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Recommend BUY
CMP 114.00
Target Price 128.00
ISIN: INE975G01012 MARCH 21st
, 2014
IL&FS TRANSPORTATION NETWORKS LTD
Result Update: Q3 FY14
STOCK DETAILS
Sector Infrastructure
BSE Code 533177
Face Value 10.00
52wk. High / Low (Rs.) 186.18/93.69
Volume (2wk. Avg ) 19000
Market Cap ( Rs in mn ) 22146.78
Annual Estimated Results (A*: Actual / E*: Estimated)
Years FY13A FY14E FY15E
Net Sales 66449.00 68219.36 75041.29
EBITDA 19818.40 22717.90 26910.89
Net Profit 5202.10 4896.12 5481.69
EPS 26.78 25.20 28.22
P/E 4.26 4.52 4.04
Shareholding Pattern (%)
1 Year Comparative Graph
IL&FS TRANSPORTATION NETWORKS S&P BSE SENSEX
SYNOPSIS
IL&FS Transportation Networks Ltd (ITNL) is a
surface transportation infrastructure company and is
one of the largest private sector BOT road operators
in India.
During Q3 FY14, net profit jumps to Rs. 1098.30 mn
against Rs. 1041.00 mn in Q3 FY13, an increase of
5.50%.
Revenue for the quarter rose by 11.42% to Rs.
19659.10 mn from Rs. 17644.10 mn, when compared
with the prior year period.
For the quarter Q3 FY14, Profit before interest,
depreciation and tax is Rs. 5255.60 mn as against Rs.
4818.80 mn in Q3 FY13.
IL&FS Transportation Networks signed Joint Venture
Agreement with Chinese Companies through its
subsidiary in Singapore.
ITNL in Joint Venture with Elsamex S.A, has been
awarded a contract by Roads Department Ministry of
Transport & Communications, Republic of Botswana
in Spain. The total value of contract is USD 216.7 mn.
ITNL was signed Concession Agreement with Gujarat
International Finance Tec-City Company Ltd for
development of a Multi-Level Car Parking at GIFT
City, Gandhinagar, Gujarat on BOOT Basis. The total
project cost is approx. Rs. 3500 mn.
During the quarter, ITNL has issued 126,450,000
Fully Paid-Up Cumulative Non-Convertible
Compulsory Redeemable Preference Shares of Rs.
10/- each at a premium of Rs. 10/-.
Net Sales and Operating Profit of the company are
expected to grow at a CAGR of 10% and 19% over
2012 to 2015E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
COMPANY NAME (Rs.) Rs. in Mn. (Rs.) Ratio Ratio (%)
IL&FS Transportation Networks Ltd 114.00 22146.78 26.78 4.26 0.61 40.00
Jaypee Infratech Ltd 18.60 25764.70 3.13 5.93 0.42 10.00
Ashoka Buildcon Ltd 76.00 12004.40 5.85 12.99 1.41 40.00
IRB Infrastructure Ltd 95.20 31641.10 6.68 14.25 2.01 40.00
FINANCIAL HIGHLIGHTS CONSOLIDATED
Results updates- Q3 FY14,
IL&FS Transportation Networks Ltd is one of the
largest private sector BOT road operators in India,
reported its financial results for the quarter ended
31st Dec, 2013.
Months Dec-13 Dec-12 % Change
Net Sales 19659.10 17644.10 11.42
PAT 1098.30 1041.00 5.50
EPS 5.65 5.36 5.50
EBITDA 5255.60 4818.80 9.06
The company’s net profit jumps to Rs. 1098.30 million against Rs. 1041.00 million in the corresponding quarter
ending of previous year, an increase of 5.50%. Revenue for the quarter rose by 11.42% to Rs. 19659.10 million
from Rs. 17644.10 million, when compared with the prior year period. Reported earnings per share of the
company stood at Rs. 5.65 a share during the quarter, registering 5.50% increase over previous year period.
Profit before interest, depreciation and tax is Rs. 5255.60 million as against Rs. 4818.80 million in the
corresponding period of the previous year.
