Monday, May 11, 2015

PNC Infratech Limited - 4 BOT projects

PNC Infratech Limited - 4 BOT projects to start paying-off in FY2016-17E, says Angel Broking Report
HDFC MF picks up 25% of anchor investor portion of Rs. 146 cr

PNC Infratech Limited (“PNC”) currently has four BOT projects to start paying off in FY20116-17E, as per Angel Broking’s report on the IPO. PNC is poised to deliver healthy growth on the top-line as well as the bottom-line front with improvement in order book, particularly on account of revival in the NHAI and UP PWD award activity as per Angel Broking’s IPO Report dated 8th May 2015. On the valuation front, the Company is available at a 12% discount to its listed Road focused EPC peers on Adj. P/E basis at the lower end of the issue price as per the Angel Report. The Issue sized between Rs. 455 crore to Rs. 488 crore closes on Tuesday, 12th May 2015.

The Report highlighted that the Ghaziabad-Aligarh, Kanpur-Kabrai and Bareilly-Almora BOT projects would commence tolling in FY2016E. Whereas, the company’s only BOT Annuity project in the portfolio, Rae Bareilly-Jaunpur BOT project, is expected to commence operations in FY2017E. With commencement of these 4 BOT projects, revenues from these subsidiaries should see sharp growth in FY2016-17E. In-line with surge in revenues, we expect debt repayment cycle of these SPVs to commence, thereby easing consol. Balance sheet stress,” says the Angel report.

PNC has 8 BOT/OMT Assets which are at different stages of execution. Of this 1 is BOT-Annuity project, 1 is an Industrial Estate maintenance project (BOT-Annuity+Fee model), 1 is an OMT project and the remaining 5 are BOT-Toll projects. Notably, all the 8 BOT projects are either UP based or are Central/North India focused. Again, if we look into the details, then the most interesting perspective that emerged is that 5 of the BOT projects have been won on Viability Gap Funding (VGF) basis amidst intense competition. The VGF component in the TPC comforts us to a certain extent. The equity IRRs are slated to be in the range of 16-18%, as has been highlighted by the Management. Only 4 of these 8 BOT/OMT projects are currently operational (including 1 OMT project). Barring Rae Bareilly-Jaunpur BOT project, all the required equity towards the other 7 BOT/OMT projects has been infused. Part proceeds (`65cr) of the IPO money would be deployed towards the equity of this project. Also all the required land for these 4 ongoing BOT projects is in place, thereby allaying fears of any delays in completion of the EPC works and in getting the Commercial Operations Date (CoD).

The Issue poses a good opportunity for investors with a 12 month investment horizon as the stock has potential to get re-rated on account of panning out of possible triggers, which include 1) commencement of Tolling/ Annuity across 4 BOT projects, 2) news flow pertaining to better execution and stable EBITDA margins (at ~13%) and (3) gradual build-up in the company’s track-record as a listed entity. Accordingly, we advise investors with a 12 months investment horizon to SUBSCRIBE to this issue at the lower end of the price band.

According to Angel Broking report, Order book to FY2015 sales (for the standalone entity) is at 2.2x which gives good revenue visibility; Rs. 50,000cr of NHAI and Uttar Pradesh (UP) PWD Roads & Highways bid-pipeline, gives visibility on the order book growth front; commencement of 4 BOT projects in the next 12 months to ease Balance Sheet stress. Announcements on new order wins, better execution, and commencement of BOT projects could lead to re-rating.

The Company has finalized the allocation of 3,861,511 equity shares to anchor investors at Rs. 378 (upper end of Price Band) aggregating to approximately around Rs. 146 crore. The anchor investors include Goldman Sachs India, HDFC Trustee Co Ltd., Birla Sun Life Trustee Co. Ltd., DSP Blackrock India, Reliance Capital Trustee Co. Ltd., Reliance Mutual Fund, L&T Mutual Fund, Sundaram Mutual Fund and Kotak Mutual Fund. HDFC MF has picked up 25% of the total anchor investor portion of Rs. 146 crore.

