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IRB Infrastructure Ltd…

INITIATING COVERAGE Mr. M H KALE Chief Financial Officer IRB INFRASTRUCTURE LTD (O) 91-22-6640 4220 Stock metrics Bloomberg code IRB IN

Reuters code IRBI.BO

BSE Group A

BSE Code 532947

NSE Code IRB INFRA

Face Value Rs 10

ISIN NO INE882101014

Market Cap (Rs Cr) 6616.76

52WeekHigh/Low 226.90/65.00

Sensex 15551.19

Nifty 4625

Average volume 585179

10.86%7.09%73.86% 8.19%

FIIs MF & Insurance

Promoters Public

Research Analyst Ashish Pandey ashish.pandey@inventuregrowth.com 022-40751515

Denil Savla denil.savla@inventuregrowth.com 022-40751515 September 3rd 2009

Current Price Rs.193.90

Target Price Rs 255.46

Potential Upside 32%

Time Frame 24 Months

IRB INFRASTRUCTURE - Road to Prosperity

IRB Infrastructure Developers Ltd. continues to play a bigger role on the increasing demand from the recent infrastructure thrust to develop Roads, National Highways, Bridges and Tunnels in India. It is one of the top most leaders in the BOT based project in the Road development Programme. IRB order book remain to be healthy with Rs 5660crs (as on June2009) which is bifurcated between EPC - Rs 30,93Crs (EPC in ongoing BOT Projects 2866Crs + Funded Projects 2,27Crs) with an average execution period of 24-30 months & O&M – Rs 2,567Crs with an execution period of 10-12 years. The Company enjoys the margin of ~ 16% in the construction order book compare to 10-11% of industry standard which is mainly due to on account of the lower subcontracting cost & larger equipment base. We remain positive on the fundamentals of the company going forward. At the CMP, the stock trades at a EV/EBITDA multiple of 17.74x, 8.74x & 6.50x its FY09, FY10E & FY11E earnings. Valuation We expect the revenue & net profit to grow at the CAGR of 62% & 68% for the period from FY09 to FY11E. We have done the SOTP Valuation for IRB INFRA. DCF Valuation of BOT projects aggregates to Rs 163.98/shares while the EPC contributes nearly at Rs 60.94/share. NAV of the 1250acres of land contributes the land value at Rs 5.94/share, Wind Mills at Rs 3.18, & Cash with holding company at 21.42. The SOTP of the complete valuation of the IRB Infra comes at Rs 255.46/ share with an upside of 32%. We initiate coverage on IRB Infrastructure with a BUY rating with huge order book backup.

Year Ended March F Y 08 F Y 09 F Y 10E F Y 11ENet Sales (Rs.Crs) 732.68 991.88 2001.11 3128.72growth (%) 139.67 35.38 101.75 56.35EBIDTA (Rs.Crs) 463.94 467.00 1001.55 1442.29growth (%) 151.05 0.66 114.46 44.01PBT (Rs.Crs) 166.58 214.96 466.36 682.15growth (%) 273.91 29.05 116.95 46.27Net Profit (Rs.Crs) 113.96 175.86 383.05 560.91growth (%) 404.23 54.33 117.81 46.43EBIDTA Margins (%) 63.32 47.08 50.05 46.10Net Profit Margins (%) 15.55 17.73 19.14 17.93EPS 3.43 5.29 11.53 16.88ROE (%) 7.03 10.17 18.74 22.11EV/EBIDTA (x) 16.63 17.74 8.74 6.50PE 54.54 35.34 16.23 11.08

Source:- IGSL Research

Industry Infrastructure

Market Data

Shareholding Pattern :

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TABLE OF CONTENT

Table of Contents Page no. Investment Thesis …… 3 Company Back ground ...... 5 Business Segments…... 8 Industry Outlook • Indian Road Industry…… 10 • BOT Projects …... 11 • NHDP Programme …... 12 • Public Private Partnership …… 15 • Infrastructure Sector ……. 16 Peer Group in BOT Segments 18 PAN India Presence …… 20 Order Book Composition ……. 21 Recent Awarded Projects ……. 22 Concerns …… 24 Financial Charts ……. 25 Quarter Analysis …… 29 Target Price Derivation ……. 30 Profit & Loss A/C Analysis …… 31 Balance Sheet Analysis …… 32 Cash Flow Statement …… 33 Ratio Analysis …… 34

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Road freight industry growing at the robust pace of 9.9% CAGR boost IRB infra to be most prominent road player…… IRB Infra developing nearly 1200km of roads & highways…. IRB Infra claims ~ 7.6% market share in Golden Quadrilateral…… Improving economic condition helps higher traffic flow leads the IRB ……

Investment Thesis Positive growth of the road infrastructure in India helps IRB Infra utmost: - India has the world's second largest road network after the United States of America (USA), aggregating nearly around 3.34mn kilometers (km). As Planning Commission of India, has predicted the road freight industry would be growing at the robust pace of 9.9% CAGR from 2007-08 to 2011-12. Indian Government has launched the ambitious National Highway Development Programme (NHDP) involving a total investment of US$ 54.1 billion up to 2012. In 2008 -09, NHAI has infused US$ 4 billion in the NHDP. The Eleventh Five Year Plan envisages a total investment of approximately Rs.3,14,152Crs (US$ 78.5 billion @ 40$) over the period of 5 years starting from 2007-2008. Many road projects with public-private partnerships (PPP) are also on the anvil. Performance driven record of IRB Infra in infrastructure development & Construction based BOT projects in the Roads & Highways: - IBR Infra has a decade of strong experience in the infrastructure & construction business. The Company is involved in the construction and then maintenance of nearly 1200 km of roads & highways in India which gives IRB Infra a strong presence across its peers in bidding the new & large BOT projects which enables it to capitalize opportunities available in the upcoming growing sector in India. Rising demand of Infrastructure development helps IRB Infra Road to prosperity: - IRB Infrastructure is a strong beneficiary of increased infrastructure spending commitment from the government of India. Investments in road infrastructure is seen at Rs 3,142bn (Rs 3,14,152Crs) during the 11th Five year plan and Rs 8,831bn (Rs 883100Crs) during the 12th Five year plan. Presently the company claims ~7.6% market share in the Golden Quadrilateral project and is one of the largest BOT developers in the country. Improved economic conditions leading to increased commercial and passenger traffic: - As the economic activity in the country has been improved which will lead to recover the commercial vehicles and passenger car traffic resulting in higher traffic flow in IRB’s key road projects. We estimate the company to be benefited from the improved economic situation.

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Key player among its competitor with highest order book in the Road projects …… Strong Order Book helps IRB to make presence in road based development projects …… Strong in house E&C, which helps IRB to execute projects on its strong capability …… Focus beyond Maharashtra & Gujarat recently awarded projects at other parts of the country ……

Best player among its peers in the road developers business: - IRB Infra is one of the largest BOT developers & earlier entrant in the Public Private Partnership program having 16 road BOT projects. The company has maintained its leadership position in this segment through interest in high traffic corridors like the Mumbai-Pune expressway. Additionally the company has forayed into India’s first BOT urban infrastructure project through Integrated Road Development project in the city of Kolhapur. Healthy Order Book: - IBR Infra order book remains to be healthy ~Rs 5660crs which is bifurcated between EPC in ongoing Projects 2,866Crs, Funded Projects 227Crs with an average execution period of 24-30 months & O&M –Rs. 2,567Crs with an execution period of 10-12 years. The order book is set to improve substantially once the financial closure of new projects will be achieved. The Company enjoys margin of ~ 16% in the construction order book compare to 10-11% of industry standard, which is mainly due to the account of the lower subcontracting cost & larger equipment base. This will thus help IRB Infra to improve its order inflow as well as create strong revenue visibility in coming years. Integrated in-house E&C helps IRB Infra of having strongest execution capability: - IRB boasts for an in house execution capability for its engineering procurement & construction works for its BOT assets as well as the funded projects. The operation and maintenance of the operational assets is also carried out through this subsidiary. We believe that carrying out the E&C operations in-house gives the company an ability to monitor the projects more closely and also keep the quality in check. The division is also executing some funded projects which include the EPC contract for highway section between Nagpur and Hyderabad package 59 and 61 awarded by NHAI and the BRTS project in Ahmedabad. Moving toward PAN INDIA presence:- IRB was recently awarded BOT projects located in states of Rajasthan, Punjab and Goa. This is the first time that the company has moved out of its otherwise stronghold of Maharashtra and Gujarat. We view this as a positive development and look at this as an enabler to the company for developing long-term capabilities for executing projects in various states of the country.