Expenditure :
Break up of Expenditure (Rs. in million)
Q3 FY14 Q3 FY13
Cost of Material Consumed 420.90 214.80
Purchase of Stock in Trade 6.20 14.20
Employee Benefit Expenses 1120.50 876.50
Depreciation &
Amortization Expense 435.20 219.50
Construction Contract Cost 10440.30 9819.90
Other Expenditure 2787.80 2220.90
Segment Revenue
Latest Updates
� IL&FS Transportation Networks Ltd has announced that Commercial Operations (Tolling activities) has been
commenced effective March 11, 2014 at the Four Laning of Narketpally - Addanki - Medarametla Road (SH-2)
in the State of Andhra Pradesh awarded to the Joint Venture of Ramky Infrastructure Limited and the
Company in the ratio of 50:50 by the Andhra Pradesh Road Development Corporation. The Project is on toll
basis with a concession period of 24 years (including 2½ years of construction period).
� IL&FS Transportation Networks Ltd in Joint Venture with Elsamex S.A, wholly owned subsidiary of the
company in Spain has been awarded a contract by Roads Department Ministry of Transport and
Communications, Republic of Botswana under Output and Performance Road Contracts System (OPRC) for
period of 10 years. The total length of the Roads to be maintained for both the Contracts is 267.4 Km for a
total value of USD 216.7 mn (approx. Rs. 13,485.2 mn).
� IL&FS Transportation Networks was signed Concession Agreement with Gujarat International Finance Tec-
City Company Limited for development of a Multi-Level Car Parking at GIFT City, Gandhinagar, Gujarat on
BOOT Basis. The Project involves Design, Development, Finance, Construction, Operation and Maintenance of
Multi Level Car parking with a capacity of approx. 5400 Car Parking Spaces comprising of 16 floors including
retail space at the Ground Floor for a period of 30 years. The total project cost is approx. Rs. 350 crores.
� ITNL International Pte Limited (IIPL), a wholly owned subsidiary of the Company in Singapore entered into a
Joint Venture Agreement with companies established and existing under the laws of China namely, (i)
Chongqing Expressway Group Company Ltd, (ii) Jiangsu Transportation Institute and (iii) China Railway 13th
Bureau Group Co. Ltd to establish an equity joint venture under the laws of China in the name of "Chongqing
Heng Yi Project Maintenance and Technology Consultancy Limited" in which IIPL shall hold 28% equity
interest.
� During the quarter, the Company has issued 126,450,000 Fully Paid-Up Cumulative Non-Convertible
Compulsory Redeemable Preference Shares of Rs. 10/- each at a premium of Rs. 10/-.
Company Profile
IL&FS Transportation Networks Ltd. (ITNL) is an established ISO 9000:2001 surface transportation
infrastructure company & is one of the largest private sector BOT road operators in India. It is a developer,
operator and facilitator of surface transportation infrastructure projects, taking projects from conceptualization
through commissioning to operations and maintenance. ITNL was incorporated in 2000 by IL&FS, an
infrastructure development and finance company, in order to consolidate their existing road infrastructure
projects and to pursue various new project initiatives in the area of surface transportation infrastructure. In
March 2008, ITNL commenced international operations through the acquisition of Elsamex S.A. ("Elsamex"), a
provider of maintenance services primarily for highways and roads in Spain & other countries.
IL&FS Transportation has grown into the largest BOT road asset owner in India with approximately 13,100 lane
km in its portfolio. It is a market leader in the Transport Infrastructure Sector with presence also in Metro Rail,
City Bus Services and Border Check-posts. In addition, we have an international footprint covering Spain,
Portugal, and Latin America with the acquisition of Elsamex S.A., a Spain-based highway operations and
maintenance and allied services provider company.
Business Activity
The key business activity is the development, implementation, operation and maintenance of surface transport
infrastructure projects.
Project Development and Implementation
ITNL performs a range of project development activities from the conceptualization of projects to commissioning
and commencement of commercial operations.
• Business development & finding opportunities to participate in competitive bidding.