The anchor allotment was as follows: GOLDMAN SACHS INDIA FUND – 2,64,530 equity shares (6.85%); HDFC TRUSTEE COMPANY LTD - HDFC CORE & SATELITE FUND – 1,45,985 equity shares (3.78%); HDFC TRUSTEE COMPANY LTD - HDFC INFRASTRUCTURE FUND – 8,27,540 equity shares (21.43%); BIRLA SUN LIFE TRUSTEE COMPANY PRIVATE LIMITED A/C BIRLA SUN LIFE MID CAP FUND – 3,96,550 equity shares (10.27%); BIRLA SUN LIFE TRUSTEE COMPANY PRIVATE LIMITED A/C BIRLA SUN LIFE SMALL & MIDCAP FUND – 79,240 equity shares (2.05%); BIRLA SUN LIFE TRUSTEE COMPANY PRIVATE LIMITED A/C BIRLA SUN LIFE PURE VALUE FUND – 52,815 equity shares (1.37%); BIRLA SUN LIFE TRUSTEE COMPANY PRIVATE LIMITED A/C BIRLA SUN LIFE EMERGING LEADERS FUND SERIES 3 – 33,005 equity shares (0.85%); BIRLA SUN LIFE TRUSTEE COMPANY PRIVATE LIMITED A/C BIRLA SUN LIFE EMERGING LEADERS FUND SERIES 4 – 19,600 equity shares (0.51%); DSP BLACKROCK INDIA TIGER FUND – 4,49,715 (11.65%); RELIANCE CAPITAL TRUSTEE CO LTD AC RELIANCE CLOSE ENDED EQUITY FUND SERIES A – 1,85,185 equity shares (4.8%); RELIANCE MUTUAL FUND A/C RELIANCE CAPITAL BUILDER FUND SR C – 1,58,725 equity shares (4.11%); RELIANCE CAPITAL TRUSTEE CO. LTD- A/C RELIANCE EQUITY OPPORTUNITIES FUND – 3,17,450 equity shares (8.22%); L&T MUTUAL FUND TRUSTEE LTD - L&T MIDCAP FUND – 83,055 equity shares (2.15%); L&T MUTUAL FUND TRUSTEE LTD - L&T EMERGING BUSINESSES FUND – 85,925 equity shares (2.23%); L&T MUTUAL FUND TRUSTEE LTD - L&T INDIA PRUDENCE FUND – 63,813 equity shares (1.65%); SUNDARAM MUTUAL FUND A/C SUNDARAM MONTHLY INCOME PLAN - AGGRESSIVE PLAN – 18,515 equity shares (0.48%); SUNDARAM MUTUAL FUND - SUNDARAM BALANCED FUND – 18,515 equity shares (0.48%); SUNDARAM MUTUAL FUND A/C SUNDARAM INFRASTRUCTURE ADVANTAGE FUND – 1,05,707 equity shares (2.74%); SUNDARAM MUTUAL FUND A/C SUNDARAM SELECT MICROCAP SERIES V – 27,300 equity shares (0.71%); SUNDARAM MUTUAL FUND A/C SUNDARAM SELECT MICROCAP SERIES VI – 40,250 equity shares (1.04%); SUNDARAM MUTUAL FUND A/CSUNDARAM SELECT MICROCAP SERIES VII – 22,505 equity shares (0.58%); KOTAK CLASSIC EQUITY – 46,564 equity shares (1.2%); KOTAK EMERGING EQUITY FUND – 1,86,229 equity shares (4.82%); KOTAK MAHINDRA (UK) LIMITED A/C INDIA MIDCAP FUND (MAURITIUS) LTD – 2,32,793 equity shares (6.03%).

The Company proposes to open on Friday, 8th May, 2015, a public issue of up to 12,921,708 Equity Shares of face value of Rs. 10 each (the “Equity Shares”) including a share premium per Equity Share (the “Offer”). The Price Band is fixed from Rs. 355 to Rs. 378 per Equity Share. The Offer comprises a fresh issue to the public of up to 11,500,000 Equity Shares by the Company (the “Fresh Issue”) and an Offer for Sale of up to 1,421,708 Equity Shares (the “Offer For Sale”) by NYLIM JACOB BALLAS INDIA (FVCI) III LLC (THE “Selling Shareholder” or “NYLIM JB”).

The Offer includes a reservation of 50,000 Equity Shares for subscription by Eligible Employees (the “Employee Reservation Portion”). The Offer less the Employee Reservation Portion is referred to as the “Net Offer” aggregating up to 12,871,708 Equity Shares. The Bid/Offer closes on Tuesday, 12th May, 2015. The minimum Bid lot is 35 Equity Shares and in multiples of 35 Equity Shares thereafter. The Net offer shall constitute at least 25% of the Post-Offer Paid up Equity Share Capital of the Company.

The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on the NSE and the BSE.

The Book Running Lead Managers (the “BRLMs”) to the Offer are ICICI Securities Limited and IDFC Securities Limited.