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Company Profile in details……

Company Background

IRB Infrastructure Developers Ltd. is a Mumbai based Infrastructure development & Construction Company over the two decade of experience in building Roads & Highways both as Contractor & Operator set up by Mr. Virendra D. Mhaiskar. IRB is a pioneer in the road BOT business and is one the largest road BOT operators in the country with 16 BOT (Build Operate & Transfer) projects under its belt. IRB holds a market share of 7.56% on the Golden Quadrilateral. IRB Infrastructure Developers Ltd. (IRB) is a holding company for the infrastructure assets of the IRB group.

The Company undertakes development of various infrastructure projects in the road sector through several Special Purpose Vehicles. IRB's work spans from building of roads, highways, bridges, and tunnels, recently the company diversified its business into real estate development sector also. Most of the work in both our infrastructure development business and construction business is won on a competitive bidding basis. The infrastructure development business involves construction, development and operation of infrastructure development projects. They are an established infrastructure company in the roads sector in India and have large portfolio of completed and operational BOT projects in the Indian road infrastructure sector. Their construction business complements their infrastructure development business and involves engineering, procurement and construction work for construction projects on a contractual basis, including in the roads sector.

The company over the past two decades has maintained its focus on road BOT projects and has been involved in developing 1400 kms of highways & roads. It generates a toll of ~Rs.17mn/ day (Incl. Surat Dahisar from Feb 19th 2009) which is estimated increase to ~Rs.25-30mn/day by Q2FY10. The company is having very strong expertise in tolling operation & construction business The company has a strong revenue visibility for its BOT project as it operates 10 cash generating projects with an average concession period for ~ 10years.

The Company has recently diversified its business into the real estate development sector. The proposed township project is the first real estate development project undertaken by the company & it is in preliminary stage of planning and development. They are in the process of acquiring land in Mauje Taje and Mauje Pimploli Taluka in Pune district in the State of Maharashtra in India on which they propose to develop an integrated township. Also IRB intends to acquire approximately 250 acres of additional land for the proposed township project.

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Subsidiaries

Source: Company

Subsidiaries of IBRD Holding of IRB Infra Developers Ltd.

Profile/ Business of Subsidary

Infrastructure Development & Construction Business Ideal Road Builders Pvt. Ltd.

(IRBPL)

100%

BOT projects (Thane Bhiwandi bypass BOT & Kaman Paygaon BOT). Bhiwandi Wada BOT & Khambhatki Ghat concession period over.

Modern Road Makers Pvt. Ltd

100%

Engineering & Construction Arm.

Aryan Toll Road Pvt. Ltd.

100%

Pune - Solapur BOT (29.81 km – NH9)

ATR Infrastructure Pvt. Ltd

100%

Pune - Nashik BOT (29.81 km – NH 50)

Mhaiskar Infrastructure Pvt.

Ltd.

100 (74% held by IRBD & 26%

by IRBPL)

Mumbai - Pune BOT (206 km – MPEW & NH4)

Thane Ghodbunder Toll Road

Pvt. Ltd..

100 (74% held by IRBD & 26%

by IRBPL)

Thane Ghodbunder Toll Road BOT (14.9 km)

IDAA Infrastructure Pvt. Ltd.

100 (53.29% held by IRBD,

10.81% by ATRPL, 23.75% held by ATR Infra & 12.05% held by

IRBPL)

Bharuch - Surat BOT (65 km – NH8)

NKT Road & Toll Pvt. Ltd.

100 (53.33% held by IRBD &

46.67% by IRBPL)

Ahmednagar - Karmala - Tembhurni Road (60 km)

IRB Infrastructure Pvt. Ltd.

100 (80.15% held by IRBD &

19.85% held by IRBPL)

Bridge over Patalganga River – Kharpada BOT (1.4 km)

MMK Toll Road Pvt. Ltd.

100 (100% held by IRBPL)

Mohol - Kurul - Kamati - Mandrup Road (33 km – SH 149)

IRB Surat Dahisar Tollway

Pvt. Ltd

90 (10% held by Deutsche Bank)

Surat - Dahisar Road – 239 km NH-8

IRB Kolhapur Integrated Road

Development Company

100 (80% IRB, 10% MRMPL &

10% ATR Infra)

Integrated Road Development in the city of Kolhapur

Real Estate Business Aryan Infrastructure Investments Pvt. Ltd

66

Land Bank Adjoining the MPEW

Aryan Hospitality Pvt. Ltd

100

-

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Managements having there strong expertise, skills & experience are require effectively to manage & direct the company towards the future growth story going ahead……

Professional Management The company is professionally managed and Mr. Virendra D Mhaiskar, the Managing Director, looks after day-to-day management.

Name Designation Experience

Mr. Virendra D.

Mhaiskar

Chairperson & Managing

director

Over 18 years

Dattatraya P Mhaiskar

Director 47 years

Deepali V Mhaiskar

Director Around 9 years

Suresh G Kelkar Director 40 years

Bhalchandra K Khare

Director Over 42 years

Govind G Desai Director Over 20 years

Chandrashekhar S Kaptan

Director 32 years

Mehul N Patel Company Secretary

9 years

Sivaramkrishnan S Iyer

Director Over 20 years

Mr Kale CFO More than 30 years

Anil D Yadav Dy CFO Over 5 years Source: Company

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Revenue generating business of IRB INFRA i.e. Engineering & Construction of Roads highways & tunnel & Real Estate …. Mumbai Based Contractor having 12 strong BOT roads based projects in its portfolios…. Construction or O&M of ~1,400kms of highways & roads across the country

Business Overview IRB Infrastructure developers Ltd.(IRBD) is a holding company for the infrastructure assets of the IRB group. The Company, earlier was known as DVJ Leasing and Finance Private Limited, was incorporated as a Private Limited Company in 1998 and was formed to fund the capital requirements of the infrastructure and construction sector ventures of the IRB Group. The company business comprises of two segments namely Construction & Development of Roads & Highways (Roads BOT’s) and recent foray into Real Estate development business to develop the integrated township of approx 1250 acres in Pune District, Maharashtra. IRB’s road business is conducted in two verticals viz. 1) Engineering & Construction 2) Toll Collection & Maintenance. In the road BOT business, IRB currently has 12 projects, out of which 10 are commissioned, 2 are under implementation. IRB, through its E&C business arm viz. – Modern Road Makers Private Limited (MRM), has gathered significant experience (approx 1200 kms.) in constructing road projects. With its 66% subsidiary viz. Aryan Infrastructure Investments Private Limited, IRB plans to foray into the real estate sector by developing a township near Pune. Roads BOT’s: - The Company currently has 12 BOT’s Projects housed in 11 SPV nearly 800Kms across Gujarat & Maharashtra, out of which 10 BOT’s projects are operational, where the construction certificate has been issued and the project under SPV has started earning revenues from the toll collection. Other is under construction and two at financial closure stage. One of the country’s earliest BOT projects, Thane Bhiwandi Bypass was implemented by one of the subsidiaries of IRB in 1997. Currently the total length of around 800kms is under IRB’s fold as a BOT operator, for a concession period of 10-12 years, this being the largest BOT portfolio in the country which has been executed by the IRB Group. Engineering & Construction (E&C):- All construction work undertaken by the IRB Group for BOT projects and funded construction contracts are executed by its subsidiary, Modern Road Makers Pvt. Ltd. (MRMPL). Since its inception, the entity has been involved in construction or O&M of ~1,400kms of highways & roads across the country.