• evaluation and preparation of bids,
• assessment of estimated project costs,
• applications for pre-qualifications and tenders,
• preparation of structural and other designs,
• SPV formation and arranging financing for the project,
• management of logistical and development issues
• Management and supervision of projects during project life cycle.
Business Development and Internal Co-ordination
ITNL has an internally well-regulated management policy governing our strategy on bidding for projects. ITNL
also subscribes to news wires to stay informed on the bids published and local and international government
initiatives. ITNL has set up an international multi-segment footprint spanning road, urban infrastructure and
railways sectors.
� Competitive Bidding
� Bilateral Negotiations
� SPV Formation and Financing
Financial Highlight CONSOLIDATED
Balance sheet as at March31st, 2012-2015E
(A*- Actual, E* -Estimations & Rs. In Millions)
FY12A FY13A FY14E FY15E
SOURCES OF FUNDS (Rs.in.mn)
Shareholder's Funds
Share Capital 1942.70 1942.70 1942.70 1942.70
Reserves and Surplus 25695.22 34455.45 43069.31 50821.79
1. Sub Total - Net worth 27637.92 36398.15 45012.01 52764.49
2. Minority Interest 2934.65 3577.21 4113.79 4319.48
Non Current Liabilities
Long term borrowings 69737.62 121849.41 146219.29 163765.61
Deferred Tax Liabilities 2046.51 2425.06 2182.55 2007.95
Other Long term Liabilities 2291.01 2950.86 3541.03 4036.78
Long Term Provisions 750.90 634.12 703.87 760.18
3. Sub Total - Non Current Liabilities 74826.04 127859.45 152646.75 170570.52
Current Liabilities
Current maturities of long term debt 10590.75 13220.08 17186.10 19592.16
Short term borrowings 21930.81 8521.99 8351.55 8685.61
Trade Payables 11304.42 11066.69 9960.02 10458.02
Other Current Liabilities 1860.04 3279.53 3804.25 4298.81
Short Term Provisions 1395.19 1979.46 1662.75 1862.28
4. Sub Total - Current Liabilities 47081.21 38067.75 40964.68 44896.88
Total Liabilities (1+2+3+4) 152479.82 205902.56 242737.23 272551.36
APPLICATION OF FUNDS
Non-Current Assets
Fixed Assets
Tangible assets 1251.63 1415.49 1726.90 2003.20
Intangible assets 27612.84 27716.93 32705.98 36630.69
Capital Work in Progress 195.20 475.99 571.19 662.58
Intangible assets under development 34812.66 66969.81 86465.22 100229.77
a) Sub Total - Fixed Assets 63872.33 96578.22 121469.28 139526.24
b) Goodwill on consolidation 5265.68 5232.59 6174.46 6791.90
c) Non-current investments 3831.91 6527.51 7310.81 7968.78
c) Deferred Tax Asset 5.23 110.60 161.48 188.93
d) Long Term loans and advances 9247.03 8116.65 10145.81 11769.14
e) Other non-current assets 48690.68 67825.30 73251.32 79111.43
1. Sub Total - Non Current Assets 130912.86 184390.87 218513.16 245356.43
Current Assets
Current maturities of Long term loans and advances 0.0 42.50 42.50 0.00
Current Investment 122.22 343.74 412.49 474.36
Inventories 210.1 168.87 182.38 193.32
Trade receivables 8820.13 7516.96 6915.60 7261.38
Cash and Bank Balances 2837.87 4552.42 5690.53 6714.82
Short-terms loans & advances 7895.73 6010.40 7873.62 9133.40
Other current assets 1680.91 2876.80 3106.94 3417.64
2. Sub Total - Current Assets 21566.96 21511.69 24224.06 27194.93
Total Assets (1+2) 152479.82 205902.56 242737.23 272551.36
Annual Profit & Loss Statement for the period of 2012 to 2015E