The Company is an Indian infrastructure construction, development and management company, with expertise in the execution of major infrastructure projects, including highways, bridges, flyovers, power transmission lines, airport runways, development of industrial areas and other infrastructure activities. It provides EPC services on a fixed-sum turnkey basis as well as on an item rate basis for various infrastructure projects. They also execute projects on a BOT (including on a DBFOT basis), operate them during the concession period on toll or annuity basis and subsequently transfer the projects. The company has executed or is executing projects across various states in India covering Rajasthan, Punjab, Haryana, Uttarakhand, Uttar Pradesh, Delhi, Bihar, West Bengal, Assam, Madhya Pradesh, Maharashtra, Karnataka and Tamil Nadu. The Company has executed 42 major infrastructure projects on an EPC basis, acquiring experience particularly in the timely execution of EPC contracts since its incorporation. They have an established track record in executing large construction projects particularly in the roads and highways and airport runways sectors. The Company’s order book in terms of total value of contracts including escalation was Rs. 78,497.00 million as on March 31, 2015 and Rs. 60,857.80 million as on March 31, 2014. In the nine month period ended December 31, 2014, the consolidated revenues were Rs. 13,263.71 million and consolidated PAT was Rs. 624.32 million. In fiscal 2014, the consolidated revenues were Rs. 13,642.43 million and consolidated PAT was Rs. 519.69 million.