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Source: Company

Toll collection is nearly Rs20 million which is expected to rise to Rs30-35 million in coming period …… Foray into the real Estates Business………. Foray into the Green Energy Business……….

Operations and Maintenance (O&M):- IRB is the largest BOT operator in India today. IRB’s daily toll collection is nearly Rs20 million which is expected to rise to Rs30-35 million after two more projects become operational by June 2009. The only company managing operation & maintenance of over 5kms of tunnels. IRB’s toll revenues have significantly increased from April 2008 due to 18% hike in the toll rates of the Mumbai-Pune Expressway and NH4 in terms of the concession agreement. This asset contributes nearly 36% to IRB’s consolidated revenue. Real Estate Development: - IRB plans to foray in the real estate arena by developing an integrated township development of approx. 1400 acres in Pune District, Maharashtra. The proposed township is expected to yield a total saleable area of ~30.6mn sq.ft. & would be developed over a period of 8-10 years. The Company has the land bank of 1250 acres currently & proposed acquisition of new land reserve of 150 acres is in a process, which would get more than 6 months to acquire. Green Energy:-A wholly owned subsidiary of the IRB viz. Modern Road Makers Pt ltd. (MRM) has forayed into the Green Energy sector in association with Suzlon Energy Ltd. MRM has installed 16 wind Mills of 1.25 MW each in Jaisalmer, Rajasthan.

Sr. No Projects Lengths in Kms No of Toll Collection Locations

1) Mumbai Pune Corridor a) Mumbai –Pune Expressway

b) Mumbai - Pune (NH4)

95

111

4 4

2) Pune - Solapur 26 2 3) Pune - Nashik 30 2 4) Thane Bhiwandi Bypass 25 2 5) Thane Ghodbhunder Road 15 1 6) Ahmednagar -Karmala – Tembhurni Road 60 1 7) Mohol – Kurul – Mandrup Road 33 1 8) Bridge over Patalganga River 1 1 9) Kaman - Paygaon Road 22 1 10) Bharuch – Surat 65 1 11) Surat – Dahisar 239 4 12) Kolhapur – IRDP( Under Construction) 50 9

TOTAL 772 33

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World's 2nd largest road network, aggregating 3.34mn kilometer & industry will grow by CAGR of 9.9% in XIth Five Year Plan…… Ambitious NHDP Programme involving a total investment of US$ 78.5 billion upto 2012……

Industry Outlook

Indian Road Industry

Development of infrastructure would not only ameliorate the supply side bottlenecks to growth, but also provide the requisite demand side stimulus to growth. The rapid construction of highways facilitates human and material movement across the country. Apart from improving connectivity, the development of secondary and tertiary roads can open up hitherto unconnected regions to trade and investment and step up access to goods, services and employment opportunities.

The country’s road network consists of national highways, state highways, major district roads, other district roads and village roads. India has the world's second largest road network, aggregating over 3.34mn kilometers (km). According to the Planning Commission, the road freight industry will be growing at a compound annual growth rate (CAGR) of 9.9 per cent from 2007-08 to 2007-12. A target of 1,231 billion tonnes km (BTK) has been put on road freight volumes for 2011-12. Growth Potential of Indian Road According to Economic Survey, the share of road transport in the GDP is over 4.6% in 2007(as against 3.8% in 2000), accounting for over two-thirds of the total transport contribution to the GDP. Road transport has emerged as a dominant segment in India’s transportation sector, growing at an annual average rate of 9.5% during 2000-01 & 2005-06 as against 6.5% growth rate of GDP. The Indian government has launched the ambitious National Highway Development Programme (NHDP) involving a total investment of US$78.5 billion up to 2012. In 2008-09 itself, the NHAI has infused US$4 billion in the NHDP. It has also started the Bharat Nirman Programme that aims to cover every village having a population of over 1,000 or over 500 in hilly and tribal areas, with all-weather roads.

For the Roads and Bridges sector, the Eleventh Five Year Plan envisages a total investment of approximately US$78.5 billion over the five-year period starting from 2007-08. Of this the shares of the Centre, State & Public are expected to be 34.2%, 31.8% & 34% respectively.

As part of a larger plan to improve the country's infrastructure, the government has given the nod to 10 road projects which will be built in public-private partnership at an estimated cost of US$2.48 billion. The projects are aimed at four-laning of national highways in eight states.

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Indian largest road network around 3.3mn km, which is the second largest in the world, which carries 65% of freight and 80% of the passenger traffic, carried out by road whereas National Highways constitute only about 2% of the road network but carry about 40% of the total road traffic Annuity Based BOT Projects are based on concession or semi –annual payment........

Size of the Industry

Indian road network is around 3.34mn km, which is the second largest in the world. Nearly about 65% of freight and 80% of the passenger traffic is carried out by road whereas National Highways constitute only about 2% of the road network but carry about 40% of the total road traffic. Number of vehicles has been growing at an average pace of 10.16% per annum over the last five years.

Source: NHAI

BOT Projects

Build-Operate-Transfer (“BOT”) Under this type of PPP contract, the Government grants to a contractor a concession to finance, build, operate and maintain a facility for the concession period. During the concession period, the operator collects user fees and applies these to cover the costs of construction, debt servicing and operations. At the end of the concession period, the facility is transferred back to the public authority. BOT projects can be annuity-based or toll-based, as defined below

BOT annuity-based projects: Under this form, the concessionaire is responsible for constructing and maintaining the project facility. The GOI, usually through the NHAI in the case of highway projects, pays the concessionaire a semi-annual payment, or annuity. The concession contract is awarded to the bidder, which, among other criteria, quotes the lowest annuity amount. Under this approach, the amount of income collected by the concessionaire is not directly related to the usage level of the project. In the context of highway projects, the amount of income is not by direct reference to the number of vehicles using the highway. Instead, the risk that traffic, and consequently user fees, may be lower than expected is borne by the NHAI alone. However, the NHAI retains the right to charge users a toll at any stage of the project and it also retains all rights to property development, advertising at the project site and other revenue-generating activities.

Indian Road Network Length in KM % in KM Expressway 200 0.01

National Highways 66,590 2.01 State Highway 1,31,899 3.99

Major District Roads 4,67,763 14.17 Rural & other Road 26,50,000 80.30

Total Length 33,00,000 (Approx) 100%

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Toll Based BOT Projects to promote private sector involvement …… Contract project based on engineering, design, specification & Execution

BOT toll-based projects: In order to reduce the dependence on its own funds and to promote private sector involvement in developing projects, the NHAI has awarded some highway projects on a toll basis. In this case, the concessionaire is responsible for constructing and maintaining the project as well as being allowed to collect revenues through tolls during the concession period. After the expiry of the concession period, the project is transferred back to the NHAI.

Engineering Procurement Construction/Lump-Sum Turnkey “EPC/Turnkey”) Contracts In this form of contract, contractors are required to quote a fixed sum for the execution of an entire project including design, engineering and execution in accordance with drawings, designs and specifications submitted by the contractor and approved by the customer. The contractor bears the risk of incorrect estimation of the amount of work, materials or time required for the job. Escalation clauses might exist in some cases to cover, at least partially, cost overruns. Operations and Maintenance (“O&M”) Contracts

Typically an operations and maintenance contract is issued for operating and maintaining facilities. This could be in sectors such as water, highways, buildings & power. The contract specifies routine maintenance activities to be undertaken at a predetermined frequency as well as breakdown maintenance during the contract period. While the contractor is paid for the routine maintenance based on the quoted rates, which are largely a function of manpower, consumables and maintenance equipment to be deployed at the site, any breakdown maintenance is paid for on a cost plus basis NHDP Program – A Biggest Opportunity

The largest highway project ever undertaken in the country is being implemented by the National Highways Authority of India (NHAI).

