IRB Infrastructure Developers Ltd. TP: INR 295 - ACCUMULATE

Stability, Growth and Returns 26 March 2018 IRB Infrastructure has a portfolio of 14 BOT assets with a market share of 11.64% in the Infrastructure golden quadrilateral and road portfolio of 7,767 lane kms as of 31st December 2017. Large Initiation part of IRB’s portfolio is along the high traffic-density corridors in Western India making it one of the best plays on anticipated traffic-growth. In March 2018 alone the group has so far received letter of award for 3 HAM projects and emerged as preferred Key Statistics bidder for another project on DBFOT basis aggregating INR 89.1 bn augmenting its CMP (INR)* 215.8 construction orderbook to INR 153 bn as of 22th March 2018 from INR 74 bn as of 31st Upside/downside (%) 36.7 December 2017 providing revenue visibility over the next three years. We believe IRB’s Market Cap (INR/USDmn) 75,755/ 1,168 foray into HAM with more assured cash flows and the upcoming TOT opportunity should provide the next leg of growth and drive re-rating. Shares outstanding (mn) 351 3 months avg volume (mn) 1.48 ✓ Foray into HAM and TOT – Catalyst for re-rating: Given the dearth of BOT projects, Dividend Yield (FY17, %) 2.3 and management’s reluctance to actively bid for EPC given the intense competitive action in EPC space, IRB’s shares have underperformed major road builders (12m 52 Wk high/low 267/198 performance of -9% vs. +53%) and are trading at a 44% discount to its peer group Sensex/Nifty 32,596/9,998 (FY19e EV/EBITDA of 6.0x vs. 10.6x on consensus estimates). In our view, HAM/TOT Bloomberg Code IRB IN is a natural progression for IRB that should drive re-rating for the stock and provide fillip to earnings momentum. IRB made its 1st mark in the growing HAM space and Performance (%)* 1M 3M 12M has received letter of award for 2 HAM projects in Tamil Nadu worth INR 35 bn on Absolute (%) (1.9) (6.5) (9.2) 15th March 2018. On 21st March 2018, IRB received letter of award for another HAM Rel. to Sensex (%) 0.2 (4.6) (21.6) project worth INR 20.43 bn in Gujarat. Our analysis suggests that at current price the

*Closing prices as on 23rd March 2018 markets are not completely discounting the revenue visibility from current order book and cash flow from existing BOT projects, let alone the upside from new projects wins. Sh. Pattern, % (as on March-2018) ✓ Strong BOT Portfolio with mix of mature vs. new assets: IRB has a balanced mix of Promoter 57.3 mature and new assets (six operational assets and seven under implementation). The FII 23.6 group was awarded three projects in FY17 (Udaipur-Gujarat, Gulabpura-Chittorgarh DII 12.0 and Kishangarh-Gulabpura) and the financial closure has been achieved for all these nd Other 7.1 projects. On 22 March 2018 IRB also emerged as preferred bidder for a project on DBFOT basis in Uttar Pradesh (Hapur bypass to Moradabad) aggregating INR 34 bn. Total 100.0 We expect mature assets to provide stability to group’s cash flows whilst the recently

Stock Price Performance* commissioned / new projects assets will provide the fillip to the growth momentum. Sensex IRB 400 ✓ Deleveraging the balance sheet: InvIT has transformed IRB’s balance sheet from tied- up capital to unlocking it. Net debt position as of 3QFY18 declined to INR 108.6 bn from INR 151.5 bn in FY17 with net debt-to-equity reducing to 1.94x in 3QFY18 from 200 2.78x in FY17. Reduced leverage will increase IRB’s ability to raise additional debt to fund its existing projects and win new orders. 0 ✓ Initiate with ACCUMULATE rating. We initiate coverage with ACCUMULATE Apr-14 Jul-15 Nov-16 Mar-18 rating with a TP of INR 295 (+37% upside) with BOT business valued at INR 103 per * Rebased to 100 | Based on daily closing prices share and EPC at INR 173. Our TP implies FY19e EV/EBITDA of 7.5x and P/E of 9.3x.

Bull-bear analysis suggests a favorable risk reward ratio with bull case valuation of

INR 402 (+86% upside) and bear case valuation of INR 188 (-13% downside).

Year End (31 Mar) FY16 FY17 FY18E FY19E FY20E Revenues (INR mn) 52,551 59,691 62,210 72,865 75,515 Rahul Chopra Analyst Name EBITDA (INR mn) 27,874 31,715 29,499 35,706 35,012 [email protected] [email protected] Margin (%) 53.0% 53.1% 47.4% 49.0% 46.4% +91-22-Diluted3347 7476 adj. EPS (INR) 18.2 20.4 25.0 31.7 28.7

ROE (%) 13.8% 14.2% 15.6% 17.4% 13.8% P/E (x) 12.0 10.7 8.7 6.9 7.6 P/BV (x) 1.6 1.5 1.3 1.1 1.0 EV/EBITDA (x) 7.8 7.0 7.5 6.7 7.2 Source: Company, YSL estimates; Note: Valuations as on 23rd March 2018

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 1

IRB Infrastructure Developers Ltd.

IRB Infrastructure Developers in Pictures

Exhibit 1: Revenue Exhibit 2: EBITDA Margin

80,000 (INR mn) 60.0% (%) 58.7% 70,000 58.0% 56.0% 60,000 53.0%53.1% 54.0% 50,000 52.0% 50.2% 49.0% 40,000 50.0% 48.3% 46.2% 30,000 48.0% 45.7% 46.3% 46.0% 47.4% 20,000 46.4% 44.0% 45.9%

10,000 42.0%

10,210 17,540 25,026 32,582 38,174 37,319 39,619 52,551 59,691 62,210 72,865 75,515

- 40.0%

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

FY18E FY19E FY20E

FY19E FY20E FY18E Source: Company, YSL

Exhibit 3: IRB’s BOT Portfolio Spread (%) Exhibit 4: IRB Order Book

Uttar 160 (INR bn) 153 Pradesh 140 126 10% 113 120 100 19 97 100 85 84 19 Harayana 7 Maharashtra 18 74 9% 80 33% 7 153 60 41 65 108 94 93 40 79 67 20 43 20 -

Rajasthan

FY12 FY14 FY16 FY15 FY17

26% FY13

3QFY18 March'18e

Gujarat Operation and maintenance (O&M) order book Karnataka 13% Construction and development (EPC) order book 10%

Source: Company, YSL

Exhibit 5: Return on Equity and ROIC (%) Exhibit 6: Leverage Ratio (x)

18.0% 17.1% 6.0 5.0 5.1 16.0% 14.2% 4.7 13.5% 13.6% 13.8% 5.0 4.6 14.0% 4.0 12.0% 10.8% 4.0 3.6 9.1% 9.0% 10.0% 8.1% 8.7% 3.0 8.0% 2.9 2.8 6.0% 2.0 2.5 2.6 4.0% 2.0 1.9 1.0 2.0% 0.0% - FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 3QFY18

ROIC ROE Net Debt to EBITDA Net Debt to Equity

Source: Company, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 2

IRB Infrastructure Developers Ltd.

KEY INVESTMENT HIGHLIGHTS

IRB on a verge of upswing

✓ Play on the entire BOT value chain: Incorporated in 1998, IRB is toll operator with a market share of 11.64% in the golden quadrilateral. IRB’s aggregate road portfolio stood at 7,767 lane kms as of 31st December 2017. Post the listing of IRB InvIT Fund on May 2017, where seven of its operational projects were transferred, IRB now has IRB Infra is a pure play toll operator with strong six operational assets, seven under implementation stage and the group has expertise in BOT projects. preferred bidder for another project on Design, Build, Finance, Operate and Transfer (DBFOT) basis. IRB’s 100% subsidiary, Modern Road Makers Pvt Ltd (MRM), undertakes construction exclusively of in-house road BOT projects. The group’s vertically integrated operations facilitate works related to the entire BOT value chain, from traffic studies, in-house construction and O&M of all operational BOT projects making the group a play on the entire BOT value chain.

Exhibit 7: IRB’s BOT portfolio snapshot Sl. Length Concession Project name Type State Date of Start (concession) No. (KM) Period 1 Kaithal-Rajasthan Border Toll Haryana 166.30 January 1, 2013 27 Years 2 Pune Solapur Toll Maharashtra 26.00 March 20, 2003 16 Years 3 Pune Nasik Toll Maharashtra 29.80 September 25, 2003 18 Years 4 Mumbai - Pune Toll Maharashtra 206.00 August 10, 2004 15 Years 5 Thane Ghodbunder Toll Maharashtra 14.90 December 24, 2005 15 Years 6 Solapur - Yedeshi Toll Maharashtra 98.70 Under Construction 29 Years 7 Yedeshi - Aurangabad Toll Maharashtra 189.10 Under Construction 26 Years 8 Ahmedabad-Vadodara Toll Gujarat 195.60 January 1, 2013 25 Years 9 Udaipur – Gujarat Border Toll Rajasthan / Gujarat 113.80 Under Tolling and Construction 21 Years 10 Kishangarh - Gulabpura Toll Rajasthan 90.00 FC completed 20 Years 11 Gulabpura – Chittorgarh Toll Rajasthan 124.87 Under Tolling and Construction 20 Years 12 Goa/Kar Border - Kundapur Toll Karnataka 189.60 Under Construction 28 Years 13 Agra Etawah Toll Uttar Pradesh 124.52 Under Tolling and Construction 24 Years 14 Hapur bypass to Moradabad Toll Uttar Pradesh 99.86 Preferred bidder 22 Years Source: Company, YSL

IRB has started to bid for ✓ Foray into HAM and TOT opportunity to be a catalyst for potential for re-rating. HAM projects and actively Despite industry players showing greater interest towards EPC and HAM projects, looking at TOT as well IRB core focus was on BOT projects where it has domain experience and expertise. which should provide IRB’s shares have unperformed the wider road operators (12 month returns of -9% catalyst for growth and vs. +53% for its peers). We believe a large part of this underperformance was due merit re-rating in our view. to drop in projects being awarded on BOT basis. That said, after initial reluctance IRB is now starting to bid for HAM projects (in March 2018 IRB had received letter of award for 2 HAM projects in Tamil Nadu and 1 HAM project in Gujarat) and will be actively looking at the TOT opportunity as well which should merit a case for re-rating.

That said, our analysis suggests that at current share price the markets are not completely discounting the revenue visibility from current order book and cash flows from existing BOT projects, let alone the new projects win.

✓ Making a footprint in HAM. IRB had bid for 3 HAM projects in FY18. On March 14, 2018, for the first time IRB bagged two projects under HAM in Tamil Nadu with the group emerging as a preferred bidder with bidding cost of INR 34.92 bn. The

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 3

IRB Infrastructure Developers Ltd.

group received letter of award for these projects on 15th March 2018. The details for the project are

• Both the projects are in Tamil Nadu for four laning of stretch on NH 332.

• Project of four laning of 56.80 Kms stretch from Poondiankuppam to Sattanathpuram with cost outlay of INR 21.96 bn

• Project of four laning of 38 Kms from Puducherry to Poondiankuppam with cost outlay of INR 12.96 bn

• The concession will comprise 730 days for construction and 15 years operations & maintenance rights thereafter.

On 19th March 2018, IRB also emerged as a preferred bidder for another HAM based project in Gujarat for INR 20.43 bn. The project is for construction of 8 lane Vadodara Kim Expressway (Padra to Vadodara Section of Vadodara Mumbai Expressway). The group received letter of award on 21st March 2018. The concession will comprise 730 days for construction and 15 years operations & maintenance rights thereafter.

Exhibit 8: Recent HAM Projects won by IRB

NHAI IRB bid 1st year Construction & Operation Length Project Bid Cost cost O&M Period (km) (INR bn) (INR bn) (INR mn)

4 laning of 56.80 Kms stretch is from 730 days construction period; 17.77 21.69 10.8 56.8 Poondiankuppam to Sattanathpuram 15 years O&M rights

4 laning of 38 Kms is from Puducherry to 730 days construction period; 10.45 12.96 20.7 38.0 Poondiankuppam 15 years O&M rights

Construction of 8 lane Vadodara Kim Expressway 730 days construction period; (Padra to Vadodara Section of Vadodara Mumbai 16.37 20.43 27.0 23.7 15 years O&M rights Expressway). Source: Company, YSL

In our estimates, we have conservatively not modelled new project wins for IRB and have not incorporated the recent HAM projects. With IRB now starting to win HAM projects as well, this should improve the earnings outlook as these projects will start commissioning and merit a case for re-rating.

✓ Expect a quantum jump in award in 4Q18 driven by HAM. In terms of award activity, the average length of road projects awarded in the last 5 years by NHAI was 2,860 km with 4,335 km awarded in FY17 alone. Target for NHAI for award is 10,000 km for FY18. According to latest available data as of 31st January 2018, NHAI has already awarded projects for a length of nearly 2,700 km (costing INR 422 bn) largely under EPC (56% by value) and HAM mode (40% by value) with plans to award 8,300 km towards the end of 2018 implying a significant uptick in award activity in 4QFY18. NHAI has already invited bids for 7,768 km length worth INR 1,416 bn with over 65% projects to be awarded under HAM mode.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 4

IRB Infrastructure Developers Ltd.