PNC Infratech Ltd
For additional information & risk factors please refer to the Red Herring Prospectus May-2015
Axis Capital
IPO NOTE
Issue highlights
• PNC Infratech Ltd (“PNC”) incorporated on August 9, 1999, is an Indian infrastructure construction, development and management company, with expertise in the execution of major infrastructure projects, including highways, bridges, flyovers, power transmission lines, airport runways, development of industrial areas and other infrastructure activities. Company provide EPC (Engineering, Procurement and Construction) services on a fixed-sum turnkey basis as well as on an item rate basis for various infrastructure projects. It also executes projects on a BOT (Build, Operate and Transfer) basis.
• Currently, PNC is executing 23 projects on an EPC contract basis and developing/operating 7 BOT projects.
• The order book in terms of value of contract including escalation was Rs.7,849.70 Crores as on March 31, 2015.
• The consolidated Revenue was Rs.1,326.37 Crores and Consolidated Profit after Tax was Rs.62.43 Crores as on 31st December 2014. The Company has increased the Total Revenue from fiscal 2010 to fiscal 2014 at a CAGR of 15.95% and the Profit after Tax at a CAGR of 3.54% over the same period.
• The shares will be listed on BSE and NSE
Brief Financial Details* (Rs. In Crs) Particulars Dec14(9) Mar14(12) Mar13(12) Mar12(12) Mar11(12)
Share Capital
39.81
39.81
39.81
39.81
39.81 Reserves 785.97 670.79 548.12 453.68 375.22
Net Worth
670.80
610.97
562.20
490.51
412.26 Revenue from Operations 1319.78 1353.43 1305.65 1273.29 1139.14
Revenue Growth (%)
-
3.66%
2.54%
11.78%
- EBITDA 202.76 173.82 156.25 153.49 128.80 EBITDA Margin (%) 15.36% 12.84% 11.97% 12.05% 11.31% Profit Before Tax 96.96 83.58 111.76 117.03 104.97
Net Profit
62.43
51.97
74.63
78.37
71.11 Net Profit as % to revenue 4.73% 3.84% 5.72% 6.15% 6.24%
Earnings Per Share
15.68%
13.06%
18.75%
19.69%
17.86% Return on Networth (%) 9.31% 8.51% 13.28% 15.98% 17.25%
Net Asset Value per Share
168.51
153.48
141.23
123.22
103.56
Source: RHP ^9 months ended 31st Dec14 *Restated Consolidated Statement
Objects Amount (Rs in Crs) Funding working capital requirements; 150 Investment in the subsidiary, PNCRHPL for part-financing the Raebareli-Jaunpur Project; 65 Investment in capital equipment; 85 Repayment/ prepayment of certain indebtedness; 35 General Corporate Purposes [  ] Total [  ]
Issue highlights
Issue size: Rs.458 - 488 Crores
No. of shares: 128.72 Lakhs (Net offer)
Face value: Rs.10
Employee Reservation : 50,000 shares.
Issue summary
Price band*: Rs.355 – 378 per Share
Bid Lot : 35 Shares and in multiple thereof.
BRLM:
ICICI Securities Ltd., IDFC Securities Ltd.
Registrar: Link Intime India Pvt. Ltd.
Issue opens*: Friday, 8th May 2015
Issue closes~: Tuesday, 12th May 2015
* The Anchor Investor Bidding Date shall be one Working Day prior to the Bid / Issue Opening Date.
Issue break-up Reservation for Shares (Lakhs)^ % of Issue
QIB*
64.36
50
Non-Institutional
19.31
15
Retail
45.05
35
* Company may allocate up to 60% Shares of the QIB Portion to Anchor Investors on a discretionary basis.
Shareholding (%) Pre- Issue Post-Issue
Promoters and Promoters Group
72.27
56.07
Others
27.73
41.93
Pre issue Post issue
No of shares (In Lakhs)
398.08
513.08
Offer Structure : No of shares
Fresh Issue
1,15,00,000
Offer for sale by shareholder*
14,21,708
Employee Reservation
(50,000)
Net Offer to Public
1,28,71,708
*Nylim Jacob Ballas India (FVCI) III LLC
For additional information & risk factors please refer to the Red Herring Prospectus - 2 -
PNC Infratech Ltd Axis Capital Ltd
BACKGROUND
Company and promoters
PNC Infratech Ltd (“PNC”) was incorporated on August 9, 1999, is a professionally managed organization with a dedicated team of engineers and professionals. The management team is well qualified and experienced in construction industry. The top management is actively involved in the day to day operations of the company and has been vital factor in PNC’s growth trajectory. In 2011, Nylim Jacob Ballas India (FVCI) III LLC (Selling Shareholder), acquired a stake in PNC and currently holds 14.29% of the pre-Offer capital of the Company.
The organization is headed by Mr. Pradeep Kumar Jain, Chairman and Managing Director and a promoter of the company, has an experience of 37 years in the construction industry and infrastructure sector and allied areas. His current responsibilities include overall administration and supervision of projects and liaison with Government and non-Government agencies. Mr. Naveen Kumar Jain is a Whole-Time Director, has over 28 years of experience and has the current responsibilities which include supervision of administration, human resources and legal and logistics related functions the Company. Mr. Chakresh Kumar Jain is Managing Director and CFO, has over 27 years of experience and has the responsibilities which include overall financial and project management and administration.
In particular, the individual promoters, who are also a part of the management, have between 20 and 40 years of experience in the infrastructure development sector, and have been instrumental in driving the growth since inception of the business and are involved in the day to day operations of the Company.
BUSINESS OVERVIEW