India is having one of the second largest road networks in the world after Unites States of America but however the usability of the road in India is not so far properly utilized by the Government of India (GOI) yet till. The Indian Road Networks comprises of Expressway, National Highways Rural & Other roads.

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Development of NHDP programme help Investment Opportunity for IRB across the Road development remain on the Top Priority ……..

Indian Road Network

0.1%

80%

14%

2%

4%

Expressways National Highways

State Highways Majors District Roads

Rural & other Roads

Source: NHAI

Huge Investment Opportunity in Roads remain on the Top Priority

The National Highways (NH), with a total length of 66,590 km, serves as the arterial network across the country. As of now, nearly 33,097 Kms of NHDP has been approved by the Union Cabinet. Phase-I and II of the NHDP envisaged 4/6laning of about 14,279 kilometers of National Highways at a total estimated cost of Rs. 65,000Crs (at 2004 prices). These two phases consists of the ongoing programme of four-laning the 5846 km long Golden Quadrilateral (GQ) connecting Delhi, Mumbai, Chennai and Kolkata is nearing completion. The ongoing four-laning of the 7,142 km North-South East-West (NSEW) corridor is to be completed by December 2009. During the XIth five year plan, Government has targeted completion of the GQ and NS-EW corridors; four-laning of 12,109km under NHDP Phase III at the cost of 80,626Crs. In addition to the above mentioned approved projects, there is a proposal for two-laning of 20,000km of National Highways under NHDP Phase IV. The government has also approved six-laning of Golden Quadrilateral of 6500km selected stretches under NHDP Phase V at the overall cost at 41,210Crs and development of 1,000km of expressways under NHDP Phase VI at the cost of Rs 16,680Cr. Construction of ring roads, grade separated intersection, flyovers, elevated highways, ROB’s, underpasses and service roads at a cost of Rs. 16,680Crs under NHDP Phase-VII.

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NHAI Target Achieved

Source: - Ministry of Road Transport & Highways

The funds required for the development of the National Highways would be fulfilling by World Bank & ADB…

The implementation of NHDP had been faced with a number of constraints that include delays in land acquisition and removal of structures, shifting of utilities, law and order problem in some States and poor performance of some contractors. Regardless of these constraints, the impact on the economy due to completion of about 96 per cent of the GQ is already visible. All the above-mentioned projects would be financed through various sources of

funds like cess, loan assistance from the World Bank and ADB, borrowings by NHAI, estimated surplus amount available from the user’s fee as well as the share of private sector. Various sources of funding to finance these projects have been finalized and the financing plan implementation by the year 2015 has been approved. The requirement of funds during the 11th Plan (2007-2012) for implementation of NHDP has been worked out. The total amount required during this period is about Rs. 1,73,501Crs.

NHDP Programme helps in rising demand for future Infrastructure development:- The Committee on Infrastructure headed by the Honorable Prime Minister has proposed a massive National Highways Development Programme as follows:-

NHDP Component

Total Length

Completed 4 lane

Under Implementation

Balance for award of civil

works

Target For Completion

Golden Quadrilateral

5,846 5,721(96%) 125 - March 2007

NS- EW 7,142 3,436 2,915 791 December 2009 Port

Connectivity 380 206 168 6 December 2009

Other NH’s 962 781 161 20 December 2009 NHDP

Phase III 12,109 787 1,878 9,444 December 2009

NHDP Phase V

6500 106 928 5,470 December 2012

NHDP Phase VII

700 0 19 681 December 2015

Total 33,639 11,037 6,194 16,412

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Source NHAI

Source NHAI Public Private Partnership is a key vehicle for the forthcoming BOT projects in recent years from GOI…

Concession Period getting Longer, - Focus based on Public Private Partnership vehicle which making forthcoming BOT Projects order pipeline looks melodiously.

The Government of India (GOI) has amended the Nation Highways Act, 1956. Since the 1997 the GOI has allowed the private players to construct & develop all the new road projects approved which are based on Public Private Partnership Model in Jan–Feb 2009 which have concession period (time for construction & collection of the toll revenue) of 20-30 years projects.

Since then the public private partnership has come a long way & currently evolved as a prominent player’s vehicle for the implementation of projects with new NHDP program. At the time, we believe that the order pipeline in the road sector looks quite impressive level. It has been decided that all the sub projects in NHDP Phase III to Phase VII would be taken up on the basis of PPP on BOT mode.

Name of the Projects Likely Cost ( Rs. Crs) Completion of the GQ & EW- NS Corridor 52434 4- Laning of 11,113 km under NHDP Phase III. 72454

2- Laning with paved shoulders of 20,000 km of National Highways under NHDP IV

27800

6- Laning of selected stretched of National Highways under NHPD Phase V

41210

Development of 1000 km of expressway under NHDP Phase – VI 16680

Construction of rings roads, Flyovers & by passes on selected under NHDP Phase - VII

16680

TOTAL 227,258

Sr No Funding Source Amount (Rs Crs) 1 Cess 36,589 2 External Assistance 4,459 3 Borrowings by NHAI 41,615 4 Surplus from the user free 3,108 5 Share of Private Sector 87,735 Total 1,73,501

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Source NHAI

Robust Growth of the Indian Infrastructure in the near term basis…

Outlook of Infrastructure sector:-

With a sweet & wash out victory of the UPA alliance in the recent government election, the importance towards the promised reforms & huge focus towards the development of the India Infrastructure in the near term comes back in limelight of the possible growth. The XIth & XIIth Five years plan will bring India’s growth story in coming periods, which is focused on the infrastructure and its allied activities. As the focus on the recent XIth & XIIth five year plan would pay a significant role in building India along with ranks of the other world economies in coming periods. The Infrastructure sector in India are expected to draws funds of about US$ 345bn during the XIth Five year plan, which offers huge investment opportunities. The strategy for the 11th Plan entails strengthening and consolidating the infrastructure-related initiatives, such as Bharat Nirman for building rural infrastructure,

Project - Road Stretch Length Programme Project Cost (INR bn)

State Concession Period

4 - laning Cuddapah Kurnool

188 NHDP III 17.5 Andhra Pradesh 30

4 - laning Walayar – Vadakkancherry

58 NHDP II 6.9 Kerala 20

4 - laning Cuddapah Kurnool

64 NHDP III 6 Andhra Pradesh 25

6 – laning Vadakkancherry – Thrissur

30 NHDP II 6.4 Kerala 20

6 – laning Delhi – Agra

179 NHDP V 25 U.P./ Haryana 26

6 – laning Kisangarh – Udaipur

315 NHDP V 36 Rajasthan 29

6 – laning Chandikol– Bhubaneshwar

67 NHDP V 11 Orissa 27

6 – laning Vijay Wada – Rajamundri

198 NHDP V 28 Andhra Pradesh 30

6 – laning Varanasi – Aurangabad

192 NHDP V 30 U.P. 30

6 – laning Nellore – Chilkaluripet

184 NHDP V 24 Andhra Pradesh 30

6 – laning Krishnagiri – Walahajpet

148 NHDP V 17 Tamil Nadu 30

6 – laning Belgaum – Dharwad

80 NHDP V 7 Karnataka 30

6– laning Indore – Dewas

45 NHDP V 5 Madhya Pradesh 30

Total 1748 220

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Top Most Player among its peers & with long & biggest projects in the road development……

sectoral initiatives, such as the RGGVY, APDRP, Accelerated Irrigation Benefit Programme (AIBP), NHDP, National Maritime Development Programme (NMDP) and the JNNURM.

The strategy for the Eleventh Plan also encourages private sector participation directly as well as through various forms of PPP’s where desirable and feasible. The share of the private sector in infrastructure investment will have to rise substantially from about 20% anticipated in the Tenth Plan to around 30% in the Eleventh Plan.