Value(Rs.in.mn) FY12A FY13A FY14E FY15E
Description 12m 12m 12m 12m
Net Sales 56056.20 66449.00 68219.36 75041.29
Other Income 1238.10 1414.00 1330.34 1396.85
Total Income 57294.30 67863.00 69549.69 76438.14
Expenditure -41400.70 -48044.70 -46831.79 -49527.25
Operating Profit 15893.60 19818.30 22717.90 26910.89
Interest -7282.10 -11190.10 -15442.81 -17913.66
Gross profit 8611.50 8628.20 7275.09 8997.23
Depreciation -765.50 -944.10 -1476.23 -1668.14
Profit Before Tax 7846.00 7684.10 5798.86 7329.09
Tax -2457.20 -2274.00 -888.99 -1832.27
Profit After Tax 5388.80 5410.10 4909.87 5496.81
Minority Interest -457.70 -254.90 -83.16 -91.47
Share of Profit & Loss of Asso. 38.50 46.80 69.41 76.35
Net Profit 4969.60 5202.00 4896.12 5481.69
Equity capital 1942.70 1942.70 1942.70 1942.70
Reserves 25695.20 34455.50 43069.31 50821.79
Face value 10.00 10.00 10.00 10.00
EPS 25.58 26.78 25.20 28.22
Quarterly Profit & Loss Statement for the period of 30th June, 2013 to 31st March, 2014E
Value(Rs.in.mn) 30-Jun-13 30-Sep-13 31-Dec-13 31-Mar-14E
Description 3m 3m 3m 3m
Net sales 14511.10 13407.10 19659.10 20642.06
Other income 287.00 267.00 378.70 397.64
Total Income 14798.10 13674.10 20037.80 21039.69
Expenditure -9307.40 -8416.60 -14782.20 -14325.59
Operating profit 5490.70 5257.50 5255.60 6714.10
Interest -3246.70 -3626.10 -4160.20 -4409.81
Gross profit 2244.00 1631.40 1095.40 2304.29
Depreciation -260.10 -276.10 -435.20 -504.83
Profit Before Tax 1983.90 1355.30 660.20 1799.46
Tax -677.90 -219.60 368.40 -359.89
Profit After Tax 1306.00 1135.70 1028.60 1439.57
Minority Interest -48.60 -38.70 37.60 -33.46
Share of Profit & Loss of Asso -12.10 15.70 32.10 33.71
Net Profit 1245.30 1112.70 1098.30 1439.82
Equity capital 1942.70 1942.70 1942.70 1942.70
Face value 10.00 10.00 10.00 10.00
EPS 6.41 5.73 5.65 7.41
Ratio Analysis
Particulars FY12A FY13A FY14E FY15E
EPS (Rs.) 25.58 26.78 25.20 28.22
EBITDA Margin (%) 28.35% 29.82% 33.30% 35.86%
PBT Margin (%) 14.00% 11.56% 8.50% 9.77%
PAT Margin (%) 9.61% 8.14% 7.20% 7.33%
P/E Ratio (x) 4.46 4.26 4.52 4.04
ROE (%) 19.50% 14.86% 10.91% 10.42%
ROCE (%) 12.82% 11.54% 11.16% 11.67%
Debt Equity Ratio 3.70 3.95 3.82 3.64
EV/EBITDA (x) 7.65 8.13 8.28 7.71
Book Value (Rs.) 142.27 187.36 231.70 271.60
P/BV 0.80 0.61 0.49 0.42
Charts
Outlook and Conclusion
� At the current market price of Rs.114.00, the stock P/E ratio is at 4.52 x FY14E and 4.04 x FY15E
respectively.
� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.25.20 and
Rs.28.22 respectively.
� Net Sales and Operating Profit of the company are expected to grow at a CAGR of 10% and 19% over 2012 to
2015E respectively.
� On the basis of EV/EBITDA, the stock trades at 8.28 x for FY14E and 7.71 x for FY15E.
� Price to Book Value of the stock is expected to be at 0.49 x and 0.42 x respectively for FY14E and FY15E.
� We recommend ‘BUY’ in this particular scrip with a target price of Rs.128.00 for Medium to Long term
investment.
Industry Overview
Roads
The Indian Government is very particular about the development and maintenance of India’s huge road network;
more so because number of vehicles in the country has been growing at an average rate of 10.16 per cent per
annum over the last five years. Thus a need for efficient and world-class road network becomes inevitable for
smooth transitions of goods and services.