PNC Infratech Ltd (“PNC”) is an Indian infrastructure construction, development and management company, with expertise in the execution of major infrastructure projects, including highways, bridges, flyovers, power transmission lines, airport runways, development of industrial areas and other infrastructure activities. Company provide EPC (Engineering, Procurement and Construction) services on a fixed-sum turnkey basis as well as on an item rate basis for various infrastructure projects. It also executes projects on a Build, Operate and Transfer (“BOT”) (including on a Design, Build, Finance, Operate and Transfer (“DBFOT”) basis, operate them during the concession period on toll or annuity basis and subsequently transfer the projects. In 2013, company entered into a project on an Operate, Maintain and Transfer (“OMT”) model as well. Company has executed or are executing projects across various states in India covering Rajasthan, Punjab, Haryana, Uttarakhand, Uttar Pradesh, Delhi, Bihar, West Bengal, Assam, Madhya Pradesh, Maharashtra, Karnataka and Tamil Nadu. The Company has executed 42 major infrastructure projects on an EPC basis.
PNC has an established track record in executing large construction projects particularly in the roads and highways, power transmission lines and airport runways sectors. Additionally, they have also completed redevelopment of an industrial area at Narela, New Delhi and are currently undertaking construction work for a double track electrified railway line as a part of the Dedicated Eastern Freight Corridor.
PNC undertake these projects as an EPC contractor as well as through public-private partnership model, particularly on a BOT basis.
Company has received a bonus from the NHAI for early completion of the four-laning road project of the Agra-Gwalior section of National Highway 3 (from 8 km to 24 km) in Uttar Pradesh, and commenced collection of toll over three months earlier than the scheduled date of completion of the Gwalior Bhind Road Project which was executed on a BOT basis.
Company also form project specific joint ventures and consortiums with other infrastructure and construction companies, when a project requires specific eligibility requirements in relation to certain large projects. Out of the 42 major infrastructure projects on an EPC basis executed by the company since incorporation, 38 infrastructure projects have been executed on an EPC basis independently by company.
Currently, Company is executing 23 infrastructure projects on an EPC basis of which one project is being executed with joint venture partner. The order book in terms of value of contract including escalation was Rs.7,849.70 Crores as on March 31, 2015.
Company’s major clients include the NHAI, Airports Authority of India, Delhi State Industrial Development Corporation, Uttar Pradesh Power Corporation Limited, RITES Limited, Military Engineering Services, Uttar Pradesh
For additional information & risk factors please refer to the Red Herring Prospectus - 3 -
PNC Infratech Ltd Axis Capital Ltd
State Highway Authority, Haryana State Road Development Corporation, Dedicated Freight Corridor Corporation of India, Madhya Pradesh Road Development Corporation Limited (“MPRDCL”) and Public Works Department, State Government of Uttar Pradesh.
COMPETITIVE STRENGTH
Expertise and experience in project management
PNC has an established track record in executing large construction projects particularly in the roads and highways, power transmission lines and airport runways sectors. Also completed redevelopment of an industrial area at Narela, New Delhi and are currently undertaking construction work for a double track electrified railway line as a part of the Dedicated Eastern Freight Corridor. The company has executed 42 major infrastructure projects on an EPC basis, acquiring experience particularly in the timely execution of EPC contracts since its incorporation.
Strong financial performance and credit profile
Despite a slowdown in economy company has experienced robust growth in the revenues and profitability over the last five years. The construction industry in India witnessed real GDP growth of 5.6% in fiscal 2012 compared to 10.2% in fiscal 2011 and 6.7% in fiscal 2010. Company has been able to increase the total revenue from fiscal 2010 to fiscal 2014 at a CAGR of 15.95% and profit after tax has increased at a CAGR of 3.54% over the same period.
Established relationship with public sector clientele and excellent pre-qualification credentials
PNC has an established relationship with certain government authorities in the infrastructure sector, including the NHAI. Company’s experience, expertise and execution track-record, as well as their association with industry bodies such as the National Highways Builders Federation, enable them to maintain an established relationship with the government authorities. Pursuant to the project execution experience in infrastructure industry and the balance sheet as on March 31, 2014, company has been declared as pre-qualified for bidding for PPP projects independently up to Rs.2,118.14 Crores up to April 30, 2015 pursuant to letter from the NHAI dated March 25, 2015.
Robust Order Book and diversified portfolio
The order book in terms of value of contract including escalation was Rs.7,849.70 Crores as on March 31, 2015 and Rs.6,085.78 Crores as on March 31, 2014, as compared against Rs.5,568.09 Crores as on March 31, 2013.
( Rs. in Crs ) Diversified Portfolio of the Order Book as on June 30th 2014 No of Projects Total Contract Value including escalation
Road Construction
19
7,439.91
Power Transmission and Distribution
1
220.14
Airport Runways
2
171.98
Water Supply Infrastructure
1
17.67
TOTAL
23
7,849.70
Integrated in-house design and engineering expertise, large fleet of sophisticated equipments.