Best Player among its peers in the road developers business:-

IRB Infra is one the earlier entrants in the Public Private Partnership programme by signing a concession agreement for the Thane - Bhiwandi bypass Phase I project in 1995. This ideally position company for any investment, which is targeted primarily towards the road development in India.

Project Name Location Length (KM)

Concession Period

Project Cost (Rs Crs )

Concession Ends

NKT Maharashtra 60.0 15 368.0 December -16

Pune - Nashik Maharashtra 30.0 18 73.7 September -21

Pune - Solapur Maharashtra 26.0 16 63.0 March -19

Thane - Ghodbunder Maharashtra 15.0 15 108.1 December -20

Kharpada Bridge Maharashtra 15.0 16 32.0 August -15

MPEW & NH 4 Maharashtra 206.0 15 & 13 383.6 August -15

Thane - Bhiwandi Maharashtra 23.0 19.5 104.0 May -17

Kaman - Paygaon Maharashtra 22.0 15 14.4 December -13

Bharauch - Surat Gujarat 65.0 15 1409.1 January -22

Mohol – Kurul - Mandrup Maharashtra 33.0 16 18.0 May -18

Surat – Dahisar Gujarat 239.0 12 2835.0 January -21

IRDP Kolhapur City Maharashtra 50.0 30 430.0 September -30

Goa/ Karnataka Goa 65.1 30 800.0 NA

Talegoan – Amravati Maharashtra 66.7 22 800.0 NA

Jaipur - Deoli Rajasthan 148.8 25 1,500.0 NA

Amritsar – Pathankot Punjab 102.4 20 1,200.0 NA

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Projects per company

Source NHAI, IGSL Research

Strong in house builds O&M, which help company to maintain its margin in forthcoming period…

The Company with the focused bidder in the road sector alone was able to make its presence in the NHDP contractor and is now the largest players in the segment in terms of kilometers under contract. The company is not at all in the bidding process of the annuity based projects and is a pure toll based player wherein the upside to returns resides with the company.

In-house Construction Strength:- The EPC activities for IRB developers funded construction projects as well as for BOT projects are all completed within the IRB Group. Similarly, operation and maintenance activities (O&M) related to its BOT projects, including toll collection, are also executed within the IRB Group.

IRB has a strong in-house construction arm, which takes care of the complete activities starting from Engineering, procurement & construction. IRB has 20 years of experience in Toll Business, which includes the agency toll collections & approx. 13 years of experience since the time the first BOT project (Thane - Bhiwandi) was awarded to the company. The company has strong locational advantage in serving the fast growing and strong economic centers of India viz, Maharashtra & Gujarat. IRB owns a large fleet of sophisticated construction equipment and this enables it to be less dependent on third parties and to efficiently manage its equipment assets. This form of backward integration provides IRB with a competitive advantage over other infrastructure development and construction companies that generally need to outsource portions of their operations to external contractors.

Company Number of Projects Length (km) Annuity BOT IRB Infra 16 1117 - 16

LNT 14 1000 NA NA GMT 8 603 4 4

Gammon Infra 7 257 4 3 Nagarjuna Const 5 250 2 3

IVRCL Infra 3 149 - 3 HCC 4 131 1 2

Patel Eng 2 109 2 -

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Order Book Position (As on June 2009)

45%

51% 4%

Funded Project

BOT Projects In O&M Phase

EPC in ongoing BOT Projects

Moving Towards the PAN INDIA presence:- As IRB Infra was presently handling the projects only based on the selected states i.e. Gujarat & Maharashtra has now moved towards the other region bagging nearly 4 new projects which makes the total of 16 BOT projects for the company. The projects belong to the states like Punjab, Rajasthan & Karnataka etc. We consider this as a positive development for the company for developing long term capabilities for executing projects in various states of the country.

Source Company

Order book Composition Rs in Crs

BOT Projects in O&M Phase 2,567

Funded Projects 228

EPC in ongoing Projects 2,866

Total 5,660

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Upcoming opportunities for IRB Infra…… IRB Surat Dahisar Tollway Pvt. Ltd. Six laning of the existing four-lane Surat - Dahisar section of NH 8 for a total length of 240 kms. The project involves the construction of 25 flyovers over various junctions. IRB Kolhapur IRDP Ltd. Maharashtra State Road Development Corporation (MSRDC) awarded the maintenance & operating contract to IRB to develop & maintain all major roads in Kolhapur city

Source Company Healthy Order backlog involving large projects like Surat-Dahisar & Kolhapur City IRB has a strong order book of Rs 5700Crs. This include 3300Crs of order from the EPC segment which has to be executed over the next 3years & order worth Rs 2400Crs from O&M with an execution period of 10-12years.

Surat - Dahisar: - Surat-Dahisar project involves the six laning of the existing four-lane Surat - Dahisar section of NH 8 for a total length of 240 kms. IRB has entered into an agreement with Deutsche Bank as a financial partner, which has an equity stake of 10% in this project. The total cost of this project is estimated at Rs. 23bn (revised construction cost), which would be funded through a mix of internal accruals & borrowings (70:30 Debt-Equity). The original construction cost was Rs. 28.4bn, which has been revised downwards due to decrease in the prices of bitumen & steel. The concession period is for 12 years including the construction period of 30 months (from Feb 2009). The project involves the construction of 25 flyovers over various junctions. However, the company would have to pay the effective share of 38% to NHAI of the toll revenue for the initial year of the concession period with an increase of 1% revenue share in each succeeding year during the course of the concession period. The toll collections have already started from February 2009 onwards.

Kolhapur City :- In March 2008, the Maharashtra State Road Development Corporation (MSRDC) awarded the maintenance & operating contract to IRB to develop & maintain all major roads in Kolhapur city. It is for the first time in the history of India’s road sector that a single operator has been appointed such project. The project will cover the up gradation of all major roads in Kolhapur into four-lane with all related infrastructure like footpaths. The total length of the road under up gradation is 49.5 km. After up gradation, IRB would own & operate these roads for 30 years. The total cost of the up gradation project is estimated at Rs 4bn (including negative

Name of the Client RFP Stage RFQ Stage

NHAI Projects – Phase III 812.20 6055.63

NHAI Projects – Phase V 8742.96 1896.0

NHAI Projects – on OMT Basis 92.0 646.0

GSRDC Projects - 1352.36

Gov. Of Rajasthan Projects - 500.0

Maharashtra PWD Projects 1219.4 189.5

Total 10,866.56 10,639.49

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Recently Awarded Projects OF IRB Infra…… Four-laning of the 65-km long National Highway- 4a Goa-Karnataka border starting from Panjim Four-lane a 102-km stretch of the Pathankot- Amritsar section of National Highway-15, on a BOT basis Jaipur to Deoli section of NH12 (a 146 km stretch) in Rajasthan under NHDP Phase III on BOT Basis

grant of Rs. 0.27bn to MSRDC), which is expected to be financed through a mix of debt (70%) & equity (30%). O&M cost over 30 years is around Rs. 650Crs. MSRDSC’s traffic data shows that around 45,000 vehicles enter and exit city through nine entry/exit points in a single day. The company expects to recover its investments through toll collection rights at the peripheral entry points of the city’s municipal limits (9 entry points). In addition to the concession period, IRB has been allotted commercial plot admeasuring 30,000 square meters by the municipal corporation. The lease period for this land is 99 years. Thus, this is the only BOT project wherein the company has got land development right. The construction activity has commenced from January 2009 & will take 2-2.5 years to be completed. The strong order book provides visibility to the future revenue and earnings of the company. This fiscal, IRB Infra expects to receive new projects worth Rs. 40-50bn. This would further strengthen the current order backlog. The break up of the current order book is given below as follows:

Other Recently Awarded Projects:-

Goa-Karnataka Highway project: Recently, IRB Infra has been awarded the four-laning of the 65-km long National Highway- 4a Goa-Karnataka border starting from Panjim. The contract has been awarded on a 30-year design-build-operate and transfer basis to IRB Infra, which will implement it through a special purpose vehicle. NHAI will be chipping in with Rs 186Crs by way of viability gap funding for this Rs. 800Crs project. The project is expected to be completed by 2011.