Exhibit 9: NHAI Award activity for FY18

Awarded until Jan 2018 Expected to be bid by March 2018

Km INR bn Km INR bn EPC 1,834 238 2,968 478 HAM 753 169 4,699 917 BOT 109 16 100 21 Total 2,696 423 7,767 1,416

EPC 68% 56% 38% 34% HAM 28% 40% 60% 65% BOT 4% 4% 1% 2% Total 100% 100% 100% 100% Source: MEP Presentation, MORTH, YSL

✓ Old assets help generate cash flows; new assets drive growth. IRB has a balanced

IRB has a good blend of mix of mature and new assets. During FY17, IRB commenced construction and mature and new assets tolling operation at the Agra-Etawah project. Further, the group was also awarded providing visibility to cash three additional projects in FY17 (Udaipur-Gujarat, Gulabpura-Chittorgarh and flows and fillip to future Kishangarh-Gulabpura). growth. On 22nd March 2018, the group also emerged as preferred bidder for project of six laning of Hapur bypass to Moradabad section in Uttar Pradesh on DBFOT basis under NHDP Phase V Project. The concession period is 22 years including construction period of 910 days. Total cost of the Project is INR 34 bn. IRB has offered a premium of INR 315 mn to NHAI to be payable from 4th year.

Exhibit 10: IRB’s Projects awarded since FY’09

FY09 Greenfield Airport Project in Sindhudurg Integrated Road Development (IRD), Kolhapur Surat-Dahisar FY10 Amritsar-Pathankot Talegaon-Amravati Jaipur-Deoli FY11 Tumkur-Chitradurga FY12 Ahmedabad-Vadodara FY13 Goa / Karnataka border to Kundapur FY14 Solapur-Yedeshi Project FY15 Mumbai-Pune Phase II

Yedeshi-Aurangabad Project Kaithal-Rajasthan Border Agra-Etawah six laning project on NH-2 FY16 Agra-Etawah Project FY17 Udaipur-Gujarat

Gulabpura-Chittorgarh Kishangarh-Gulabpura HAM project - Four laning of 56.80 Kms stretch from Poondiankuppam to FY18 Sattanathpuram in Tamil Nadu HAM project - Four laning of 38 Kms from Puducherry to Poondiankuppam in Tamil Nadu

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 5

IRB Infrastructure Developers Ltd.

HAM project - Construction of 8 lane Vadodara Kim Expressway (Padra to Vadodara Section of Vadodara Mumbai Expressway) in Gujarat Preferred bidder for the project of Six Laning of Hapur bypass to Moradabad section on DBFOT basis in Uttar Pradesh On LFL basis, we expect Source: Company, YSL tolling revenues to grow at We expect mature assets to provide stability to group’s profitability and cash flows a CAGR of +24% driven by a) traffic growth of +6%, b) visibility given their established traffic profile whilst the recently commissioned tariff growth of +4% and c) assets will provide the fillip to the growth momentum. commissioning of new projects. IRB’s tolling revenues increased from INR 12.3 bn in FY12 to INR 25.3 bn in FY17, registering a CAGR of +15%. Post transfer of seven operational projects to InvIT, IRB’s FY17 tolling revenues would be INR 11.6 bn. On a LFL basis (excluding projects transferred to InvIT), we would expect IRB’s tolling revenues to grow at a CAGR of +24% driven by a) traffic growth of +6%, b) tariff growth of +4% and c) commissioning of new projects.

✓ Robust Order Book. IRB’s EPC order book as of December 31, 2017 stood at INR 67.5 bn excluding INR 6.6 bn O&M on operational BOT projects with total IRB’s EPC orderbook has increased to INR 120 bn as construction order book of INR 74 bn. Post the award of 3 HAM projects and IRB of 20th March 2018 (from emerging as preferred bidder for another DBFOT project in Uttar Pradesh, the INR 67.5 bn as of December group’s construction order book has more than doubled to INR 153 bn as of 22nd 31st2017) providing revenue March 2018. We believe the present order backlog would provide sufficient visibility over the next revenue visibility for the EPC vertical over the next three years. three years ✓ Play on anticipated traffic-growth revival. IRB’s BOT portfolio comprises of 14 BOT toll projects with a large part of its project portfolio along high traffic-density corridors in the Western India. This makes IRB one of the best plays on anticipated traffic-growth revival / GDP growth. In our view, BOT projects with a pipeline of income generating assets have a self-sustaining cash generative business model. Further, these projects can be monetised by offering them to the InvIT and the proceeds can be further reinvested into new projects.

✓ De-leveraging the balance sheet. InvIT has completely transformed IRB’s balance sheet from tied-up capital to unlocking it and has improved the health of group’s balance sheet. IRB’s net debt position as of 3QFY18 declined to INR 108.6 bn from Post InvIT, leverage INR 151.5 bn in FY17. The group’s net debt-to-equity has come down from 2.78x in position enhancing IRB’s FY17 to 1.94x in 3QFY18 while net debt-to-EBITDA has improved from 4.62x in enhanced financial pre- qualification criteria and FY17 to 4.02x in 3QFY18. Improved balance sheet has enhanced IRB’s financial pre- its ability to raise qualification criteria opening a gamut of opportunities with increased ability to additional debt. raise additional debt funding existing projects and win new orders. This will further enable IRB to improve its construction capacity from the current 300-400 kms annually to potentially 500-600 kms annually leading to increase in revenue potential.

✓ Upside Optimality from lower rates. The group’s average cost of debt has come down from 11.25% in FY15 to 10.25% in FY17. Post InvIT, IRB’s leverage has reduced substantially which could potentially lead to credit rating upgrade and further reduce IRB’s cost of debt. In our model, we have conservatively assumed average cost of debt to remain constant at 10.25% without benefit of further rate reduction. Our sensitivity analysis implies +7% further upside to our base

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 6

IRB Infrastructure Developers Ltd.

valuation with an implied valuation of INR 315 for 100 bps reduction in cost of debt. Shares have underperformed ✓ Shares have underperformed and trading at attractive valuation. Over the past 12 its peers over the past 12 months. Foray into HAM months, IRB shares have unperformed the border indices underperforming the and TOT opportunity should BSE Sensex by 21%. On a more like-for-like comparison against major road drive re-rating, in our view. builders, IRB shares have underperformed with shares down -9% over the last 12 months against an average 12-month performance of +53% for the road sector peers.

Exhibit 11: 12m share price performance Exhibit 12: Indexed share price performance

350 IRB Infrastructure Ahluwalia Contracts IRB Infrastructure -9% Ashoka Buildcon KNR Constructions MEP Infrastructure NCC 300 Sadbhav Engineering 18% PNC Sadbhav Engineering Sadbhav Infrastructure Ahluwalia Contracts 23% 250 Ashoka Buildcon 24%

Sadbhav Infrastructure 30% 200 PNC 40%

NCC 49% 150

KNR Constructions 61% 100 MEP Infrastructure 53%

Dilip Buildcon 177% 50 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18

Source: Factset, YSL Because of its recent underperformance, IRB shares are trading at an attractive valuation compared to its peer group. On FY19e consensus estimates, IRB is trading at EV/EBITDA multiple of 6.0x, a 44% discount to its peer group average EV/EBITDA multiple of 10.6x. On P/B multiple, the shares are trading at 1.12x, a -58% discount to its peer group average P/B multiple of 2.76x. On a P/E basis, the shares are trading at FY19e PE multiple of 8.0x, a -57% discount to its peer group average P/E of 19.1x.

Exhibit 13: EV/EBITDA (x) (FY19E) Exhibit 14: P/B (x) (FY19E)

16.0 15.2 4.50 4.26 12.1 12.4 4.00 3.42 3.38 3.50 3.17 12.0 9.8 9.5 9.9 10.2 3.00 2.35 2.50 2.13 8.0 6.0 2.00 1.70 1.50 1.12 4.0 1.00 0.50

0.0 0.00

Sadbhav Eng Sadbhav

Sadbhav Eng Sadbhav

NCC Limited NCC

NCC Limited NCC

PNC Infratech PNC

PNC Infratech PNC

Dilip Buildcon Dilip

Dilip Buildcon Dilip

Ashoka Buildcon Ashoka

Ashoka Buildcon Ashoka

IRB Infrastructure IRB

IRB Infrastructure IRB

KNR Constructions KNR

KNR Constructions KNR Ahluwalia Contracts Ahluwalia Ahluwalia Contracts Ahluwalia Source: Factset, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 7

IRB Infrastructure Developers Ltd.

✓ Initiate with ACCUMULATE rating. In this note we initiate IRB Infrastructure with ACCUMULATE rating. We have arrived at our target price of INR 295 suggesting a 37% upside. Our TP implies FY19e EV/EBITDA of 7.5x, P/B of 1.5x and P/E of 9.3x.

• BOT business: Our target price is based the sum-of the-parts methodology where we have valued the BOT business at INR 103 per share by calculating the NPV of the future cash flows of each project. We have applied a cost of equity of 13.5% for new projects and used a 50bps discount for the existing projects given the comfort from historic traffic visibility. Our model assumes a conservative traffic growth assumption of 6% and tariff growth of 5%. We have arrived at our • target price of INR 295 based EPC: We apply an EV/EBITDA multiple of 5.0x to arrive at a valuation of INR on SOTP based valuation. 173 per share for the EPC business. Our TP implies FY19e EV/EBITDA of 7.5x. • InvIT: Whilst we acknowledge the long-term nature of IRB InvIT and its recent underperformance, we value IRB’s current stake in InvIT at current market price (INR 23 per share) as it best reflects the valuation on a 12-month forward basis.

• Others: We value other income on EV/EBITDA of 5.0x at INR 17 per share. We also reduce net debt (excluding BOT) equating to INR 22 per share.

Exhibit 15: SOTP based valuation

Equity Value Per share Valuation (INR mn) value (INR) 36,044 103 BoT Assets 7,997 23 InvIT 60,771 173 Construction business 6,064 17 Other income (excl. Invit) (7,777) (22) Net Debt (Cash) excl BOT loan portfolio 295 Target Price (INR) Source: YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 8

IRB Infrastructure Developers Ltd.

Technical View

✓ On the monthly chart, stock has been oscillating in a falling channel from 2014 onwards indicating long consolidation phase. Upper end of the channel is placed at 265, a sustained trade above this resistance with healthy volumes can trigger a major trend reversal.

✓ On the weekly chart, it is currently facing resistance at the 200-WMA placed at 220, a sustained trade beyond this resistance can resume the uptrend.

✓ Moreover, technical indicator RSI is taking support at the 40 level i.e. lower end of the bull zone suggesting a range shift in favour of the bulls.

Exhibit 16: IRB Infra – Price Volume Chart

Source: Falcon, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 9

IRB Infrastructure Developers Ltd.

Strong Sector fundamentals

✓ Infrastructure remains a key engine for India's GDP growth. Infrastructure is a key engine for India’s economic growth and the sector is a direct play on India’s GDP growth and government policy reforms. The infrastructure push has been a major target in all four budgets for the NDA government. The expenditure towards Infra sector is a direct play the infrastructure reached from INR 1.81 tn in FY15 to INR 4.94 tn in FY18 with on India’s GDP growth government further increasing its allocation for FY19e by +21% YoY to INR 5.97 tn. and policy reforms. Within the infra space, roads and railways remain priority sectors with budget allocating an all-time high allocation of INR 1.48 tn and INR 1.21 tn, respectively.

✓ Favorable opportunities in road segment. India has the 2nd largest road network in the world with over 5.47 million km of which only ~2% are national highways but carry ~40% of road traffic. Post the slump in construction and award activity in FY13 and FY14, due to policy paralysis and irrational exuberance on part of For the last three years the private players, for the last three years the government has been ironing out issues government has taken hampering growth of the roads sector and has taken lot of corrective measures. corrective measures to Some of the key initiatives include 1) awarding of projects only after 80% of land revive growth in the sector. has been acquired for Build Operate Transfer (BOT) projects and 90% of land has been acquired for Engineering, Procurement and Construction (EPC) projects 2) faster forest and environmental clearances, 3) introduction of Hybrid Annuity

Model (HAM) based projects, 4) exit policy for developers to unlock equity from completed projects, 5) premium deferment scheme, 6) extension of concession period. Award and construction activity have picked up ✓ Award and Construction activity picking up. Awarding of road projects by significantly from lows of National Highways Authority of India (NHAI) increased by 10x from FY09 (643 FY13/FY14. km) to FY12 (6,481 km). However, the following two years (FY12-FY14) turned out to be very disappointing with awards plummeting to lows of 1,116 km in FY13 and 1,435 km in FY14. With improving health of balance sheet for private players and corrective policy measures undertaken by the government, the sector has seen a strong revival.