PNC is an integrated construction and infrastructure development company, which enables them to manage a broad spectrum of projects from item rate contracts, EPC to PPP implementation. They have also developed in-house design and engineering capabilities and have a large fleet of sophisticated construction equipment, thereby allowing them to provide end-to-end solutions for the projects.
PNC has an experienced and well-qualified engineering and design team, with skills in various fields, including civil, structural, electrical, mechanical and instrumentation. Company’s design and manufacturing capabilities of varied and extensive nature, enhances the ability to participate in projects requiring high-end engineering design capabilities. Further, the gestation period to commence work after the project is awarded is minimalized.
Highly qualified management team
PNC’s management team is well qualified and experienced in the construction industry and has been in many ways responsible for the growth of the operations. The strength and entrepreneurial vision of company’s Promoters and management has been instrumental in driving the growth and implementing the strategies.
For additional information & risk factors please refer to the Red Herring Prospectus - 4 -
PNC Infratech Ltd Axis Capital Ltd
STRATEGY
Diversify and expand into new functional areas
PNC seek to capitalize on Infrastructure development opportunities by leveraging on their established project execution track record and by diversifying into new functional areas of infrastructure development sector. As part of the business growth strategy, PNC intend to expand their presence in developments of industrial areas, and dedicated freight corridor projects and further diversify into waste management and water-related infrastructure projects such as river-connecting.
Continue the focus on EPC contracts as well as increase penetration in BOT and OMT projects
PNC’s core infrastructure operations have been through EPC contracts. PNC intend to actively pursue BOT/BOOT opportunities, both independently and in partnership with other partners, they seek to continue their focus on EPC contracts as well. BOT projects generally provide better operating margins because of the added overall control of project costs that can be exerted by the contractor. Additionally, BOT projects offer the possibility of higher revenues to the contractor by virtue of better than anticipated use of the asset. PNC also seek to foray into additional projects on OMT basis which provides primarily a maintenance contract along with revenues from collection of toll. PNC has been awarded the Kanpur Lucknow Ayodhya Road Project by the NHAI on OMT basis.
Maintain performance and competitiveness of existing business
The Indian construction industry has witnessed significant growth over the last few years. Growth in the Indian construction industry will be primarily driven by an increased public and private partnership (“PPP”) and investment in the infrastructure development industry. Additionally, the government has taken steps to encourage additional investments in infrastructure, such as, electronic project monitoring system, increased loan assistance and providing economic benefits to private sector participants for BOT projects executed on a toll-based or annuity basis.
PNC has also continually focused on increasing their bid capacity and pre-qualification ability to enable them to bid for larger projects. A key element of PNC’s growth strategy is to, besides committing to grow through expansion, seek to improve the performance and competitiveness of existing activities, i.e., in the construction of roads, airport runways and power transmission and distribution projects. Also PNC intend to continue to invest in equipment to support their expanding operations. The Investments in modern equipment ensure continuous availability of critical equipment and make their operations more cost effective
Develop and maintain strong relationships with the clients and strategic partners
PNC’s services are significantly dependent on winning construction projects undertaken by large government agencies and companies, and infrastructure projects undertaken by governmental authorities and others and funded by governments. Their business is also dependent on developing and maintaining strategic alliances with other contractors with whom they may want to enter into project-specific joint ventures or sub-contracting relationships for specific purposes. They seek to continue to develop and maintain these relationships and alliances.
In the recent past, PNC has collaborated with POSCO Engineering & Construction India Pvt Ltd for infrastructure development projects pursuant to a MOU dated June 13, 2014. PNC will continue to bid jointly for projects with other domestic and foreign companies which will enable them to leverage their strengths and build their competencies.
Strengthen systems and internal processes
Maintaining quality, minimizing costs and ensuring timely completion of engineering and construction projects depends largely on the skill and workmanship of the employees. As competition for qualified personnel and skilled laborers are increasing among construction companies, PNC seek to attract, train and retain qualified personnel and skilled laborers by increasing their focus on training the staff in advanced and basic engineering and construction technology and skills.
PNC also seek to implement an enterprise resource planning (“ERP”) system for improved efficiency and better control over their project sites and offer their engineering and technical personnel a wide range of work experience, in-house training and learning opportunities by providing them with an opportunity to work on a variety of large, complex construction projects.