Highway project in Punjab: IRB Infra has emerged as the lowest bidder to four-lane a 102-km stretch of the Pathankot- Amritsar section of National Highway-15, on a BOT basis. The project is on Grant basis with concession period of 20 years and estimated cost of the project is Rs. 1200Crs. The Company has sought a grant of Rs. 126Crs for the project from NHAI. The construction period is 910 days.

Highway project in Rajasthan: IRB Infra has emerged as the lowest Bidder for the highway project to be built between Jaipur to Deoli section of NH12 (a 146 km stretch) in Rajasthan under NHDP Phase III on BOT Basis. The project is on Grant basis with concession period of 25 years & estimated cost of the project is Rs. 1500Crs. IRB Infra has sought a grant of Rs. 306Crs for the Project from NHAI.

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Four lanning of Talegaon - Amravati section of NH 6 (167-km stretch) under NHDP Phase III on BOT Basis MIDC to build an green field airport at sindhudurg on DBFO basis…… New Investments Strategies in WindMills business to save tax…… Maintain its operating margins by importing bitumen, furnance oil releated other products……

Highway project in Maharashtra: IRB Infra has emerged as the lowest Bidder for the highway project, which involves four lanning of Talegaon - Amravati section of NH 6 (167-km stretch) under NHDP Phase III on BOT Basis. The project is on Grant basis with concession period of 22 years & estimated cost of the project is Rs 800Crs. IRB Infra has sought a grant of Rs 216Crs for the Project from NHAI.

Venturing into New Segments – Airport Construction IRB Infrastructure Developers has bagged an order from the Maharashtra Industrial Development Corporation (MIDC) to build a Greenfield airport at Sindhudurg on design- build- finance- operate basis. The cost of the single-runway airport would be Rs 1500 mn. The company had to remit a premium of Rs 200 mn to the Government for the project. The construction period allowed for the project is 18 months and the concession period is 95 years. MIDC would hand over nearly 650 acres of land of which, 350 acres would go for airport development and the balance would be available to IRB for commercial use.

Investment into Wind Energy Business – to save tax Modern Road Makers Pvt Ltd (MRM), wholly owned subsidiary of IRB has installed 16 Wind Mills of 1.25MW each in Jaisalmer, Rajasthan and in aggregate, these wind turbines have capacity to generate 20MW which is sold to Jodhpur Vidyut Vitran Nigam Ltd. These windmills will enable MRM to take Benefit of accelerated depreciation which will result in savings on Corporate Tax. MRM has started process to register the windmill project with United Nations Framework Convention on Climate change for Clean Development Mechanism (CDM) under Kyoto Protocol.

Backward Integration – to boost operating margins going haead As a part of integration process, IRB through its subsidiary MRM Pvt Ltd has also ventured into importing Bitumen, Furnace Oil & Other petroleum products for self consumption & sale to third party. This has helped to tide over the challenges in raw material management and boost the company Operating Margins going forward.

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Risk & Concern involve for the future growth of IRB Infra…

Risk & Concerns

Equity Dilution: - As far as the IRB Infra is concerned, the company might have to dilute its equity for funding its awarded projects or to be awarded project by the way of equity dilution/ right issue/ preference issue. Slowdown in the Economic growth: - There is a significant risk in the traffic growth due to the slowdown of the economy. Also the ability to raise the toll revenue beyond detrain point because of the government intervention. Price Escalation: - Any price escalation in the cost of and/or scarcity in availability of key equipments, material cost may affect the IBRD performance. Projects Delays: - Delays in completion of the current contracts or complying with contract schedules could have a material adverse effect on IRB’s cash flow position, revenues and earnings. IRB’s revenues are derived primarily from contracts awarded on a project-by-project basis. It is very difficult to predict whether & when a new project would be awarded due to lengthy & complex bidding & selection processes. This could result in substantial fluctuations in IRB’s operations and cash flows materially from period to period depending on the timing of contract awards.

Interest Rate Risk: - The interest rate of most of the projects under the execution are linked to the benchmark rates & reset at Periodic interval.

Poor Traffic Growth: - Traffic is one of the basic parameters affecting the viability of road projects. The ongoing economic slowdown and a rise in fuel price could adversely affect traffic growth. Toll rates and development of an alternative route also affect traffic. As per the concession agreement, an alternate route can only be developed under certain circumstances such as when the existing road traffic has achieved its designated capacity.

Regulatory Risk: - The government and regulatory authorities are involved in IRB’s all infrastructure projects. Timely acquisition of land by the authorities and various approvals is crucial for the timely completion of the project. The company’s success depends on support from the authorities and the government; and resolving any issues regarding regulatory changes.

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EBITDA margins to remain constant …. The company is focusing on the new projects under the NHDP programme which provides them to maintain its EBITDA margin going ahead by ~45%. Also main raw materials (Bitumen) is been required more for upcoming projects so the company entering in fixed price contract therapy for the raw material consumption, which would help in maintaining its EBITDA margins going forward…. Revenue growth trends give a glimpse of IRB Infra Future growth ….. We expect the Company to grow its top-line by CAGR of 72% from 991.88Crs during FY 09 to 3128.72Crs by FY11E. Strong sales grow on account of robust order book which stood at 5700Crs as on June 2009. ROE for FY10 & FY11 is expected to be 18.74% & 22.11%, an improvement of 10.17% during the FY 09. ROCE is expected to increase in line with ROE from 15.37% to 17.50% during FY10 & FY11 compared to 8.21% during the FY 09.

Earnings Outlook & Financial Details

63.32

40.49

60.45

47.08 50.0546.10

43.2549.45

35.5536.66

15.5517.73 19.14 17.93

7.39

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

FY 2007 FY 2008 FY 2009 FY 2010E FY 2011E

%

EBITDA Margins EBIT Margins PAT Margins

Source IGSL Research

Sales Trend

305.71732.69

991.88

2001.11

3128.72

0.00

1000.00

2000.00

3000.00

4000.00

FY 07 FY 08 FY 09 FY 10E FY 11E

Rs (Crs)

Source IGSL Research

ROE &ROCE showing a mixed trend

17.50

15.37

8.21

4.40

9.87

22.11

18.74

10.17

5.99

7.03

0.00

5.00

10.00

15.00

20.00

25.00

FY 2007 FY 2008 FY 2009 FY 2010E FY 2011E

ROCE (%) ROE (%)

Source IGSL Research

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Mumbai Pune Expressway & NH4 Agreement Period 2004-19 Concession Period 15yrs Total Cost 1301.6 Total Debt 1184.1 Total Equity 105 Internal Accruals 15 Payable to MSRDC 918 Construction Cost 383.6 Operation & Maintenance 754.79 Growth in toll Charges every 3 year 18% Growth in Traffic 6% Net Present value 1257.19 NPV/Shares 35.83

Surat Dhaisar BOT Project Agreement Period 2010-21 Concession Period 12yrs Total Cost 2835 Total Debt 1956 Total Equity 879 Growth in toll Charges 5% Growth in Traffic 6% Net Present value 2063 NPV/Shares 26.62

Surat Barauch BOT Project Agreement Period 2006-22 Concession Period 15yrs Total Cost 1409 Upfront Fee 504 Total Debt 1211 Total Equity 198 Growth in toll Charges 5% Growth in Traffic 6% Net Present value 1037.70 NPV/Shares 31.23

Source IGSL Research

Pune Solapur BOT Project Agreement Period 2003-19 Concession Period 16yrsTotal Cost 63Total Debt 45Total Equity 18Growth in toll Charges 5%Growth in Traffic 6%Net Present value 102.05NPV/Shares 3.07

Pune Nashik BOT Project Agreement Period 2003-19 Concession Period 18yrsTotal Cost 73.7Total Debt 72.7Total Equity 1Growth in toll Charges 5%Growth in Traffic 6%Net Present value 147.57NPV/Shares 4.44