Exhibit 17: Roads awarded & completed (km) – MoRTH Exhibit 18: Roads awarded & completed (km) – NHAI

30,000 12,000 10,000 25,000 10,000

20,000 8,000

6,491

15,000 6,000

15,000 6,000

5,058

4,355 4,344 10,000

8,231 4,000

3,359

3,067

2,844

6,061

2,693

2,628

5,732

5,013

2,248

2,205

4,410

1,988

4,260 1,783

5,000 1,901 1,501

2,000 1,435

1,116

643

10,098 25,000 16,270

9,794 1,916 7,980 3,169 0 0 FY12 FY13 FY14 FY15 FY16 FY17 FY18* FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18*

Length Awarded Length Completed Length Awarded Length Completed

Source: MORTH, NHAI, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 10

IRB Infrastructure Developers Ltd.

In FY16, for the very first time in history, projects with length of >10,000 km were awarded and construction of 6,000 km were completed Ministry of Road Transport and Highways (MoRTH). In FY17 the government further increased the target by 2.5 times with awards target set at 25,000 km and construction target at 15,000 km. The actual awards for FY17 crossed 16,000 km and construction of 8,231 km were completed.

Government has set an award target of 25,000 km and construction target of 15,000 Expect a significant pickup km for FY18. Until December 2017 4163, km of roads were awarded and 5,680 km in award activity. of roads were constructed. The target awards for 4QFY18 is 10,197 km and construction target of 7,264 km implying a significant pickup in activity towards the end of FY18e.

✓ Major policy initiatives to drive growth. National Highways Development Project (NHDP) started in 1998 by the NDA government, is the flagship program to upgrade and strengthen national highways through seven phases. NHDP represented 46,635 km of roads and highways work & construction including golden quadrilateral. As of FY17, NHDP has completed 58% of the projects, 22% are under construction, and 20% are yet to be awarded.

Bharatmala project was cleared by the Union Cabinet on 25th October 2017 is the flagship program which aims to increase the share of freight on national highways

Bharatmala project entails from 40% to 70-80%. Under this program 66,100 km of road length have been an investment of INR 5.35 tn identified. Of this 24,800 km of roads are being considered under the phase-I with 34,800 km of roads to be alongside the balance 10,000 km from NHDP. Delivery of phase I is expected to be developed by 2022e. completed by 2022e at an estimated cost of INR 5.35 tn.

✓ HAM to drive the next leg of growth. BOT was the primary mode of project awards during FY09‐12. However, these projects started running into trouble due aggressive bidding with over estimation of traffic growth. As a result, the government reverted to the EPC route for awarding the projects to kick start the activity in the road sector. During FY15 and FY16, c70% of projects were awarded Going forward, we expect on EPC basis. Government has introduced the hybrid annuity model in FY16 to c80% projects to be further accelerate the road awarding. HAM based model addresses the two major awarded on HAM and EPC with tilt towards the concerns for road builders 1) reduced equity investment 2) No traffic risk. NHAI former. has been increasing awarding more projects in this route with c60% of projects awarded in FY17 (vs. 12% in FY16) as HAM. Going forward, it is expected that majority of road projects will be awarded on HAM with over c.80% of the road projects proposed to be awarded under EPC and HAM routes.

✓ Will Toll Operate Transfer (TOT) be the future? The government is also considering monetisation of operational national highway through the ToT model to fund the equity requirement of upcoming projects. ToT opportunity will be to the tune of INR 340 bn over the near to medium term. This translates into award of 7,000-7,500 km per annum. Ten TOT packages are expected to be awarded over the next 12-18 months.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 11

IRB Infrastructure Developers Ltd.

Exhibit 19: Mix of project awards (by value) Exhibit 20: Mix of project awards (by length)

100% 0% 100% 0% 12% 8% 90% 90% 80% 80% 70% 60% 70% 56% 60% 72% 60% 76% 72% 50% 70% 50% 40% 40% 30% 30% 35% 33% 20% 20% 10% 28% 10% 24% 20% 17% 10% 0% 8% 0% 2014-15 2015-16 2016-17 2014-15 2015-16 2016-17

BOT EPC Hybrid Annuity BOT EPC Hybrid Annuity

Source: NHAI, YSL

Key Risks

✓ Business dependent on new asset for growth: This combined with an EPC focus only for in-house projects, makes the business heavily dependent on new assets addition for earnings growth, once the current portfolio becomes operational.

✓ Traffic Risk. We have built in a traffic growth range of 6-8% for road projects. Lower traffic growth can adversely impact the revenue growth for the projects since all of IRB’s projects are toll-based and revenue is directly dependent on traffic unlike annuity based projects.

✓ Adverse regulatory changes. Any adverse regulatory changes in term of bidding process, toll rates, etc, which is decided by government, can adversely impact the company.

✓ Interest rate risk. Increase in interest rates can have an adverse impact on cash flows since most of the projects have a reset clause. However, there is some respite on this front since the Mumbai Pune Expressway has a fixed rate for the remaining period and most of the recently awarded contracts have a fixed interest rate for the construction period (typically two or three years).

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 12

IRB Infrastructure Developers Ltd.

IRB INFRASTRUCTURE COMPANY DESCRIPTION

Incorporated in 1998, IRB Infrastructure (IRB) is a pure-play toll operator with a market share of 11.64% in the golden quadrilateral. IRB has been a pioneer in India’s transport infrastructure building India’s first BOT project (Thane-Bhiwandi Bypass) and the first in the country to list an Infrastructure Investment Trust.

Post the listing of IRB InvIT Fund on May 2017, where seven of its operational projects were transferred, IRB now has six operational assets and another seven projects that are under implementation stage with an aggregate portfolio of 7,767 lane kms as of 31st December 2017.

IRB through its subsidiary Aryan Infrastructure Investment Pvt Ltd also owns ~1250 acres of land bank along the Mumbai-Pune Expressway. Furthermore, IRB, through its wholly-owned subsidiary IRB Sindhudurg Airport Pvt Ltd is also looking to develop the Sindhudurg Airport project on a design, build, finance and operate (DBFO) basis.

Exhibit 21: IRB’s BOT portfolio snapshot Sl. Length Concession Project name Type State Date of Start (concession) No. (KM) Period 1 Kaithal-Rajasthan Border Toll Haryana 166.30 January 1, 2013 27 Years 2 Pune Solapur Toll Maharashtra 26.00 March 20, 2003 16 Years 3 Pune Nasik Toll Maharashtra 29.80 September 25, 2003 18 Years 4 Mumbai - Pune Toll Maharashtra 206.00 August 10, 2004 15 Years 5 Thane Ghodbunder Toll Maharashtra 14.90 December 24, 2005 15 Years 6 Solapur - Yedeshi Toll Maharashtra 98.70 Under Construction 29 Years 7 Yedeshi - Aurangabad Toll Maharashtra 189.10 Under Construction 26 Years 8 Ahmedabad-Vadodara Toll Gujarat 195.60 January 1, 2013 25 Years 9 Udaipur – Gujarat Border Toll Rajasthan / Gujarat 113.80 Under Tolling and Construction 21 Years 10 Kishangarh - Gulabpura Toll Rajasthan 90.00 FC completed in Feb’18 20 Years 11 Gulabpura – Chittorgarh Toll Rajasthan 124.87 Under Tolling and Construction 20 Years 12 Goa/Kar Border - Kundapur Toll Karnataka 189.60 Under Construction 28 Years 13 Agra Etawah Toll Uttar Pradesh 124.52 Under Tolling and Construction 24 Years 14 Hapur bypass to Moradabad Toll Uttar Pradesh 99.86 Preferred bidder 22 Years Source: Company, YSL

Exhibit 22: IRB’s Lane KMs in BOT portfolio

14,000 11,828 12,000 9,846 9,846 10,000 7,867 7,677 8,000 7,472 6,439 5,452 6,000 4,768

4,000 3,506

2,000

- FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 1H18

Source: Company, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 13

IRB Infrastructure Developers Ltd.

BUSINESS VERTICALS

IRB has 2 reporting segments a) Operations and Maintenance and b) Construction.

✓ Operations and maintenance (O&M): IRB has a strong expertise in handling the operation and maintenance of BOT road projects with 14 projects under operations and maintenance. IRB’s net block in BOT Assets (operational and construction) have grown from INR 26.74 bn in FY08 to INR 21.95 bn in FY17 registering a CAGR of +26%. In FY17, BOT revenues for IRB were INR 23.78 bn contributed to ~40% of group’s revenues and a share of ~64% of group’s EBITDA driven by robust 85%+ EBITDA margin. IRB’s lane KM in the BOT portfolio increased from 3,506 km in FY09 to 11,828 km in FY17, registering a CAGR of +16% (FY09-FY17). Post transfer of seven projects to InvIT, the BOT lane portfolio currently stands at 7,677 km at the end of December 2017.

Exhibit 23: BOT Revenues Exhibit 24: BOT EBITDA and margin 23,779 25,000 (INR mn) 25,000 (INR mn) (%) 100.0% 21,230 20,348 20,000 18,521 20,000 18,248 75.0% 16,040 15,000 13,757 15,000 11,624 50.0% 10,000 10,000

25.0% 5,000 5,000

- - 0.0% FY15 FY16 FY17 9m end FY15 FY16 FY17 9m end Dec'17 Dec'17 Source: Company, YSL

✓ Construction and development: IRB’s construction business complements its BOT vertical by executing the EPC and operation and management (O&M) aspects of BOT concessions. In FY17, construction revenues were INR 3,591 mn and contributed to ~60% of group’s revenues and a share of ~36% of group’s EBITDA (35% margin).

Exhibit 25: Construction Revenues Exhibit 26: Construction EBITDA and margin

40,000 12,000 11,366 (%) 40.0% (INR mn) 35,912 (INR mn) 11,037 35,000 31,321 31,817 9,626 30,000 9,000 30.0% 7,207 25,000 21,098 20,000 6,000 20.0% 15,000

10,000 3,000 10.0% 5,000

- - 0.0% FY15 FY16 FY17 9m end FY15 FY16 FY17 9m end Dec'17 Dec'17 Source: Company, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 14

IRB Infrastructure Developers Ltd.

INVESTMENT HIGHLIGHTS

✓ Focus on cash generative BOT assets

IRB’s robust balance sheet strength and past execution track record means that the group is pre-qualified to bid for entire gamut of road development projects. However, the group continues to remain focused on its core area of strength i.e. BOT projects. BOT projects with a pipeline of income generating assets are relatively non-cyclical enabling IRB to have a self-sustaining business model. Further, these projects can be monetised by offering them to the InvIT Trust and the proceeds can be further reinvested into new projects.

We believe BOT projects are capable of generating higher rate of return vis-à-vis EPC/HAM projects driven by:

o Lower competition in the BOT space. Currently, there is not much of the intensity within the BOT space compared to EPC/HAM projects with only four to six bidders on the BOT side versus ten to twelve bidders for the EPC projects and eight to ten bidders for the HAM projects.

o Aggressive bidding in EPC projects have reducing the rate of returns for these projects.

o Lower structural rate of return for HAM projects as revenue collection from tolls would not be the responsibility of the concessionaire.

Exhibit 27: Potential awards for IRB in FY18

Total Road KM target (KMs) 25,000 Share of BOT assumed (%) 15% BOT projects to be awarded (KMs) 3,750 Share of IRB (%) 30% 40% Potential awards for IRB (KMs) 300 400 Source: YSL

✓ +20% CAGR in toll revenue (excl InvIT) over FY17-FY20e

IRB’s tolling revenues increased from INR 12.3 bn in FY12 to INR 25.3 bn in FY17, registering a CAGR of +15%. Post transfer of eight operational projects to InvIT, IRB’s FY17 tolling revenues would be INR 11.6 bn. On a LFL basis (excluding projects transferred to InvIT), we would expect IRB’s tolling revenues to grow at a CAGR of +24% driven by a) traffic growth of +6%, b) toll rates growth of +4% and c) commissioning of new projects.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 15

IRB Infrastructure Developers Ltd.