For additional information & risk factors please refer to the Red Herring Prospectus - 5 -
PNC Infratech Ltd Axis Capital Ltd
COMPANY’S PROJECTS
Completed Road Projects
Certain significant road infrastructure projects completed by the Company as of June 30, 2014 are set forth hereunder.
• Four laning of the existing two lane section of the Etawah bypass on NH2 completed by May 31, 2008;
• Development of the Sagar Beena Road completed by April 15, 2007;
• Development of Phase II of Package – 6 for Road no.9, Porsa-Mehgaon-Mau-Seonda section of SH19, completed on June 5, 2008;
• Four-laning of the Agra-Gwalior section of NH3, including construction of a road-over bridge, completed on January 15, 2005;
• Construction work of Gairatganj-Silwani-Gadarwada (SH44), NH12 Junction to Silwani (SH 15) and Bareli-Pipariya Road (SH19) completed by January 21, 2011;
• Improvement of Gurgaon-Nuh-Rajasthan Border (SH13) completed by June 30, 2011;
• Widening and strengthening of NH24 to four lane standards (Garhmukhteshwar to Moradabad) and construction of road-over bridge in 181 km of NH24 and bridges on NH87 in UP, completed by October 10, 2012;
• Development of Section III, Jaora Section completed by May 4, 2011;
• Four laning of Agra – Gwalior section of NH3, including construction of a major bridge on the Khari river, completed by July 18, 2001; and
• Short term improvement and maintenance of the Panipat-Jalandhar section on NH1, including collection of user free (toll), completed by December 20, 2003.
Completed Airport Infrastructure Projects
Certain significant airport infrastructure projects completed by the Company as of March 31, 2015 are set forth hereunder.
• Strengthening of main runway 19L/01R and proving CAT – II lighting at 19L approach at the NSCBI Airport, Kolkata, completed by May 3, 2005;
• Upgradation of airstrips for operation of Boeing 737 type aircrafts at Saifai Etawah, UP, completed by Feb 2, 2007;
• Resurfacing of runway, extension of existing runway and allied works at AFS Jorhat under MES, completed by April 18, 2014;
• Extension and strengthening of the runway and construction of the new apron and isolation bay and associated works at the Devi Ahilyabai airport, Indore completed by July 15, 2009;
• Repairs, resurfacing, regarding of shoulders of existing runway and area drainage works at Air Force Station Yelahanka, Bangalore of MES, completed by January 6, 2005; and
• Resurfacing of hard standing at Mehra Chowk at 402 AFS Chakeri, Kanpur , completed by March 3, 2004.
Other Completed Infrastructure Projects
As of March 31, 2015, company has completed the construction in respect of one industrial infrastructure project in
respect of the re-development and management of Industrial Estate of Narela, New Delhi.
Ongoing Projects :
EPC Projects
Company has undertaking the below-mentioned projects in their entirety on a sole operator basis.
Set forth hereunder is certain information in respect of the five largest EPC contracts in the order book in terms of total contract value including escalation as on March 31, 2015:
 Development of Agra to Firozabad (Village Gurha) (from -2.634 km to 53.500 km) and construction of an access controlled expressway project in Uttar Pradesh on EPC basis of total contract value of Rs.1,635.75 Crores;
 Rehabilitation and upgradation of Sonauli to Gorakhpur Section (from 0km to 80km) of NH29E in UP to two-lane, with paved shoulders of total contract value including escalation of Rs.441 Crores;
 Construction of balance work of new four-lane Agra by-pass in UP of total contract value including escalation of Rs.385 Crores;
 Four-laning of part of Dholpur-Morena section (from 51.00 km to 61.00 km), including Chambal Bridge, of NH3 on North-South Corridor of total contract value including escalation of Rs. 293.61 Crores;
 Rehabilitation and upgradation of Barabanki-Jarwal section of NH28C (from 0km to 43.00 km) in UP of total contract value including escalation of Rs.272.70 Crores; and
For additional information & risk factors please refer to the Red Herring Prospectus - 6 -
PNC Infratech Ltd Axis Capital Ltd
Additionally, the order book as on March 31, 2015 comprises the following EPC projects being undertaken by the company pursuant to BOT projects of the Company:
 Contract for design, engineering, finance, construction, operation and maintenance of Ghaziabad-Aligarh section (from 23.60 km to 140.20 km) of NH91 in UP of total contract value of Rs.1724.99 Crores;
 Two-laning with paved shoulders of Raebareli to Jaunpur section (from 0km to 166.40 km) of NH231 in UP of total contract value of Rs.728.36 Croes;
 Four-laning with paved shoulders of Bareilly-Almora section of SH47 in UP of total contract value of Rs.540 Crores;
 Two-laning with paved shoulders of Kanpur-Kabrai section of NH86 in UP of total contract value of Rs.429 Crores; and
 Two-laning of Gwalior-Bhind up to UP Border section of NH92 in MP/UP of total contract value of Rs 315.87 Crores.
BOT Projects
Information in respect of the BOT projects being developed/operated by us as on March 31, 2015:
 Design, engineering, finance, construction, operation and maintenance of Ghaziabad-Aligarh section
(from 23.60 km to 140.20 km) of NH91 in UP under the NHDP Project Phase III;
 Two-laning with paved shoulders of Raebareli to Jaunpur section (from 0km to 166.40km) of NH231 in UP under the NHDP Project Phase IV;
 Four-laning with paved shoulders of Bareilly-Almora section of SH47 in UP;
 Two-laning with paved shoulders of Kanpur-Kabrai section of NH86 in UP;
 Re-development and management of Industrial Estate of Narela, New Delhi;