The administration awarded about 2, 000 km worth of new road construction contracts in FY13.
Foreign direct investment (FDI) received in construction development sector from April 2000 to July 2013 stood
at US$ 22.44 billion, according to the Department of Industrial Policy and Promotion (DIPP).
Railways
• The Indian Railways generated total approximate earnings on originating basis of Rs 44,260.16 crore
(US$ 7.08 billion) during 1st April 2013 to 31st July 2013 as against Rs 39,969.24 crore (US$ 6.39 billion)
during the corresponding period last year, registering an increase of 10.74 per cent. While the total goods
earnings increased by 9.20 per cent, total passenger revenue earnings shot up by 12.70 per cent.
The revenue earnings from other sources amounted to Rs 1,307.87 crore (US$ 209.11 million) during 1st
April 2013 to 31st May 2013. The total approximate numbers of passengers booked during 1st April
2013 – 31st July 2013 were 2, 810.33 million.
• The cumulative FDI inflow into the railways related components sector stood at US$ 351.26 million from
April 2000 to July 2013, according to statistics released by DIPP.
Ports
• India’s 12 big ports, which account for about 58 per cent of the total cargo shipped through the country’s
ports, handled 137 million tonnes (MT) of goods in the first quarter of FY14.
• Container cargo volumes at these 12 ports stood at 1.87 million standard containers during the reported
quarter, according to data compiled by the Indian Ports Association (IPA).
Infrastructure in India: Key Developments
• Dubai-based DP World has been awarded a contract to develop the Jawaharlal Nehru Port Trust (JNPT)'s
Rs 600-crore (US$ 95.97 million) container terminal in Navi Mumbai. DP World is a leading marine
terminal operator and its Indian subsidiary Nhava Sheva would be building this standalone container
handling facility under this 17-year concession agreement.
• IL&FS Transportation Networks Ltd, one of India's biggest road builders, has recently signed a US$ 300
million contract to build a six-lane highway. The project will link an eastern industrial zone (having
heavy-duty traffic) to mining districts such as Dhanbad, the nation's coal capital.
• India's first ever aviation university, the Rajiv Gandhi National Aviation University at Rae Bareli in Uttar
Pradesh, will start imparting training to aspiring pilots, aircraft engineers and cabin crew in September
2014. The educational entity is a Government organisation that has been developed to acknowledge the
industry's chronic talent shortage.
Government Initiatives
• The Indian Government plans to earmark US$ 1 trillion for the development of infrastructure over 2013-
18. To attract investments in the sector, it has modified its policies so that developers no longer have to
wait for clearance from forest authorities to commence construction. Another supportive policy came
from the central bank wherein it reclassified loans to road builders as secured loans rather than
unsecured loans, which would give more comfort to banks to lend to projects.
• Meanwhile, Shipping Minister GK Vasan has indicated that the Government will soon decide upon the
new tariff guidelines for major ports in India, which is expected to provide autonomy to the port
terminals to fix market linked tariffs. The draft tariff guideline is awaiting feedback from stakeholders.
The ministry has also set itself a target for FY14 to award 30 port projects involving an outlay of about Rs
25,000 crore (US$ 4 billion).
These projects, 19 of which will come under public-private partnership (PPP) mechanism, will build an
additional capacity of 288 million tonnes per annum (MTPA). The Government had awarded 32 projects
worth Rs 6, 765 crore (US$ 1.08 billion) in FY13 which will add a capacity of about 137 MTPA.
Road Ahead
Indian port sector is poised to mark great progress in the years to come. It is forecasted that by the end of 2017
port traffic will amount to 943.06 MT for India’s major ports and 815.20 MT for its minor ports.
Along with that, Indian aviation market is expected to become the third largest across the globe by 2020,
according to industry estimates. The sector is projected to handle 336 million domestic and 85 million
international passengers with projected investment to the tune of US$ 120 billion. Indian Aviation Industry that
currently accounts for 1.5 per cent of the gross domestic product (GDP), has been instrumental in the overall
economic development of the country, according to Mr Ajit Singh the Minister for Civil Aviation.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – [email protected]
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