Exhibit 28: IRB’s Tolling Revenues - Annual basis

Revenues (INR mn) Mar'12 Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Mar'18E Mar'19E Mar'20E 9,129 9,677 3,710 Mumbai - Pune 3,977 4,162 4,377 5,673 6,331 6,819 3,942 4,388 4,884 Ahmedabad - Vadodara - 291 1,219 1,566 2,187 3,309 377 1,389 1,551 Kaithal – Rajasthan Border ------348 369 461 Thane Ghodbunder 292 312 328 396 328 307 319 338 402 Pune - Nashik 226 235 227 243 268 281 266 287 - Pune - Solapur 170 176 189 216 234 224 - - - IRDP Kolhapur BOT Project - - 25 41 23 - 1,134 1,263 2,130 Agra Etawah - - - - - 636 926 1,791 1,999 Udaipur – Gujarat Border ------823 2,372 2,647 Gulabpura – Chittorgarh ------Goa / Karnataka Border to 111 1,452 1,620 Kundapur ------66 866 967 Solapur Yedeshi ------1,250 2,263 Yedeshi Aurangabad ------127 1,669 1,863 Kishangarh - Gulabpura ------599 - - Others - Transferred to InvIT 7,626 8,935 10,370 12,792 14,369 13,678 18,169 27,111 24,496 Total 12,291 14,111 16,736 20,926 23,740 25,254 Source: Company, YSL

Exhibit 29: IRB’s Tolling Revenues - Quarterly basis

Revenues (INR mn) Jun'16 Sep'16 Dec'16 Mar'17 Jun'17 Sep'17 Dec'17 Mumbai – Pune 1,880 1,735 1,372 1,833 2,278 2,134 2,332 Ahmedabad – Vadodara 875 826 690 917 916 865 1,007 Kaithal – Rajasthan Border - - - - - 42 167 Thane Ghodbunder 90 83 52 82 83 78 99 Pune – Nashik 70 77 59 76 79 80 84 Pune – Solapur 63 55 45 61 64 58 65 Agra Etawah - 167 235 235 246 243 286 Udaipur – Gujarat Border - - - - - 115 388 Gulabpura – Chittorgarh ------343 Others - Transferred to InvIT 3,779 3,506 2,750 3,643 320 278 - Total 6,757 6,448 5,203 6,846 3,987 3,894 4,771 Source: Company, YSL

✓ Old assets help generate cash flows; new assets drive growth

IRB has a balanced mix of mature and new assets. Currently the ratio of operational to under construction projects (in terms of lane kms) stands at 41:59. With the further addition of operational projects, the ratio is estimated to be around 64:36 by end of FY19e.

We expect the mature assets to provide stability to group’s profitability and cash flows given their established traffic profile while the recently commissioned /yet- to-be-commissioned assets will provide the fillip to the growth momentum.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 16

IRB Infrastructure Developers Ltd.

Exhibit 30: IRB’s Projects awarded since FY’09

FY09 Greenfield Airport Project in Sindhudurg Integrated Road Development (IRD), Kolhapur Surat-Dahisar FY10 Amritsar-Pathankot Talegaon-Amravati Jaipur-Deoli FY11 Tumkur-Chitradurga FY12 Ahmedabad-Vadodara FY13 Goa / Karnataka border to Kundapur FY14 Solapur-Yedeshi Project FY15 Mumbai-Pune Phase II

Yedeshi-Aurangabad Project Kaithal-Rajasthan Border Agra-Etawah six laning project on NH-2 FY16 Agra-Etawah Project FY17 Udaipur-Gujarat

Gulabpura-Chittorgarh Kishangarh-Gulabpura HAM project - Four laning of 56.80 Kms stretch from Poondiankuppam to Sattanathpuram FY18 in Tamil Nadu HAM project - Four laning of 38 Kms from Puducherry to Poondiankuppam in Tamil Nadu HAM project - Construction of 8 lane Vadodara Kim Expressway (Padra to Vadodara Section of Vadodara Mumbai Expressway) in Gujarat Preferred bidder for the project of Six Laning of Hapur bypass to Moradabad section on DBFOT basis in Uttar Pradesh Source: Company, YSL

✓ New projects won in FY17 & FY18

During FY17, IRB commenced construction and tolling operation at the Agra- Etawah project. Further, the group was also awarded there additional projects in FY17 (Udaipur-Gujarat, Gulabpura-Chittorgarh and Kishangarh-Gulabpura) compared with only one project awarded in FY16 (Agra-Etawah). The total cost of the three projects is INR 57.3 bn spanning across project length of 329 km. IRB has offered NHAI a premium of INR 5.8 bn for these three projects.

The group has already achieved the financial closure for all the projects with financial closure for Udaipur-Gujarat project in July 2017, Gulabpura-Chittorgarh in October 2017 and Kishangarh-Gulabpura in February 2018. Achieving financial closures for the projects successively within a short span of time validates lenders' trust in credentials for the project, IRB’s domain expertise and its execution capabilities.

Exhibit 31: New project awards in FY17 & FY18

Project Project length Premium/ Construction Period of Year Project Awarded Client State cost (km) (Grant) (INR mn) period concession

FY17 Udaipur-Gujarat NHAI Rajasthan / Gujarat 20,879 114 1,638 910 days 21 years NHAI Rajasthan 20,900 125 2,286 910 days 20 years Gulabpura-Chittorgarh Kishangarh-Gulabpura NHAI Rajasthan 15,500 90 1,863 910 days 20 years 315 (payable from NHAI Uttar Pradesh 34,000 99 910 days 22 years FY18 Hapur bypass to Moradabad 4th year) Source: Company, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 17

IRB Infrastructure Developers Ltd.

✓ Mumbai -Pune: The crown jewel

Mumbai-Pune is one of the most profitable BOT project for IRB contributing to 27% of tolling revenues in FY17. Post transfer of eight projects to InvIT, this project generated 53% of group’s tolling revenues in 3QFY18. The project receives 18% tariff hike every three years with last tariff hike in April 2017. The concession period for the project is expected to be complete on 10-Aug-19. As recently commission projects gain traction, we expect Mumbai-Pune share in group’s toll revenue to decline to 38% in FY18e with a 17% share in FY19e as the project ends near completion.

✓ Geographic diversification

While maintaining a strong focus on the western part of the country, IRB continues to increase its nationwide presence exploring opportunities in other parts of the country as well. Over the past nine years IRB has expanded into new states including Rajasthan, Gujarat, Karnataka, Uttar Pradesh and Haryana. IRB’s BOT road portfolio excluding Maharashtra and Gujarat has increased from 42% in FY16 to 54% 3QFY18.

Exhibit 32: Expanding Geographic Footprint Exhibit 33: IRB’s BOT Portfolio Spread (3QFY18)

100% Uttar Pradesh 90% 10% 80% 42% 52% 70% 54% Harayana Maharashtra 9% 60% 33% 50% 21% 40% 18% 13% 30% 20% Rajasthan 37% 31% 33% 10% 26% 0% FY16 FY17 1H18 Gujarat Karnataka 13% Maharashtra Gujarat Rest of India 10%

Source: Company, YSL

✓ In house EPC means IRB is play on entire BOT value chain

IRB Infra had seven under construction projects as of 31st December 2017 with an order book of INR 74.0 bn with construction orderbook of INR 67.5 bn and INR 6.6 bn BOT Projects in O&M Phase. The group’s construction orderbook has increased to INR 120 bn as of 19th March 2018 following award of 3 HAM projects. Strong execution track record led by an in-house fully integrated engineering procurement construction (EPC) division and healthy order book will help IRB maintain the business risk profile over the medium term.

IRB carries out EPC work only for its captive BOT projects. Its 100% subsidiary, Modern Road Makers Pvt Ltd (MRM), undertakes construction exclusively of in- house road BOT projects. The group also manages the entire tolling and maintenance functions in-house during operations phase. This enables IRB to reduce depending on outsourcing and exercise greater control over quality and execution timelines.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 18

IRB Infrastructure Developers Ltd.

o Play on entire BOT value chain. IRB has vertically integrated operations and the group carries traffic studies, EPC work and O&M for its operational BOT projects in-house making it a play on the entire BOT value chain.

o Superior margins versus peers. IRB maintains a large fleet of in-house construction equipment giving the group ability to exercise greater control over execution and timelines resulting in higher margins compared to its peers.

o Order Book: IRB’s EPC order book as of December 31, 2017 at INR 67.5 bn and INR 6.6 bn O&M on operational BOT projects with total construction order book of INR 74 bn. IRB’s construction order book has more than doubled to to INR 153 bn as of 22nd March 2018 driven by recent project wins (3 HAM projects and one DBFOT). We believe the present order backlog would provide sufficient revenue visibility for the EPC vertical over the next three years.

Exhibit 34: IRB’s Construction Orderbook and orderbook to revenues (x)

160 (INR bn) 153 140 126 113 120 100 19 97 100 85 84 19 7 18 74 80 7 153 60 41 65 108 94 93 40 79 67 20 43 20

-

FY12 FY14 FY16 FY13 FY15 FY17

3QFY18 March'18e

Operation and maintenance (O&M) order book Construction and development (EPC) order book

Source: Company, YSL

✓ InvIT has transformed IRB’s balance sheet

IRB launched India’s first infrastructure InvIT, IRB InvIT Fund in India in May 2017 at valuation of around INR 59 bn. The group transferred six of its operational project assets along with its liabilities to InvIT trust for a cash consideration of INR 16.81 bn and INR 8.89 bn as units in the trust. Subsequently, IRB transferred Pathankot Amritsar project to InvIT in September 2017.

With the InvIT, IRB is in a self-sustaining zone where it will bid for projects, execute them, stabilise and transfer them to the InvIT to realise its capital and redeploy the capital back in the business. IRB intends to one project to InvIT on an annual basis.

InvIT has completely transformed IRB’s balance sheet from tied-up capital to unlocking it with improved health of the group’s balance sheet. IRB’s net debt position as of 3QFY18 declined to INR 108.6 bn from INR 151.5 bn in FY17. The group’s net debt-to-equity has come down from 2.78x in FY17 to 1.94x in 3QFY18 while net debt-to-EBITDA has improved from 4.62x in FY17 to 4.02x in 3QFY18.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 19

IRB Infrastructure Developers Ltd.

Improved balance sheet has enhanced IRB’s financial pre-qualification criteria opening a gamut of opportunities with increased ability to raise additional debt funding existing projects and win new orders. This will further enable IRB to improve its construction capacity from the current 300-400 kms annually to potentially 500-600 kms annually leading to increase in revenue potential.

Exhibit 35: IRB’s leverage ratio ND/EBITDA and ND/EQUITY

6.0 (x) 5.0 5.1 4.7 5.0 4.6 4.0 4.0 3.6

3.0

2.9 2.8 2.0 2.5 2.6 2.0 1.9 1.0

- FY13 FY14 FY15 FY16 FY17 3QFY18

Net Debt to EBITDA Net Debt to Equity

Source: Company, YSL

✓ Upside from HAM, TOT and Other New Projects not priced in

At this point in time IRB is well-funded for immediate opportunities (both ToT or the HAM projects) and the group is not dependent on fund-raising for future growth. With a self-sustaining revenue model for the BOT and strong revenue visibility in the construction space, the current share price is pricing in the cash flow from existing projects alongside value to the construction vertical.

With IRB now starting to bid for HAM projects alongside further opportunities within the TOT space opens a huge gamut of opportunities for IRB. Although we do acknowledge the difficulty in assigning new projects for valuation purpose given the moving parts, we believe the markets are not pricing in an upside potential from new projects for IRB be it the core BOT, HAM or TOT.

o Starting to bid HAM projects: Whilst the BOT continues to remain group’s core focus, IRB has also started bidding for HAM projects. IRB has bid for 3 HAM projects in FY18.

On March 14, 2018, for the first time IRB bagged two projects under Hybrid Annuity Model (HAM) in Tamil Nadu with the group emerging as a preferred bidder for two HAM projects aggregating 94.80 kms at a cost of INR 34.92 bn. The details for the project are

• Both the projects are in Tamil Nadu for four laning of stretch on NH 332.

• Project of four laning of 56.80 Kms stretch from Poondiankuppam to Sattanathpuram with cost outlay of INR 21.96 bn

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 20

IRB Infrastructure Developers Ltd.

• Project of four laning of 38 Kms from Puducherry to Poondiankuppam with cost outlay of INR 12.96 bn

• The concession will comprise 730 days for construction and 15 years Operations & Maintenance rights thereafter.

On 19th March 2018, IRB also emerged as a preferred bidder for another HAM based project in Gujarat for INR 20.43 bn. The project is for construction of 8 lane Vadodara Kim Expressway (Padra to Vadodara Section of Vadodara Mumbai Expressway).

o Opportunities in the TOT space: There are 10 packages expected to be awarded over the next 12-18 month. With its robust balance sheet and strong historic track record in BOT, we believe IRB is well positioned to capitalize opportunities in the TOT space.

o Bharatmala programme: IRB is also actively looking at various aspects of the Bharatmala programme as it is progressively rolled out.

o Bidding with international players: IRB is also in talks with long-term foreign investors, including pension funds, for bidding toll-operate-transfer (TOT) projects that will raise the group’s ability to bid more than one package.

✓ Potential rate reduction to drive profitability

The group’s average cost of debt has come down from 11.25% in FY15 to 10.25% in FY17. Post InvIT, IRB’s leverage has reduced substantially which would lead to credit rating upgrade and help IRB reduce its cost of debt. In our model, we have conservatively assumed average cost of debt to remain constant at 10.25% without benefit of further rate reduction.

Exhibit 36: IRB’s average cost of debt

11.4% (%) 11.25% 11.25% 11.2% 11.0% 10.75% 10.8% 10.60% 10.6%

10.4% 10.25% 10.2% 10.0% 9.8% 9.6% FY13 FY14 FY15 FY16 FY17

Source: Company, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 21

IRB Infrastructure Developers Ltd.