Thane Bhiwandi Bypass Agreement Period 1998-17 Concession Period 18yrs Total Cost 104 Total Debt 70 Total Equity 34 Growth in toll Charges 6% Growth in Traffic 5% Net Present value 260.85 NPV/Shares 7.85

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Source IGSL Research

Kaman Paygoan BOT Project Agreement Period 1998-13 Concession Period 15yrsTotal Cost 14.4Total Debt 10Total Equity 4.4Growth in toll Charges 5%Growth in Traffic 6%Net Present value 15.37NPV/Shares 0.46

Thane Godhbunder Road Agreement Period 2005-20 Concession Period 15yrs Total Cost 246.3 Total Debt 216.6 Total Equity 29.7 Growth in toll Charges (Every 3 years) 18% Growth in Traffic 6% Net Present value 233.94 NPV/Shares 7.04

Kharpada Bridge BOT Project Agreement Period 1997-15 Concession Period 17.7 yrs Total Cost 32 Total Debt 22 Total Equity 11 Growth in toll Charges 5% Growth in Traffic 4% Net Present value 37.26 NPV/Shares 1.12

MKKM BOT Project Agreement Period 1998-17 Concession Period 16yrsTotal Cost 18Total Debt 11Total Equity 7Growth in toll Charges 5%Growth in Traffic 6%Net Present value 41.25NPV/Shares 1.24

NKT BOT Projects Agreement Period 2001-16 Concession Period 15yrs Total Cost 36.8 Total Debt 21.8 Total Equity 15 Growth in toll Charges 5% Growth in Traffic 6% Net Present value 66.51 NPV/Shares 2.00

IRDP Kolhapur City BOT Projects Agreement Period 2009-39 Concession Period 30yrsTotal Cost 430Total Debt 258Total Equity 172Growth in toll Charges 6%Growth in Traffic 5%Net Present value 798.50NPV/Shares 9.13

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Source IGSL Research

Goa Karnataka BOT Project Agreement Period 2010-40 Concession Period 30yrs Total Cost 800 Govt Grand 186 Total Debt 430 Total Equity 190 Growth in toll Charges 5% Growth in Traffic 6% Net Present value 368.96 NPV/Shares 7.67

Pathankot Amritsar BOT Project Agreement Period 2010-30 Concession Period 20yrs Total Cost 1200 Govt Grand 127 Total Debt 751 Total Equity 322 Growth in toll Charges 6% Growth in Traffic 5% Net Present value 348.60 NPV/Shares 3.53

Talegoan Amravati BOT Project Agreement Period 2010-35 Concession Period 22yrsTotal Cost 800Govt Grand 216Total Debt 400Total Equity 184Growth in toll Charges 6%Growth in Traffic 5%Net Present value 440.14NPV/Shares 13.25

Jaipur Deoli BOT Project Agreement Period 2010-35 Concession Period 25yrsTotal Cost 1500Govt Grand 306Total Debt 836Total Equity 358Growth in toll Charges 6%Growth in Traffic 5%Net Present value 792.04NPV/Shares 9.49

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Q1 FY10 Quarter Performance Analysis

P & L (Rs in Crs)

June FY 2009

June FY 2009

Var (%)

March FY 2009

March FY 2008

Var (%)

Statements Q1 Q1 Full Year FullYear Net Sales 414.13 230.06 80.01 991.88 732.69 35.38 Total expense 247.95 112.63 120.15 554.48 320.81 72.84 EBITDA 166.18 117.43 41.51 467.00 463.94 0.66 EBITDA % 40.13 51.04 -21.39 47.08 63.32 -25.64 Interest 46.72 31.02 50.61 137.66 195.75 -29.68 EBDT 119.46 86.41 38.25 329.34 268.19 22.80 EBDT % 28.85 37.56 -23.20 33.20 36.60 -9.29 Deprecitation 37.64 25.53 47.43 114.38 101.61 12.57 Other Income 21.5 5.85 267.52 29.6 52.02 -43.10 PBT 103.32 66.73 54.83 244.56 218.60 11.88 PBT % 24.95 29.01 -13.98 24.66 29.83 -17.36 Tax 18.18 12.56 44.75 37.78 39.98 -5.50 Tax rate 17.60 18.82 -6.52 15.45 18.29 -15.54 PAT 85.14 54.17 57.17 206.78 178.62 15.77 PAT % 20.56 23.55 -12.69 20.85 24.38 -14.48 Miniority Interest 3.68 0.00 0.00 1.32 12.64 -89.56 Adj PAT 81.46 54.17 50.38 205.46 165.98 23.79 EPS 2.45 1.63 50.38 6.18 4.99 23.79 Equity 332.3 332.3 - 332.3 332.3 - No of Shares 33.23 33.23 - 33.23 33.23 - Face value 10 10 - 10 10 -

IRB has posted a performance driven record in current quarter with a robust top line growth of 80% to Rs 414.13Crs in Q1FY10 as against Rs 230.06Crs in Q1FY09. Company majorly concentrating on project execution & simultaneously building up robust order backlog with Rs 430Crs projects to be awarded where the company emerged as lowest bidders.

EBITDA Margins for the Quarter declined 1090bps to 40.1in Q1 FY10 from 51.0% in Q1FY09. As the

company has changed, its revenues mix in favour of construction segment, which earns relatively lower margins (18.4% for the quarter).

PAT Margins for quarter declined by 300bps to 23.6% in Q1FY09. PAT shown a record of 50%growth to Rs

81.5Crs against Rs 54.17Crs largely by other income contribution of Rs 21.5Crs.

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Price target Derivation We expect the revenue & net profit to grow at the CAGR of 62% & 68% for the period from FY 08A to FY 11E. We have done the SOTP Valuation for IRB INFRA which includes DCF Valuation of BOT projects aggregates to Rs 163.98/shares while the EPC contributes nearly at Rs 60.94/share. NAV of the 1250acres of land contributes the land value at Rs 5.94/share, Wind Mills at Rs 3.18, & Cash with holding company at Rs 21.42. Thus aggregating to Rs 255.46/ share with an upside of 32%. We initiate coverage on IRB Infrastructure with a BUY rating and a price target of 255.46 – indicating an upside of 32%. Given the strong order book position, high execution capability & strong track record, with strong Govt. focus on road infrastructure creating massive opportunity from new projects to add the order book. We believe that with large number of outstanding bids there is an upside to our price target with limited downside.

List of Projects Project Cost (Crs) Ownership(%) NPV/Share Method Thane – Biwandi Bypass 104 100 7.85 FCFEKaman – Paygaon Road 14.4 100 0.46 FCFEKharpada BOT 32 100 1.12 FCFENagar – Karmala - Tembhurni Project 36.8 100 2.00 FCFEMohol – Kurul – Kamati - Mandrup Road 18.0 100 1.24 FCFEPune - Solapur 63.0 100 3.07 FCFEPune - Nashik 73.7 100 4.44 FCFEPune – Mumbai (Expressway & NH4) 1301.6 100 35.83 FCFEThane – Ghodbunder Road 246.3 100 7.04 FCFESurat - Bharuch 1409.1 100 31.23 FCFESurat - Dahisar 2500.0 100 26.62 FCFEIRDP Kolhapur City Project 430.0 100 9.13 FCFEGoa - Karnataka 800.0 100 7.67 FCFEPathankoat - Amritsar 1200.0 100 3.53 FCFEJaipur - Deoli 1500.0 100 9.49 FCFEAmaravati - Talegaon 800.0 100 13.25 FCFE Total BOT 163.98 EPC 100 60.94 11.84x FY11EReal Estate 100 5.94 NAVWind Mills 105.7 100 3.18 NAVCash Value 711.81 21.42 NAV Total 255.46

