7 7,024.4 Profit after Tax 542.9 635.8 557.0 568.2 Growth (%) 3.1 33.3 16.7 17.4 Depreciation 707.1 853.3 903.2 1,069.2 Direct Expenditure 1,306.0 2,054.0 2,532.4 2,698.2 Cash Flow before wc changes 2,216.4 2,677.6 2,968.4 3,757.2 Employee Expenses 189.8 246.1 287.1 336.9 Net Increase in Current Assets -7.1 0.0 0.0 0.0 Administrative Expenses 140.0 169.5 197.8 232.1 Net Increase in Current Liabilities -69.2 73.0 48.7 59.1 Total Operating Expenditure 1,635.8 2,469.6 3,017.3 3,267.2 Net cash flow from operating activities 1,823.5 1,824.2 3,388.1 2,860.5 EBITDA 2,211.7 2,660.6 2,968.4 3,757.2 Growth (%) 26.1 20.3 11.6 26.6 (Purchase)/Sale of Fixed Assets -2,311.0 -2,577.7 -3,214.4 -415.3 Interest 931.2 1,063.3 1,390.7 1,869.2 Interest received on fixed deposits 101.7 123.9 126.9 160.9 Depreciation 707.1 853.3 903.2 1,069.2 Net Cash flow from Investing Activities -2,295.5 -2,453.8 -3,087.5 -254.4 Other Income 113.0 123.9 126.9 160.9 PBT 686.5 867.9 801.4 979.6 Issuance of share capital 421.6 0.0 0.0 0.0 Total Tax 144.1 231.6 245.1 411.5 Long term borrowing proceeds 2,507.1 2,473.4 1,774.5 -255.2 PAT before MI 542.4 636.3 556.2 568.2 Repayments of Long term borrowings -794.3 0.0 0.0 0.0 Minority Interest -0.6 0.4 -0.8 0.0 Net Cash flow from Financing Activities 473.5 1,255.0 227.5 -2,280.0 PAT 542.9 635.8 557.0 568.2 Net Cash flow 1.6 625.4 528.0 326.1 Growth (%) 18.3 17.1 -12.4 2.0 Opening Cash/ Cash Equivalent 443.1 1,579.8 2,205.2 2,733.3 EPS 16.3 19.1 16.8 17.1 Closing Cash/ Cash Equivalent 1,579.8 2,205.2 2,733.3 3,059.4

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios (| Crore) FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E Liabilities Per share data (|)

Equity Capital 351.5 351.5 351.5 351.5 EPS 16.3 19.1 16.8 17.1 Securities Premium Account 0.0 0.0 0.0 0.0 Cash EPS 37.6 44.8 43.9 49.3 Reserve and Surplus 4,009.4 4,490.1 4,890.8 5,303.4 BV per share 131.2 145.7 157.7 170.1 Secured Loan 11,435.9 14,100.5 15,802.7 15,554.0 Revenue per Share 115.7 154.3 180.1 211.3 Unsecured Loan 0.0 0.0 0.0 0.0 Premium Payable 21,550.1 21,358.9 21,431.2 21,424.7 Operating Ratios (%) Minority Interest 35.1 35.5 34.7 34.7 EBITDA Margin 57.5 51.9 49.6 53.5 Deferred Tax Liability 17.0 17.0 17.0 17.0 PBT / Net Sales 17.8 16.9 13.4 13.9 Liability side total 37,399 40,354 42,528 42,685 PAT Margin 14.1 12.4 9.3 8.1 Assets Inventory days 24.7 31.6 23.0 30.5 Total Gross Block 675.3 760.0 810.0 860.0 Debtor days 0.5 0.5 0.5 0.5

Less Acc. Depreciation on Tangible A 391.9 456.3 523.3 593.0 Creditor days 0.0 0.0 0.0 0.0 Net Block 283.5 303.7 286.7 267.0 Net Intangible Assets 31,480.0 34,178.8 35,981.6 41,863.1 Return Ratios (%) Total Fixed Assets 36,598.8 38,306.7 40,617.9 39,964.0 RoE 12.4 13.1 10.6 10.0 RoCE 10.2 10.2 10.4 13.4 Investments 8.8 8.8 8.8 8.8 RoIC 4.9 5.3 5.8 6.4 Valuation Ratios (x) Inventory 259.9 444.4 377.3 587.0 P/E 13.0 11.1 12.7 12.4 Debtors 4.9 6.5 7.6 9.0 EV / EBITDA 7.6 7.1 6.8 5.2 Loans and Advances 912.6 1,216.8 1,419.7 1,666.1 EV / Net Sales 4.4 3.7 3.4 2.8 Cash 1,579.8 2,205.2 2,733.3 3,059.4 Market Cap / Sales 1.8 1.4 1.2 1.0

Total Current Assets 2,757.2 3,873.0 4,537.9 5,321.5 Price to Book Value 1.6 1.5 1.3 1.2 Current Liabilities 1,747.3 1,542.9 2,295.9 2,209.1 Solvency Ratios (x) Provisions 218.9 291.9 340.6 399.7 Debt / EBITDA 0.0 0.0 0.0 0.0 Net Current Assets 791.0 2,038.2 1,901.4 2,712.7 Debt / Equity 2.6 2.9 3.0 2.8 Miscellaneous Expenses 0.0 0.0 0.0 0.0 Current Ratio 0.6 0.9 0.7 0.9 Assets side total 37,399 40,354 42,528 42,685 Quick Ratio 0.5 0.7 0.5 0.6

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

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ICICIdirect.com coverage universe (Infrastructure) CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) P/B (x) RoE (%) Sector / Company (|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E NBCC (NBCC) 244 228 Buy 14,640 5.1 6.1 9.6 47.4 40.3 25.4 38.4 32.2 18.9 9.8 8.7 7.4 20.7 21.6 29.0 IRB Infra (IRBINF) 212 230 Hold 7,465 19.1 16.8 14.8 11.1 12.7 14.3 7.1 6.8 5.4 1.5 1.3 1.3 13.1 10.6 8.8 PNC Infratech (PNCINF) 563 700 Buy 2,890 47.4 36.9 41.0 11.9 15.3 13.7 10.5 9.3 7.1 2.1 1.9 1.7 11.3 12.3 12.2 Sadbhav Engg. (SADENG) 289 300 Buy 4,944 7.7 9.9 11.8 36.9 28.8 24.2 18.7 16.1 14.0 3.3 3.0 2.7 9.0 10.5 11.2 Ashoka Buildcon (ASHBUI) 159 150 Hold 2,966 3.7 4.5 5.4 42.1 42.1 42.1 9.7 9.3 8.5 1.8 1.7 1.7 4.2 4.8 5.9 Simplex Infra (SIMCON) 308 325 Buy 1,529 13.3 18.5 31.8 21.9 15.8 9.2 7.4 6.7 5.9 0.9 0.9 0.8 4.4 5.8 9.3 NCC (NAGCON) 79 85 Buy 4,320 4.0 3.9 5.0 19.4 20.0 15.4 8.0 7.2 6.4 1.3 1.2 1.2 6.6 6.1 7.5 Source: Company, ICICIdirect.com Research

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RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

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Disclaimer ANALYST CERTIFICATION We , Deepak Purswani, CFA MBA (Finance),Vaibhav Shah, MBA (Finance); research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

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It is confirmed that Deepak Purswani, CFA MBA (Finance),Vaibhav Shah, MBA (Finance); research analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

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