Bull Bear Scenario

Exhibit 37: IRB Infra – Bull Bear Scenario (All figures expressed in INR per share)

450 402 17 400 15 60

350 295 15 300

250 20

200 188 55 15 17 150

100

50

- Bear Case EPC Rate Traffic Tariff Base case Tariff Traffic Rate EPC upside Bull Case downside increase decrease decrease valuation increase increase reduction

Source: YSL

Base Case

✓ Our base case target price is INR 295 implying +37% upside to current market price of INR 218.

✓ We have valued BOT portfolio at INR 104 per share assuming traffic growth of +6% and tariff growth of +5%. ✓ We have assumed cost of debt to remain constant at 10.25%. ✓ We have valued EPC business at INR 173per share at an EV/EBITDA multiple of 5.0x

Bear Case

✓ Our bear case valuation is INR 188 per share implying 13% downside.

✓ Our bear case scenario assumes +5% traffic growth (vs. +6% base case) and +4% tariff growth (vs. +5%). ✓ In our bear case scenario we have increased cost of borrowing by 100 bps. ✓ We have valued EPC business at INR 156 per share at EV/EBITDA multiple of 4.5x.

Bull Case

✓ Our bull case valuation is INR 402 per share implying 86% upside. ✓ Our bull case scenario assumes +7% traffic growth (vs. +6% base case) and +6% tariff growth (vs. +5%). ✓ We have reduced cost of borrowing by 100 bps to reflect potential rating upgrade post InvIT listing. ✓ We have valued EPC business at INR 190 per share at EV/EBITDA multiple of 5.5x.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 22

IRB Infrastructure Developers Ltd.

INDUSTRY OUTLOOK

✓ Infrastructure remains a key engine for India’s GDP growth

Infrastructure remains a key engine for India’s GDP growth with an investment of INR 50.0 tn required across roads, airports, railways, ports and inland waterways. The government remains committed to further enhance public investment within this space. The priority accorded to the sector is evident from the fact that Prime Minister personally reviews the targets and achievements in infrastructure sectors on a regular basis.

The infrastructure push has been a major target through all four Budgets for the NDA government. Starting with an allocation of INR 1.81 tn in FY15, the expenditure towards infrastructure reached INR 4.94 tn in FY17. In its union budget FY18, Government of India further increased its allocation for the infrastructure sector for FY19e by +21% YoY to INR 5.97 tn.

Roads and railways remain priority sectors for capital expenditure with FY18 budget allocating an all-time high allocation with an investment of INR 1.48 tn and INR 1.21 tn for FY19e, respectively. The outlay for NHAI (including Road Works) for FY19e was increased +16% YoY to INR 705.4 bn from INR 606.7 bn in FY18 (revised estimates). NHAI is also looking to monetize its mature road assets through TOT and Infrastructure Investment Funds (InvITs).

✓ Favorable macro opportunities in road segment in long run

India has the 2nd largest road network in the world with over 5.47 mn km of which only 2% (~103,933 km) are national highways but carry 40% of road traffic. Road transport is one of the most cost effective and preferred modes of transport, both for freight and passengers, keeping in view its level of penetration and last mile connectivity in populated areas.

Exhibit 38: India’s Road Mix

Highway type Length (Km) % of total National Highways / Expressway 103,933 2% State Highways 161,487 3% Other Roads 5,207,044 95% Total 5,472,464 100% Source: NHAI, YSL

✓ Award and Construction activity picking up

Given government’s emphasis on public-private partnership, most of the projects awarded during FY09-FY12 were on BOT (toll) basis followed by BOT (annuity) basis. Awarding of road projects by NHAI increased by 10x between FY09 (643 km) and FY12 (6,481 km).

However, the next two years (FY12-FY14) turned out to be very disappointing as the execution of projects awarded between FY09-12 did not take off due to 1) delays in land acquisition, 2) receipt of environment/forest clearances, 3) high leverage of the private sector and cash flow issues faced by developers, 4) pure play EPC companies foraying into the BOT gambit with over estimation of traffic growth resulting in aggressive bidding. Awarding of new projects also slumped as BOT

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 23

IRB Infrastructure Developers Ltd.

projects faced low takers due to high capital requirement and cautious lending by financial institutions. The road awards by NHAI came down from the peak of 6,491 km in FY12 to lows of 1,116 km in FY13 and total awards by MoRTH came down from 9,794 km in FY12 to 1,916 km in FY13.

Exhibit 39: Roads awarded & completed – MoRTH Exhibit 40: Roads awarded & completed - NHAI 12,000

30,000 10,000 25,000 10,000

20,000 8,000

6,491

15,000 6,000

15,000 6,000

5,058

4,355 4,344 10,000

8,231 4,000

3,359

3,067

6,061

2,844

5,732

2,693

2,628

5,013

4,410

2,248

2,205 4,260

5,000 1,988

1,783

1,901 1,501

2,000 1,435

1,116

9,794 1,916 3,169 7,980

10,098 16,270 25,000 643 0 FY12 FY13 FY14 FY15 FY16 FY17 FY18* 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18* Length Awarded Length Completed Length Awarded Length Completed

Source: MORTH, NHAI, YSL

Indian road sector has witnessed strong revival over the past three years, thanks to multiple steps taken by the government to address the long pending issues in the sector.

Some of the key initiatives include

1) awarding of projects only after 80% of land has been acquired for BoT projects and 90% of land has been acquired for EPC projects,

2) faster forest and environmental clearances,

3) introduction of HAM based projects,

4) exit policy for developers to unlock equity from completed projects,

5) premium deferment scheme

6) extension of concession period.

As a result, project awarding has picked up from the lows. To put this into perspective, in FY16 for the very first time in history projects with length of >10,000 km were awarded and construction of 6,000 km were completed (MoRTH). Encouraged by FY16 success in FY17 the government further increased the target by 2.5x times with awards target set at 25,000 km and construction target at 15,000 km. The actual awards for FY17 crossed 16,000 km and construction was 8,231 km. The target award for FY18e was set at 25,000 km and construction activity at 10,000 km.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 24

IRB Infrastructure Developers Ltd.

✓ Expect a quantum jump in award in 4Q18

Government has set a target of 25,000 km of national highways to be awarded in FY18 (10,000 km under the ambit of NHAI) and construction target of 15,000 km (6,000 km would fall under the target of NHAI).

o According to latest available, 4,163 km were awarded until December 2017 against the target of 10,418 km until December. The target awards for 4QFY18 is 10,197 km (vs. 4,163 km awarded for 9MFY18).

o In terms of construction, 5,680 km were constructed until December 2017 against the target of 7,567 km until December. The target for construction 4QFY18 is 7,264 km (vs. 5,689 km completed for 9MFY18).

o The pace of actual construction vs. target has been slow with FY18 YTD average rate of constructing at 20.26 km/day (vs. the target of 41.1 km/day).

While 4Q18 award activity may seem to be an uphill task given that historically the actual awarding has fallen short of target; nevertheless, the momentum (in terms of both awarding and construction) continues to be strong and in the intent in the right direction. Also, whilst the awards and construction targets are ambitious, if we put this into historic context, the average pace of construction has nearly doubled from lows of 12 km per day in FY12 to 20 km per day in FY18. In terms of award activity, the average length of road projects awarded in the last 5 years by NHAI was 2,860 km, with 4,335 km awarded in 2016-17. Target for NHAI for award is 10,000 km for FY18. NHAI has already awarded projects for a length of nearly 2,700 km so far in FY18 (costing INR 430 bn) and plans to award 3,300 km in February 2018 and 5,000 km in March 2018 implying a significant uptick in awards for the balance of the year (Source: MoRTH).

Exhibit 41: Awards: Target vs. Achievement (FY18)

MORTH NHAI NHIDCL Total Awards Awarded Awards Awarded Awards Awarded Awards Awarded target (Km) (km) target (Km) (km) target (Km) (km) target (Km) (km) Apr-17 199 110 0 0 0 0 199 110 May-17 295 310 24 3 1 0 320 313 Jun-17 466 470 159 161 31 0 656 631 Jul-17 458 249 29 29 108 0 595 278 Aug-17 158 207 857 142 14 0 1,029 349 Sep-17 2,664 130 763 135 43 0 3,470 265 Oct-17 773 204 189 200 6 1 968 405 Nov-17 331 155 0 279 184 142 515 576 Dec-17 377 344 1,979 828 310 64 2,666 1,236 YTD December 5,721 2,179 4,000 1,777 697 207 10,418 4,163 Jan-18 454 2,000 111 2,565 Feb-18 1,184 2,000 220 3,404 Mar-18 1,948 2,000 280 4,228 4QFY18 3,586 6,000 611 10,197 Total 9,307 10,000 1,308 20,615 Source: MoRTH, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 25

IRB Infrastructure Developers Ltd.

Exhibit 42: Construction: Target vs. Achievement (FY18)

MORTH NHAI NHIDCL Total Target for Actual Target for Actual Target for Actual Target for Actual (Km) construction construction construction construction construction construction construction construction Apr-17 375 455 350 221 15 13 740 689 May-17 465 712 380 214 5 3 850 929 Jun-17 559 397 420 235 17 10 996 642 Jul-17 252 244 170 167 23 1 445 412 Aug-17 233 260 140 135 15 0 388 395 Sep-17 277 200 180 138 25 9 482 347 Oct-17 605 355 480 265 40 51 1,125 671 Nov-17 688 480 480 239 20 138 1,188 857 Dec-17 813 498 520 225 20 15 1,353 738 YTD December 4,267 3,601 3,120 1,839 180 240 7,567 5,680 Jan-18 454 2,000 111 2,565 Feb-18 1,184 2,000 220 3,404 Mar-18 1,948 2,000 280 4,228 3,987 2,880 397 7,264 4QFY18 Total 8,254 6,000 577 14,831 Source: MoRTH, YSL

The table below shows the state wise projects likely to be awarded for FY18 with Maharashtra (1,900 km), Rajasthan (1,150 km) and Uttar Pradesh (1,020 km) having the largest share of pie.

Exhibit 43: State wise projects to be awarded for FY18

To be awarded in FY18e State % of total (km) Maharashtra 1,900 17% Rajasthan 1,150 10% Uttar Pradesh 1,020 9% Odisha 880 8% Andhra Pradesh 745 7% Madhya Pradesh 740 7% Gujarat 650 6% Karnataka 620 6% Tamil Nadu 570 5% Bihar 500 4% Jharkhand 430 4% Telangana 365 3% Haryana 350 3% West Bengal 280 3% Chattisgar 270 2% Punjab 150 1% Himachal Pradesh 150 1% Delhi 140 1% Kerala 120 1% J&K 100 1% Total 11,130 100% Source: MoRTH, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 26

IRB Infrastructure Developers Ltd.

SHIFTS IN THE OPERATING MODEL

Exhibit 44: Operating model for road projects

Revenue Concession Development Types Description Award Criteria Financing Risk Traffic Risk Stream Period Risk

Private party builds roads, undertakes Highest revenue BOT (Toll) Toll ~20-25 years Concessionaire Concessionaire Concessionaire O&M and collects sharing bid toll Private party builds BOT roads, undertakes Annuity ~20-25 years Lowest annuity Concessionaire Concessionaire Authority (Annuity) O&M and collects payment annuity Private party builds roads, undertakes Annuity O&M and collects Lowest bid payment BOT (Hybrid annuity frin the 15 years post project cost and Concessionaire (60%) + interest, Concessionaire Authority Annuity) granting authority, construction O&M payments Authority (40%) O&M Construction annually payment Support 40% from Authority

Engineering, Private party builds Procurement roads, money is Contract Lowest tariff and Not required Concessionaire Authority Authority spent by amount requested Construction government (EPC)

Private party Operate, Highest % of toll collects toll and No development Manage, and revenues or undertakes O&M Toll ~9 years except in case of Concessionaire Concessionaire Transfer highest premium (also develops paved shoulders (OMT) per year project facility)

Private party collects toll during ~ 1 year the concession (Short-term) Highest revenue Tolling Toll No development Concessionaire Concessionaire period and pays the ~ 1-5 years sharing bid estimated toll to the (Long-term) authority Private party pays the estimated toll Long term upfront to the (typically Model is under Model is under authority, more than 25 TOT Toll consideration by No development Concessionaire consideration undertakes O&M years as NHA by NHAI and collects the toll observed during concession globally period Source: MEP Infrastructure presentation, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 27

IRB Infrastructure Developers Ltd.