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Profit & Loss Statement Rs Crs FY07 FY08 FY09 FY10E FY11E Gross Sales 305.71 732.69 991.88 2001.11 3128.72Excise Duty 0 0 0 0 0Net Sales 305.71 732.69 991.88 2001.11 3128.72% Growth 18.95 139.67 35.38 101.75 56.35Other Income 19.37 52.02 29.6 50 50Total Income 325.08 784.75 1021.48 2035.92 3169.66% Growth 59.16 141.40 30.17 99.31 55.69 Total Expenditure Direct Expenses 107.82 258.91 468.24 860.48 1407.92% Sales 35.27 35.34 47.21 43.00 45.00Employee Expenses 14.8 34.1 42.48 85.65 156.44% Sales 4.84 4.65 4.28 4.28 5.0Office Expenses 17.66 27.80 43.76 88.25 163.01% Sales 5.78 3.79 4.41 4.41 5.21Total Other Expenses 210.49 274.7 373.15 412.7 497.44% Sales 14.19 12.64 11.65 11.32 10.70TOTAL EXPENDITURE 140.28 320.81 554.48 1034.37 1727.37% Sales 45.89 43.79 55.90 51.69 55.21EBITDA 184.80 463.94 467.00 1001.55 1442.29% Growth 151.05 0.66 114.46 44.01Depreciation 52.59 101.61 114.38 191.31 295.43EBIT 132.21 362.33 352.62 810.24 1146.86Interest 87.66 195.75 137.66 343.88 464.72PBT 44.55 166.58 214.96 466.36 682.15% Growth 131.90 273.91 29.05 116.95 46.27Tax 16.22 36.06 21.70 50.13 62.19Fringe Benefit Tax 0.26 0.7 15.53 31.31 57.19Deferred Tax -1.73 3.22 0.54 0.54 0.54Total Tax 14.75 39.98 37.78 81.99 119.92Reported Profit After Tax 29.80 126.60 177.18 384.37 562.23% Growth 324.82 39.96 116.94 46.27Minority Interest 7.2 12.64 1.32 1.32 1.32Net Profit 22.60 113.96 175.86 383.05 560.91Source IGSL Research

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Balance Sheet Rs Crs FY07 FY08 FY09 FY10E FY11E SOURCES OF FUNDS Share Capital 247.27 332.36 332.36 332.36 332.36Reserves Total 130.32 1288.38 1397.72 1711.95 2205.03Net worth 377.59 1620.75 1730.08 2044.31 2537.39Total Debt 2517.96 2021.2 2485.87 3126.16 3872.63Minority Interest 111.78 28.11 59.91 82 125Differed Tax Liability (Net) 0.6 2.62 18.15 18.15 18.15Total Liabilities 3007.93 3672.68 4294.01 5270.42 6553.17APPLICATION OF FUNDS Gross Block 2119.34 2218.85 2460.09 3536.39 4192.89Less : Accumulated Depreciation 232.56 334.04 443.96 635.27 930.7Net Block 1886.78 1884.81 2016.13 2901.12 3262.19Capital Work in Progress 555.23 888.85 1454.53 1000 1650Investments 41.35 198.49 110.83 125 120.83Current Assets, Loans & Advances Inventories 9.17 50.21 205.39 414.37 647.87Sundry Debtors 143.65 11.76 12.98 70.81 95.85Cash and Bank 370.34 522.15 414.73 591.80 711.81Loans and Advances 213.45 374.78 399.5 550 600Total Current Assets 736.61 958.9 1032.6 1626.98 2055.53Current Liabilities 544.15 1033.36 1027.6 1212.57 1442.96Provisions 343.45 445.25 666.7 833.78 1000.54Total Current Liabilities 231.35 259.95 321.03 383.62 536.33Net Current Assets 505.26 698.95 711.57 1243.35 1519.20Total Assets 3007.93 3672.68 4294.01 5270.42 6553.17Source IGSL Research

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CASH FLOW Rs.Crs FY07 FY08 FY09 FY10E FY11E Profit before Tax & Extraordinary Items 44.55 166.58 214.96 466.36 682.15ADD: Depreciation 52.58 101.61 114.38 163.87 184.73ADD: Interest (net) 75.32 147.13 115.62 311.78 458.37ADD: Others -5.63 -3.65 -0.84 -4.08 1.12 Op. Profit before Working Capital Changes 166.82 411.66 444.12 937.93 1326.37 Changes IN WC 103.48 -158.49 -142.08 -402.63 -265.75Cash Generated from/(used in) Operations 270.30 253.17 302.04 535.30 1060.61Direct Tax Paid -23.12 -41.21 -40.49 -81.99 -119.92 Cash Flow From Operating Activities 247.18 211.96 261.55 453.32 940.69 Cash Used in Investing Activities -1168.0 -528.3 -606.7 -513.3 -1217.3 Net Cash Used in Financing Activities 931.36 407.54 330.79 -11.27 386.84 (Decrease)/Increase in Share Capital 425 0 0 0 0 (Decrease)/Increase in Working Long Term Borrowings 29.24 703.04 535.68 68.73 50.00Dividend Paid -6.60 -1.48 -22.26 -66.45 -66.45Interest Paid -86.04 -194.23 -125.73 -318.38 -424.72 Net Inc/(Dec) in Cash and Cash Equivalent 10.53 91.16 -14.38 -71.28 110.20 Cash & Cash Equivalents at Beginning of the year 9.81 20.34 111.50 97.13 25.85 Cash & Cash Equivalents at End of the year 20.34 111.50 97.13 25.85 136.05Deposit Account Balance 0.00 411.03 318.00 552.39 575.76Total Cash & Bank Balance 20.34 522.15 414.73 591.80 711.81

Source IGSL Research

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Ratio Analysis Turnover Ratios FY07 FY08 FY09 FY10E FY11E Net sales to total assets 0.10 0.20 0.23 0.38 0.48Net sales to Fixed assets 0.16 0.39 0.49 0.69 0.96Net sales to net working capital 0.61 1.05 1.39 1.61 2.06Net Working Capital Days 603.25 348.19 261.85 226.79 177.23Working Capital to Sales -0.05 -0.07 -0.05 -0.06 -0.04Net sales to inventory 33.34 14.59 4.83 4.83 4.83Net sales to debtors 2.13 62.30 76.42 28.26 32.64Inventory Days 35.45 63.67 114.03 96.88 75.58Debtors Days 92.78 6.16 15.42 15.20 11.18Creditors Days 124.08 58.58 50.56 30.26 21.85Liquidity ratios (x) Current ratio 3.18 3.69 3.22 4.24 3.83Debt Equity ratio 6.67 1.25 1.44 1.53 1.53Inventory Days 35.45 63.67 114.03 96.88 75.58Valuation Ratios (x) EPS 0.68 3.43 5.29 11.19 16.38Dilute EPS 0.68 3.43 5.29 11.19 16.38Cash EPS 2.26 6.49 8.73 16.94 25.27PE 275.01 54.54 35.34 16.23 11.08Book Value Per Share 15.27 48.76 52.05 61.17 75.51P/BV 12.25 3.83 3.59 3.04 2.45EV/EBIDTA 36.64 16.63 17.74 8.74 6.50EV/SALES 22.15 10.53 8.35 4.37 3.00Market Cap/Sales 15.13 8.48 6.27 3.11 1.99Face Value (Rs) - 10 10 10 10Return Ratios (%) ROE 5.99 7.03 10.17 18.74 22.11ROCE 4.40 9.87 8.21 15.37 17.50Margins (%) EBIDTA 60.45 63.32 47.08 50.05 46.10EBIT 43.25 49.45 35.55 40.49 36.66PAT 7.39 15.55 17.73 19.14 17.93Growth (%) Sales - 139.67 35.38 101.75 56.35EBIDTA - 151.05 0.66 114.46 44.01EBIT - 174.05 -2.68 129.77 41.55PAT - 404.23 54.33 117.81 46.43EPS - 404.23 54.33 117.81 46.43Source IGSL Research

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