 Operation of Section III, Jaora Section under JNTRCPL (a Joint Venture); and
 Two-laning of Gwalior-Bhind up to UP Border section of NH92 in MP/UP
OMT Projects
Company also forayed into OMT projects and has been awarded the operation and maintenance of Kanpur- Lucknow section of NH25, Lucknow bypass of NH56A and NH 56B and Lucknow-Ayodhya section of NH28 in UP on OMT basis by the NHAI for a period of nine years from August 2013. The aggregate road length is 217.32 kilometers. The company has commenced toll collection at all the three toll plazas.
REVENUE MIX
Revenue
Company’s Total Revenue comprises of the revenue from operations and other income. The revenue from operations includes the revenue from contract turnover, toll collection and maintenance, sale of material, sale of scrap material and annuity based contracts.
The following table depicts break-up of the revenue from operations and other income for fiscals 2014, 2013 and 2012, in absolute terms and expressed as a percentage of total revenue for such periods.
Revenue from: Nine Month Ended December 31,2014 Fiscal 2014 Fiscal 2013 Fiscal 2012
Rs. in Crs
% to Total
Rs. in Crs
% to Total
Rs. in Crs
% to Total
Rs. in Crs
% to Total
Contract turnover
1103.02
83.16%
1171.89
85.90%
1275.90
97.41%
1228.05
95.97%
Toll collection & maintenance revenue
174.82
13.18%
140.89
10.33%
20.83
0.16%
-
-
Sale of material and others
23.45
1.77%
28.50
2.09%
25.29
1.93%
43.55
3.40%
Sale of scrap material
2.36
0.18%
3.19
0.23%
2.37
0.18%
1.68
0.13%
Annuity revenue
16.13
1.22%
8.96
0.66%
-
-
-
- Revenue from operations 1319.78 99.50% 1353.43 99.21% 1305.65 99.68% 1273.28 99.50%
Other income
6.59
0.50
10.81
0.79%
4.14
0.32%
6.42
0.50% Total Revenue 1326.37 100% 1364.24 100% 1309.79 100% 1279.70 100%
For additional information & risk factors please refer to the Red Herring Prospectus - 7 -
PNC Infratech Ltd Axis Capital Ltd
PRINCIPAL FACTORS AFFECTING COMPANY PERFORMANCE :
Performance of the civil infrastructure sector
PNC’s ability to benefit from increased investments proposed in the infrastructure sector is a key to the results of operations. Further, any change in government policy with respect to its focus or development of infrastructure projects in India would have a material adverse effect on their financial condition and results of operations. PNC’s ability to bid for, and hence, undertake major infrastructure projects will continue to depend on their ability to pre-qualify for these projects, including by entering into joint ventures with other companies.
Competition
PNC compete against various infrastructure and engineering and construction companies. Their competition varies depending on the size, nature and complexity of the project and on the geographical region in which the project is to be executed. Also the price competitiveness of the bid is usually the most important selection criterion. To bid for some higher value contracts, PNC sometimes seek to form strategic alliances or joint ventures with other experienced and qualified companies.
Cost of raw materials, labour and other inputs
The cost of raw materials, fuel, labour and other inputs constitutes a significant part of the operating expenses. PNC’s ability to pass on increases in the purchase price of raw materials, fuel and other inputs may be limited in the case of contracts with limited price escalation provisions. Un-anticipated increases in the price of raw materials, fuel costs, labour or other inputs not taken into account in their bid can also have compounding effects by increasing costs of performing other parts of the contract. Depending on the size of a project, these variations from estimated contract performance may result in their experiencing reduced profitability or losses on projects.
Collection of receivables from the clients
PNC, at times, encounter delays in the collection of receivables from their clients, including government owned, controlled or funded entities. Their operations involve significant working capital requirements and delayed collection of receivables could adversely affect the liquidity and results of operations. In addition, they may be subject to additional regulatory or other scrutiny. Such projects will involve their taking on the long-term risk that the client may default on its payments to them. There can be no assurance that any such development would not adversely affect their business.
Variability of payment terms
Company’s revenues are dependent on the payment terms involved in a project. Their contracts typically stipulate payment terms on the basis of achievement of specified milestones and schedules for the project. In some contracts, however, the payment terms may not include advance payments or the contract may have payment schedules that shift payments toward the end of a project or otherwise increase the working capital burdens.
Access to capital resources
In this industry, in many cases, significant amounts of working capital are required to finance the purchase of materials, the hiring of equipment and the performance of engineering, construction and other work on projects before payments are received from clients. In certain cases, companies are contractually obligated to their clients to fund the working capital requirements of the projects. If they experience insufficient cash flows to allow them to make required payments on their debt or fund working capital requirements, there may be an adverse effect on their business and results of operations.
For additional information & risk factors please refer to the Red Herring Prospectus - 8 -
PNC Infratech Ltd Axis Capital Ltd
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