Exhibit 45: Project awards (by value) (INR bn) Exhibit 46: Mix of project awards (by value)

800 100% 0% 684 12% 90% 700 609 83 80% 600 70% 60% 72% 500 60% 50% 70% 400 363 481 40% 300 227 30% 33% 200 20% 28% 164 200 10% 17% 100 8% 119 0% 63 46 - 2014-15 2015-16 2016-17

BOT EPC Hybrid Annuity BOT EPC Hybrid Annuity

Source: NHAI, YSL

Exhibit 47: Project awards (by length) (km) Exhibit 48: Mix of project awards (by length)

5,000 100% 0% 4,368 8% 4,500 90% 345 4,364 4,000 80% 56% 3,500 3,069 70% 2,434 60% 76% 3,000 - 72% 50% 2,500 3,149 40% 2,000 2,335 30% 1,500 35% 20% 1,000 1,508 10% 24% 20% 10% 500 873 0% 734 422 - 2014-15 2015-16 2016-17

BOT EPC Hybrid Annuity BOT EPC Hybrid Annuity

Source: NHAI, YSL

Cash generative BOT assets but drying out

BOT was the primary mode of project awards during FY09‐12. However, these projects started running into trouble due aggressive bidding as some pure play EPC companies forayed into the BOT gambit with over estimation of traffic growth. Consequentially, BOT projects started to see slowdown due to unwillingness of private parties to commit towards BOT due to concerns about project future traffic growth, high upfront investments and balance sheet pressures faced by developers.

The share of BOT projects in terms of road length reduced from 24% in FY15 to 10% in FY17 whilst the share in terms of contract size reduced from 28% in FY15 to 8% in FY17. While the share of BOT projects in the pie reduced, at the same time competitive intensity has also reduced as fewer players now have the necessary competency and experience to qualify for such projects providing competitive edge to pure play BOT operators like IRB. Currently, only four to six bidders are on the BOT side versus ten to twelve bidders for the EPC projects and eight to ten bidders for the HAM projects.

In our view, BOT projects with a pipeline of income generating assets are relatively non-cyclical enabling the developer to have a self-sustaining business model. Further, these projects can be monetised by offering them to the InvIT Trust and the proceeds

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 28

IRB Infrastructure Developers Ltd.

can be further reinvested into new projects. We believe BOT projects are capable of generating higher rate of return vis-à-vis EPC/HAM projects.

Competitive intensively in the EPC space

While the interest in BOT projects reduced, for the newly introduced HAM projects (introduced in FY16), it took some time for lenders and road developers to become comfortable with. As a result developers were initially finding it difficult to achieve financial closure for HAM projects. The government reverted to the EPC route for awarding road projects to kick start the activity in the road sector. During FY15 and FY16, c70% of projects were awarded on EPC basis by NHAI. EPC space consequentially showed aggressive bidding reducing the rate of returns for these projects. We would expect continued competitive intensity for EPC projects.

Hybrid annuity model (HAM) can be a game changer

Government has introduced the hybrid annuity model to further accelerate the road awarding. The hybrid annuity model addresses the two major concerns of the developers:

✓ Reduced equity investment by developers: Under the HAM, 40% of the construction cost is undertaken by the government. Thus, the developer needs to finance only remaining 60% of the construction cost. Assuming D/E of 70:30, the equity commitment to the entire project is limited to 18% vs. 30% earlier.

✓ Private sector is not required to bear traffic risk: From the developer’s perspective, there is no traffic risk as the developer earns the revenue through annuity payments from the government. The entire traffic risk is now shifted to the government. While annuity payments in HAM projects means lower project risk, returns from these projects are also lower as revenue collection from toll would not be the responsibility of the concessionaire.

NHAI has been awarding more projects under the HAM route with c60% of projects awarded in FY17 vs. 12% in FY16 and nil in FY15. We expect EPC and HAM projects to attract greater interest as they require limited upfront capital and involve lower risk than BOT projects. Going forward, it is expected that majority of road projects will be awarded on HAM basis in FY18e with over c.80% of the road projects proposed to be awarded under EPC and HAM routes.

Will TOT be the future?

The government is also considering monetisation of operational national highway that are generating toll revenue for at least two years through the ToT model to free up capital to fund the equity requirement of upcoming projects. Under the TOT model the right of toll collection on selected national highway stretches will be assigned for a 30- year period to developers/investors against an upfront payment of a lump-sum amount to the government. During the tenure of the contract, the operation and maintenance would be the responsibility of the developer.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 29

IRB Infrastructure Developers Ltd.

Opportunities

✓ ToT projects entail 30-year tolling rights for bundled NH stretches totaling up to 650-700 kms amounting to roughly USD 1 bn value each. The advantages of the TOT model is that the investors don’t have to go through any hassles of construction or delays due to land acquisition.

✓ ToT opportunity is expected to be the tune of INR 340 bn over near to medium term. This translates into award of 7,000-7,500 km per annum with strong bid visibility on the back of ~20,000 km projects at advanced DPR stage.

✓ Initially, 75 public funded national highway projects with aggregate length of ~4,500 km and annual toll revenue collection of around INR 27 bn have been identified for the TOT model.

✓ On 1st March 2018, Macquarie Group won the 1st round of TOT auction with rights to manage 648 km of national highways by bidding INR 96.82 bn against government’s expectation of INR 62.58 bn. Other bidders included Brookfield, IRB- Autostrade and Roadis-NIIF, who quoted INR 75.11 bn, INR 69.30 bn and INR 66.11 bn, respectively

✓ 10 packages expected to be awarded over the next 12-18 months

✓ Other than tolling, the projects present significant embedded value in the form of

o Enhancement/Value addition work that will come to the concessionaire as EPC work (over project tenure of 30 years).

o Upgradation of corridor from 4-lane to 6-lane to be available on RoFR basis to concessionaire. At average INR 200 mn/km, this alone could be USD 2 bn EPC opportunity.

Key initial challenges

✓ High upfront payment. At present in the ToT model potential buyers have to make an upfront payment of around USD 1 bn making it a challenge for Indian firms to bid. NHAI is planning to make some changes including 1) reducing the concession period from 30 years to 20 years 2) reducing the value of projects to much less than the present estimates of around USD 1 bn. While the first set of auctions will go as per the existing plans, the second and third lot of roads could be based on revised proposals.

✓ Competitive bidding. The bidding for TOT projects will be more competitive with less variance than BOT or HAM models since six out of the nine assets to be bid under the TOT model are part of the Golden Quadrilateral and the other three are in the industrial clusters. Also, more than 50% of assets have an average vintage of 10 years enabling bidders to accurately bid based on actual toll collections, routine operations and major maintenance expenses

✓ Refinancing risk: TOT projects may find it difficult to tie up debt, as the debt tenor in India is typically 10-15 years. Given as the initial concession period is 30 years, such projects could also pose a significant refinancing risk.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 30

IRB Infrastructure Developers Ltd.

✓ Interest burden in initial years. With long concession period, the initial estimated concession value is bulky, requiring large debt and thus large interest payments, which would be a burden on the bidder during initial years until the project achieves significant ramp up in revenues.

✓ Long term traffic potential. Predictability of cash flows for a horizon of 30 years is a daunting task, as toll revenues and operation and maintenance expenses may vary depending upon the economy, WPI, CPI etc and expectations for long term traffic potential if alternative routes are developed.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 31

IRB Infrastructure Developers Ltd.

KEY GOVERNMENT INITIATIVES

National Highway Development Program (NHDP) scheme

NHDP is the government’s flagship program to upgrade and strengthen national highways through seven phases to be executed by the NHAI. The project was started in 1998 under the leadership of then Prime Minister, Shri Atal Bihari Vajpayee. NHDP represents 46,635 km of roads & highways work and construction to boost economic development. The government has planned to end the NHDP program in early 2018 and consume the ongoing projects under the larger Bharatmala project. As at the end of FY17, NHDP has completed 58% of the projects, 22% are under construction, and 20% are yet to be awarded.

✓ Phase 1: The Golden Quadrilateral (GQ; 5,846 km) connecting the four major cities of Delhi, Mumbai, Chennai and Kolkata. ✓ Phase II: Connecting four extreme points of the country. The North–South and East–West Corridor (NS-EW; 7,142 km) connecting Srinagar in the north to Kanyakumari in the south and Silchar in the east to Porbandar in the west. As of 31 May 2017, 92% of the project had been completed, 4% is under implementation and 4% are yet to be awarded. ✓ Phase III: Four-laning of 12,109 km of high density national highways connecting state capitals and places of economic, commercial and tourist importance on a Build, Operate and Transfer (BOT) basis. As of 31 May 2017, 65% of the project had been completed, 18% is under implementation and 17% are yet to be awarded. ✓ Phase IV: Convert existing single-lane highways into two lanes with paved shoulders. As of 31 May 2017, 31% of the project had been completed, 46% is under implementation and 23% are yet to be awarded.

Exhibit 49: Road projects status under NHDP scheme

Balance Balance Under Already 4/6 Under Total Length Already 4/6 length for length for Implementation Laned Implementation (Km) Laned (Km.) award award (Km.) (Km.) (Km.) (Km.) (Km.) NHDP-I 5,846 5,846 - - 100% 0% 0% NHDP-II 7,142 6,568 300 274 92% 4% 4% NHDP Phase III 11,809 7,621 2,161 2,027 65% 18% 17% NHDP Phase IV 13,203 4,058 6,050 3,095 31% 46% 23% NHDP Phase V 6,500 2,564 1,428 2,508 39% 22% 39% NHDP Phase VI 1,000 - 184 816 0% 18% 82% NHDP Phase VII 700 22 94 584 3% 13% 83% Port Connectivity 435 383 52 - 88% 12% 0%

NHDP Total 46,635 27,062 10,269 9,304 58% 22% 20% Others (Ph.-I, Ph.-II - 85% 15% 0% & Misc.) 2,048 1,743 305 SARDP -NE 110 110 - - 100% 0% 0%

Total by NHAI 48,793 28,915 10,574 9,304 59% 22% 19% Source: NHAI, YSL

✓ Phase V: Six-laning of 6,500 km of four-laned highways. As of 31 May 2017, 39% of the project had been completed, 22% is under implementation and 39% are yet to be awarded.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 32

IRB Infrastructure Developers Ltd.

✓ Phase VI: Construction of 1,000 km of expressways connecting major commercial and industrial townships. As of 31 May 2017, 18% is under implementation and 82% are yet to be awarded.

✓ Phase VII: Construction of ring roads, by-passes, underpasses, flyovers, etc. comprising 700 km of road network. As of 31 May 2017, 3% of the project had been completed, 13% is under implementation and 83% are yet to be awarded.

Bharatmala project

Bharatmala Project, which was cleared by the Union Cabinet on 25th October 2017, is the second largest highways construction project in the country since NHDP. Bharatmala will look to improve connectivity particularly on economic corridors, border areas and far flung areas. Under the phase-I, 24,800 km of roads are being considered. In addition, the programme would also include 10,000 km of balance road works under NHDP, taking the total to 34,800 km at an estimated cost of INR 5.35 tn. Delivery of phase I is expected to complete by 2022e.

Key highlights of Bharatmala project

✓ Improvement in efficiency of existing corridors through development of multimodal logistics parks and elimination of choke points. The program aims to develop a total of fifty economic corridors from six presently.

✓ Increase the share of freight on national highways from 40% to 70-80%.

✓ 550 districts to be connected by 4+ lane highways from 300 districts presently.

✓ Enhanced focus on improving connectivity in North East and leveraging synergies with Inland Waterways.

✓ Emphasis on use of technology & scientific planning for project preparation and asset monitoring.

✓ Seamless connectivity with neighboring countries.

Exhibit 50: Key Highlights of Bharatmala project

From To

Six Corridors Fifty Corridors (GQ, NS-EQ)

40% fright on 70-80% fright on national highways national highways

~300 districts connected by ~550 districts connected by 4+ Lane highways 4+ Lane highways

Source: NHAI, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 33

IRB Infrastructure Developers Ltd.

The project includes

✓ National Corridors Efficiency improvements: 13,100 km total length with 5,000 km under phase 1 with an investment of INR 1.20 tn.

✓ Economic corridors: 44 economic corridors planned with length of 26,200 km. 6 economic corridors planned in phase 1 with total length of 9,000 km.

✓ Inter-corridor & Feeder Routes: 66 inter corridor routes with length of 8,400 km and 116 feeder routes with length of 7,600 km. Under the phase 1 6,000 km of length to be completed with an outlay of INR 0.80 tn.

✓ Coastal and port connectivity roads of 5,300 km with 2,000 km to be developed under phase 1.

✓ Border and international connectivity roads of 4,100 km with 2,00 km planned under phase 1 with an investment of INR 0.20 tn.

✓ Expressways of 1,900 km with 800 km to be developed under phase 1 with an investment of INR 0.40 tn.

✓ The balance 10,000 km of NHDP roads.

Exhibit 51: Bharatmala – Project highlights

Total Length Upgrade proposed in Outlay Category Identified (km) Phase I (km) (INR tn) National Corridors Efficiency Improvement 13,100 5,000 1.20 Economic Corridors development 26,200 9,000 0.80 Inter-corridor and Feeder routes development 15,500 6,000 1.00 Coastal and Port Connectivity Roads 5,300 2,000 0.25 Border and International Connectivity Roads 4,100 2,000 0.20 Expressways 1,900 800 0.40 Total 66,100 24,800 3.85 Balance Road works under NHDP 10,000 1.50 Sub-total (A+B) 34,800 5.35 Roads under other existing schemes 48,877 1.57 (E.g., LWE, SARDP-NE, NHIIP, SetuBharatam, Char Dham) Grand Total 83,677 6.92 Source: NHAI, YSL

✓ Funding for Bharatmala project: INR 1.06 tn from private investment, INR 2.09 tn from market borrowings and INR 2.20 tn from budgetary allocation.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 34

IRB Infrastructure Developers Ltd.

Exhibit 52: Funding for Bharatmala project

Bharatmala : Phase 1 Other Schemes Total Funding (INR tn) (INR tn) (INR tn) Debt from market 2.09 0.00 2.09 Private Investment (PPP) 1.06 0.00 1.06 Gross budgetary support 2.20 1.57 3.77 Central Road Fund (CRF) earmarked for NH 1.40 0.97 2.37 Budgetary support –SARDP-NE, EAP, Counterpart Funds, etc. 0.00 0.60 Expected monetization through ToT 0.34 0.00 0.34 PBF –Toll Collections of NHAI 0.46 0.00 0.46 Total 5.35 1.57 6.92 Source: NHAI, YSL

Other projects

✓ Setu Bharatam: The ‘Setu Bharatam’ project aims to make all national highways free from railway level crossing by 2019 to ensure road safety. Under the project, 208 rail-over bridges and rail-under bridges will be built at the cost of INR 208 bn. In addition, 1,500 decade-old bridges will be reconstructed and revamped at a cost of INR 300 bn.

✓ Chardham Project: The project envisages connecting Kedarnath, Badrinath, Gangotri and Yamunotri through 888km of disaster-proof two-lane roads in Uttarakhand at a cost of INR 120 bn. The Finance Ministry has also approved an extra budgetary support of INR 20.7 bn.

✓ North East Connectivity Project: MoRTH has assigned special emphasis to the development of highways in the North East region and has incorporated a National Highways & Infrastructure Development Corporation (NHIDCL). NHIDCL is handling 134 national highway and other infrastructure development projects covering about 8,000 km to be executed at a cost of about INR 1tn.

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 35

IRB Infrastructure Developers Ltd.

Initiate with ACCUMULATE rating and TP of INR 295

IRB shares have underperformed the major are down -road builders and are down 9% over the last 12 months against an average 12-month performance of +53% for major road builders. Against the BSE SENSEX the shares have underperformed by 21% on a 12-month basis. We believe a large part of this underperformance was due to drop in projects being awarded on BOT basis.

On FY19e consensus estimates, the shares are trading at EV/EBITDA of 6.0x, a -44% discount to its peer group average EV/EBITDA of 10.6x. On P/B, the shares are trading at 1.12x, a -58% discount to its peer group average P/B of 2.69x. On a P/E basis, the shares are trading at FY19e PE of 8.0x, a -57% discount to its peer group average P/E of 19.2x.

We see multiple re-rating and earnings driver for the stock

1) Foray into HAM based project will provide fillip to investors sentiment.

2) Opportunity from TOT projects.

3) Earnings upside from potential reduction in interest rate.

4) Potential revival in traffic growth on existing operational assets.

5) Government’s continued thrust on the road sector and conductive policy reforms.

Exhibit 53: Comparative Valuation Table

Market EV P/E P/E EV/Sales EV/Sales EV/EBITDA EV/EBITDA P/B P/B Company Name Price Cap (INR FY18E FY19E FY18E (x) FY19E (x) FY18E (x) FY19E (x) FY18E (x) FY19E (x) (INR mn) mn) (x) (x) IRB Infrastructure 216 76,476 188,393 8.3 8.0 3.3 3.0 7.0 6.0 1.26 1.12 Ahluwalia Contracts 387 25,951 24,884 21.9 17.9 1.5 1.3 11.4 9.8 4.16 3.42 Ashoka Buildcon 233 43,512 90,954 315.7 89.1 2.7 2.3 10.5 9.5 2.46 2.35 Dilip Buildcon 965 131,935 152,589 24.2 18.5 2.2 1.8 12.0 9.9 5.49 4.26 KNR Constructions 291 40,920 41,217 20.1 19.8 2.3 1.9 13.4 12.1 3.76 3.17 NCC Limited 121 72,678 90,679 27.9 20.8 1.1 1.0 12.5 10.2 1.84 1.70 PNC Infratech 157 40,238 45,261 21.1 17.5 2.4 1.7 17.6 12.4 2.37 2.13 Sadbhav Eng 380 65,171 77,619 29.5 26.4 2.0 1.7 17.9 15.2 3.81 3.38

Average* 21.9 18.4 2.2 1.9 12.8 10.6 3.14 2.69

Median 23.0 19.1 2.2 1.8 12.2 10.1 3.11 2.76 Source: Factset estimates, YSL, Priced as of 23rd March 2018

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 36

IRB Infrastructure Developers Ltd.

Valuation methodology

We value the company using the sum-of the-parts (SOTP) methodology:

✓ BOT business: For the BOT business we calculate the NPV of the future cash flows of each project by applying cost of equity of 13.5% for new projects and projects under implementation. For operational projects, we apply a discount of 50 bps due to higher certainty of toll collection and base traffic. Our valuation for the BOT business stands at INR 103 per share.

✓ EPC business: We apply an EV/EBITDA multiple of 5.0x to arrive at a valuation of INR 173 per share for the EPC business.

✓ InVIT: Whilst we acknowledge the long-term nature of IRB InvIT and its recent underperformance, we value IRB’s current stake in InvIT at current market price (INR 26 per share) as it best reflects the valuation on a 12-month forward basis.

✓ Ex-BOT debt adjustment: Adjusting for net debt for non-BOT business we arrive at our TP of INR 295 per share, implying a potential return of 36%.

Exhibit 54: Valuation

Loan Equity Project Cost Per share Project Client State Outstanding Value (INR mn) value (INR) (INR mn) (INR mn) 13,016 342 13,622 39 Mumbai - Pune MSRDC Maharashtra 48,800 31,717 (331) (1) Ahmedabad - Vadodara NHAI Gujarat 22,900 13,716 5,212 15 Kaithal – Rajasthan Border NHAI Haryana 2,462 625 83 0 Thane Ghodbunder MSRDC Maharashtra 737 738 243 1 Pune - Nashik MOSRT&H Maharashtra 630 511 (186) (1) Pune - Solapur MOSRT&H Maharashtra 25,230 7,173 669 2 Agra Etawah NHAI Uttar Pradesh Rajasthan / 20,879 2,649 1,667 5 Udaipur – Gujarat Border NHAI Gujarat 20,900 na 4,469 13 Gulabpura – Chittorgarh NHAI Rajasthan 28,390 13,093 1,214 3 Goa / Karnataka Border to Kundapur NHAI Karnataka 14,920 8,322 2,680 8 Solapur Yedeshi NHAI Maharashtra 33,770 15,988 4,014 11 Yedeshi Aurangabad NHAI Maharashtra 15,260 na 2,686 8 Kishangarh - Gulabpura NHAI Rajasthan 247,894 94,874 36,044 103 BoT Assets (INR mn)

InvIT (INR mn) 7,997 23

Construction business (INR mn) 60,771 173

Other income (excl. Invit) 6,064 17

Net Debt (Cash) excl BOT loan portfolio (INR mn) (7,777) (22)

Valuation (INR) 293

Target Price (rounded to nearest 5) (INR) 295 Source: YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 37

IRB Infrastructure Developers Ltd.

Exhibit 55: Income Statement Summary (INR million unless stated)

FY16 FY17 FY18E FY19E FY20E Revenues 52,551 59,691 62,210 72,865 75,515 YoY growth 32.6% 13.6% 4.2% 17.1% 3.6%

Cost of material consumed (3,713) (2,683) (625) (1,457) (1,510) Road work and site expenses (16,825) (20,184) (25,322) (28,019) (30,996) Employee benefits expenses (2,465) (2,726) (3,159) (3,589) (3,912) Other expenses (1,673) (2,384) (3,604) (4,094) (4,085) Total Expenses (24,677) (27,977) (32,711) (37,159) (40,503) YoY growth 50.9% 13.4% 16.9% 13.6% 9.0%

EBITDA 27,874 31,715 29,499 35,706 35,012 Margin 53.0% 53.1% 47.4% 49.0% 46.4% YoY growth 19.8% 13.8% -7.0% 21.0% -1.9%

Depreciation and amortisation expenses (8,533) (8,548) (5,501) (4,947) (4,699)

EBIT 19,341 23,167 23,998 30,759 30,313 Margin 36.8% 38.8% 38.6% 42.2% 40.1% YoY growth 19.5% 19.8% 3.6% 28.2% -1.5%

Finance costs (10,389) (12,585) (10,180) (13,187) (14,433)

Profit Before Tax 8,952 10,582 13,819 17,572 15,880 Margin 17.0% 17.7% 22.2% 24.1% 21.0%

Tax (2,306) (2,685) (5,048) (6,420) (5,801)

Profit After Tax 6,646 7,897 8,771 11,153 10,079 Margin 12.6% 13.2% 14.1% 15.3% 13.3%

Diluted EPS (Rs) 18.2 20.4 25.0 31.7 28.7 YoY growth 11.4% 12.0% 22.6% 27.2% -9.6% DPS (Rs) 4.0 5.0 5.0 5.0 5.5

Key Ratios Cost of material consumed % of sales 7.1% 4.5% 1.0% 2.0% 2.0% Road work and site expenses % of sales 32.0% 33.8% 40.7% 38.5% 41.0% Employee benefits expenses % of sales 4.7% 4.6% 5.1% 4.9% 5.2% Depreciation and amortisation expenses % of sales 16.2% 14.3% 8.8% 6.8% 6.2% Finance costs % of sales 19.8% 21.1% 16.4% 18.1% 19.1% Other expenses % of sales 3.2% 4.0% 5.8% 5.6% 5.4% Total expenses % of sales 83.0% 82.3% 77.8% 75.9% 79.0% Total expenses excl. D&A and Finance as % of sales 47.0% 46.9% 52.6% 51.0% 53.6% Effective Tax rate 26% 25% 37% 37% 37% ROIC (%) 8.2% 8.9% 7.6% 9.0% 8.0% ROE (%) 13.8% 14.2% 15.6% 17.4% 13.8% EBITDA to Interest (x) 2.7 2.5 2.9 2.7 2.4 EBIT to Interest (x) 1.9 1.8 2.4 2.3 2.1 Source: Company, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 38

IRB Infrastructure Developers Ltd.

Exhibit 56: Balance Sheet Summary (INR million unless stated)

Year-end 31st March FY16 FY17 FY18E FY19E FY20E Non-current assets Property, plant and equipment 2,698 2,412 2,118 1,851 1,563 Capital work-in-progress 784 610 640 640 640 Goodwill 1,121 1,115 1,115 1,115 1,115 Toll Collection Rights 347,669 240,350 234,849 229,903 225,204 Intangible assets under development 39,414 67,454 92,821 126,740 152,062 Financial assets 942 958 9,394 9,394 9,394 Deferred Tax Assets (net) 3,377 3,855 3,169 2,296 1,507 Other non-current assets 243 294 294 294 294 Total Non-Current assets 396,248 317,048 344,399 372,233 391,779

Inventories 3,088 3,527 4,246 4,973 5,154 Financial assets 17,671 16,485 22,724 23,617 24,903 Current tax assets (net) 443 538 538 538 538 Other current assets 4,209 1,975 794 794 794 Total Current assets 25,411 22,525 28,301 29,921 31,389

Assets Held for sale 126,836

421,660 466,409 372,700 402,154 423,167 Total Assets

Financial liabilities (31,606) (26,929) (23,265) (23,795) (23,926) Provisions (92) (87) (98) (98) (98) Other current liabilities (670) (3,632) (3,524) (3,524) (3,524) Current tax liabilities (net) (298) (492) (1,232) (1,232) (1,232) Total Current liabilities (32,666) (31,140) (28,119) (28,648) (28,780)

Financial liabilities (338,955) (279,652) (284,245) (303,917) (316,796) Provisions (1,278) (841) (751) (751) (751) Deferred tax liabilities (net) (42) - - - - Total Non-current liabilities (340,276) (280,494) (284,995) (304,667) (317,546)

Liabilities held for sale (102,059)

Total Liabilities (372,942) (413,693) (313,114) (333,316) (346,326)

48,718 52,716 59,586 68,838 76,841 Net Assets

Equity share capital 3,515 3,515 3,515 3,515 3,515 Securities premium 14,060 14,060 14,060 14,060 14,060 Other reserves 30,788 35,141 42,012 51,264 59,267 Equity attributable to equity holders 48,363 52,716 59,586 68,838 76,841 Non-controlling interests 355 - - - - 48,718 52,716 59,586 68,838 76,841 Total Equity

Net Debt (141,723) (146,516) (143,492) (162,610) (174,287) Net Debt to EBITDA (x) 5.08 4.62 4.86 4.55 4.98 Net Debt to Equity (x) 2.93 2.78 2.41 2.36 2.27 Gearing ratio (%) 74.6% 73.5% 70.7% 70.3% 69.4% Book Value per share (Rs) 138.6 150.0 169.5 195.9 218.6 Source: Company, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 39

IRB Infrastructure Developers Ltd.

Exhibit 57: Cash Flow Summary (INR million unless stated)

Cash Flow Statement FY16 FY17 FY18E FY19E FY20E Cash flow from operating activities Profit before tax 870 984 1,382 1,757 1,588 Depreciation and amortisation 853 855 615 563 541 Finance cost 1,064 1,333 1,018 1,319 1,443 Interest income on fixed deposits (103) (101) - - - Others 16 46 - - - Operating profit before working capital 2,701 3,117 3,015 3,639 3,573 Movement in working capital: (48) 403 (1,486) (54) (13) Cash generated from operations 2,652 3,520 1,528 3,585 3,559 Taxes paid (net) (313) (311) (436) (555) (501) Net cash flow from operating activities 2,340 3,209 1,092 3,030 3,058

Cash flows from investing activities Purchase of PPE (3,159) (2,780) (2,575) (3,433) (2,575) Proceeds from sale of non-current investments 2 7 2,478 - - Investments in bank deposits (104) 42 - - - Interest received 105 102 - - - Others 12 (370) - - - Net cash flow from investing activities (3,144) (2,998) (97) (3,433) (2,575)

Cash flows from financing activities Net borrowings 2,360 1,634 235 1,967 1,288 Interest paid (1,435) (1,751) (1,018) (1,319) (1,443) Dividend paid on equity shares (211) (70) (176) (176) (193) Tax on equity dividend paid (43) (14) (14) (14) (14) 671 (202) (973) 458 (363) Net cash flows from financing activities

(133) 9 21 55 120 Change in cash and cash equivalents

Cash and cash equivalents at the beginning of the 410 276 231 252 308 year Cash and cash equivalents at the end of the year 276 286 252 308 428 Cash within assets held for sale - (55) - - - 276 231 252 308 428 Cash on the balance sheet Source: Company, YSL

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 40

IRB Infrastructure Developers Ltd.

INCOME STATEMENT (INR Millions) CASH FLOW STATEMENT (INR Millions)

Year ending March FY16 FY17 FY18E FY19E FY20E Year ending March FY15 FY16 FY17E FY18E FY19E Revenues 52,551 59,691 62,210 72,865 75,515 Profit before tax 870 984 1,382 1,757 1,588 Growth (%) 32.6 13.6 4.2 17.1 3.6 Depreciation and amortization 853 855 615 563 541 EBITDA 27,874 31,715 29,499 35,706 35,012 Finance cost 1,064 1,333 1,018 1,319 1,443 EBITDA margin (%) 53.0 53.1 47.4 49.0 46.4 Others (87) (55) - (0) 0 Growth (%) 19.8 13.8 -7.0 21.0 -1.9 Movement in working capital: (48) 403 (1,486) (54) (13) Depreciation & amortization (8,533) (8,548) (5,501) (4,947) (4,699) Cash generated from operations 2,652 3,520 1,528 3,585 3,559 EBIT 19,341 23,167 23,998 30,759 30,313 Taxes paid (net) (313) (311) (436) (555) (501) EBIT margin (%) 36.8 38.8 38.6 42.2 40.1 Cash flow from operating activities 2,340 3,209 1,092 3,030 3,058 Purchase of PPE (3,159) (2,780) (2,575) (3,433) (2,575) Interest (10,389) (12,585) (10,180) (13,187) (14,433) Other investing activities 15 (218) 2,478 - - Other income - - - - - Cash flow from investing activities (3,144) (2,998) (97) (3,433) (2,575) Profit before tax 8,952 10,582 13,819 17,572 15,880 Net borrowings 2,360 1,634 235 1,967 1,288 Tax (2,306) (2,685) (5,048) (6,420) (5,801) Interest paid (1,435) (1,751) (1,018) (1,319) (1,443) Less: Minority interest 6,646 7,897 8,771 11,153 10,079 Dividend paid on equity shares (254) (85) (190) (190) (208) Reported net profit 6,646 7,897 8,771 11,153 10,079 Cash flows from financing activities 671 (202) (973) 458 (363) Extraordinary items - - - - - Change in cash and cash equivalents Adjusted net profit 6,646 7,897 8,771 11,153 10,079 Cash at the beginning of the year (133) 9 21 55 120 Adjusted net margin (%) 12.6 13.2 14.1 15.3 13.3 Cash at the end of the year 410 276 231 252 308 18.2 20.4 25.0 31.7 28.7 Diluted EPS (INR) 11.4 12.0 22.6 27.2 (9.6) Growth (%)

BALANCE SHEET (INR Millions) KEY RATIOS Year ending March FY16 FY17 FY18E FY19E FY20E Year ending March FY15 FY16 FY17E FY18E FY19E TOTAL ASSETS PROFITABILITY RATIOS PPE 2,698 2,412 2,118 1,851 1,563 53.0 53.1 47.4 49.0 46.4 Capital work-in-progress 784 610 640 640 640 EBITDA Margin (%) 12.6 13.2 14.1 15.3 13.3 Goodwill 1,121 1,115 1,115 1,115 1,115 Adjusted net margin (%)

Toll Collection Rights 347,669 240,350 234,849 229,903 225,204 Return on invested capital (%) 8.2 8.9 7.6 9.0 8.0 39,414 67,454 92,821 126,740 152,062 Intangible assets Return on equity (%) 13.8 14.2 15.6 17.4 13.8 Other non-current assets 4,562 5,107 12,856 11,983 11,195 EFFICIENCY RATIOS Total Non-Current assets 396,248 317,048 344,399 372,233 391,779 Net Debt to EBITDA (x) 5.08 4.62 4.86 4.55 4.98 Total Current assets 25,411 22,525 28,301 29,921 31,389 Net Debt to Equity (x) 2.93 2.78 2.41 2.36 2.27 Assets Held for sale - 126,836 - - - 1.86 1.84 2.36 2.33 2.10 TOTAL ASSETS 421,660 466,409 372,700 402,154 423,167 EBIT to Interest (x) Inventory days 21.2 21.3 24.6 24.6 24.6 0.6 4.3 11.5 11.5 11.5 TOTAL LIABILITIES (338,955) (279,652) (284,245) (303,917) (316,796) Receivable days (1,278) (841) (751) (751) (751) Financial liabilities Payable days 21.2 27.2 17.9 17.9 17.9 (42) - - - - Provisions PER SHARE DATA Deferred tax liabilities (net) (340,276) (280,494) (284,995) (304,667) (317,546) Diluted EPS (INR) 18.2 20.4 25.0 31.7 28.7 Total Non-current liabilities (32,666) (31,140) (28,119) (28,648) (28,780) Book value per share (INR) 138.6 150.0 169.5 195.9 218.6 Total Current liabilities - (102,059) - - - DPS (INR) 4.0 5.0 5.0 5.0 5.5 Liabilities held for sale (372,942) (413,693) (313,114) (333,316) (346,326) VALUATION RATIOS TOTAL LIABILITIES (338,955) (279,652) (284,245) (303,917) (316,796) 12.0 10.7 8.7 6.9 7.6 P/E (x) 1.6 1.5 1.3 1.1 1.0 Equity share capital 3,515 3,515 3,515 3,515 3,515 P/BV (x) 7.8 7.0 7.5 6.7 7.2 Securities premium 44,848 49,201 56,072 65,324 73,327 EV/EBITDA (x)

Non-controlling interests 355 - - - - Dividend Yield (%) 1.8 2.3 2.3 2.3 2.5 48,718 52,716 59,586 68,838 76,841 TOTAL EQUITY

For important information about YES SECURITIES (INDIA) LTD. and other disclosures, refer to the end of this material. 41

IRB Infrastructure Developers Ltd.

Recommendation History

IRB Infrastructure Developers Ltd. Date Rating Target Price Closing Price* 350 Closing Prices Target Price 26-Mar-18 ACCUMULATE 295 215.8 *Closing prices as on 23rd March 2018 300

250

200

150

100

50

0 Apr-14 Jul-15 Nov-16 Mar-18

RATING RATIONALE

Analysts assign ratings to the stocks according to the expected upside/downside relative to the current market price and the estimated target price. Depending on the expected returns, the recommendations are categorized as mentioned below. The performance horizon is 12 to 18 months unless specified and the target price is defined as the analysts’ valuation for a stock. No benchmark is applicable to the ratings mentioned in this report.

ACCUMULATE: expected point to point returns of 15% or more NEUTRAL: expected point to point returns in the range of -10% and +15% REDUCE: expected point to point decline of 10% or more NO VIEW: Not in regular research coverage SUSPENDED: The rating as well as the target price has been suspended temporarily. This could be due to events that made coverage impracticable or to comply with applicable regulations and/or company policies.

ABOUT YES SECURITIES (INDIA) LIMITED

YES SECURITIES (INDIA) LIMITED (‘‘YSL’’) was incorporated on 14th March 2013 as a wholly owned subsidiary of YES BANK LIMITED. YSL does not have any other associates. YSL is a SEBI registered stock broker holding membership of NSE and BSE. YSL is also a SEBI registered Category I Merchant Banker and a Research Analyst. YSL offers, inter alia, trading/investment in equity and other financial products along with various value added services. We hereby declare that there are no disciplinary actions taken against YSL by SEBI/Stock Exchanges.

DISCLAIMER

Investments in securities market are subject to market risks, read all the related documents carefully before investing.

The information and opinions in this report have been prepared by YSL and are subject to change without any notice. The report and information contained herein are strictly confidential and meant solely for the intended recipient and may not be altered in any way, transmitted to, copied or redistributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of YSL.

The information and opinions contained in the research report have been compiled or arrived at from sources believed to be reliable and have not been independently verified and no guarantee, representation of warranty, express or implied, is made as to their accuracy, completeness, authenticity or validity. No information or opinions expressed constitute an offer, or an invitation to make an offer, to buy or sell any securities or any derivative instruments related to such securities. Investments in securities are subject to market risk. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. Investors should note that each security's price or value may rise or fall and, accordingly, investors may even receive amounts which are less than originally invested. The investor is advised to take into consideration all risk factors including their own financial condition, suitability to risk return profile and the like, and take independent professional and/or tax advice before investing. Opinions expressed are our current opinions as of the date appearing on this report. Investor should understand that statements regarding future prospects may not materialize and are of general nature which may not be specifically suitable to any particular investor. Past performance may not necessarily be an indicator of future performance. Actual results may differ materially from those set forth in projections.

Technical Analysis reports focus on studying the price movement and trading turnover charts of securities or its derivatives, as opposed to focussing on a company’s fundamentals and opinions, as such, may not match with reports published on a company’s fundamentals.

42

IRB Infrastructure Developers Ltd.

YSL, its research analysts, directors, officers, employees and associates accept no liabilities for any loss or damage of any kind arising out of the use of this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject YSL and associates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Disclosure of interest

Name of the Research Analyst : Rahul Chopra

The analyst hereby certifies that opinion expressed in this research report accurately reflect his or her personal opinion about the subject securities and no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendation and opinion expressed in this research report.

Sr. No. Particulars Yes/No 1 Research Analyst or his/her relative’s financial interest in the subject company(ies) No 2 Research Analyst or his/her relative or YSL’s actual/beneficial ownership of 1% or more securities of the subject No company(ies) at the end of the month immediately preceding the date of publication of the Research Report 3 Research Analyst or his/her relative or YSL has any other material conflict of interest at the time of publication of the No Research Report 4 Research Analyst has served as an officer, director or employee of the subject company(ies) No 5 YSL has received compensation or other benefits from the subject company(ies) or third party in connection with this No research report 6 Broking/Investment Banking/Merchant Banking relationship with the subject company at the time of publication of No Research Report 7 YSL has managed or co-managed public offering of securities for the subject company in the past twelve months No 8 Research Analyst or YSL has been engaged in market making activity for the subject company(ies) No

Since YSL and its associates are engaged in various businesses in the financial services industry, they may have financial interest or may have received compensation for investment banking or merchant banking or brokerage services or for any other product or services of whatsoever nature from the subject company(ies) in the past twelve months or associates of YSL may have managed or co-managed public offering of securities in the past twelve months of the subject company(ies) whose securities are discussed herein.

Associates of YSL may have actual/beneficial ownership of 1% or more and/or other material conflict of interest in the securities discussed herein.

YES SECURITIES (INDIA) LIMITED Registered Office: Unit No. 602 A, 6th Floor, Tower 1 & 2, Indiabulls Finance Centre, Senapati Bapat Marg, Elphinstone Road, Mumbai – 400013, Maharashtra, India. Tel: +91-22-33479688 | Email: [email protected] | Website: www.yesinvest.in CIN: U74992MH2013PLC240971|SEBI Registration – NSE: INB/F/E/231491433, BSE INB/F 011491439 | MERCHANT BANKER: INM000012227 | RESEARCH ANALYST: INH000002376 | INVESTMENT ADVISER: INA000007331 | AMFI ARN Code – 94338

43