CLSA Gives a Buy Call on IRB Infrastructure Developers with a Target of Rs. 166


CLSA is bullish on BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) listed IRB Infrastructure Developers Ltd. (IRB), India’s leading and largest highway infrastructure developers, with an asset base of over Rs. 45,000 Crs., has recommended Buy rating on the stock with a target price of Rs. 166 in its recently released research report.

CLSA in its recent research report said that the company has delivered and demonstrated its ability to win, build, and divest assets profitably with its second deal after the public InvIT (Infrastructure Investment Trust). Following an injection of Rs. 44 bn by GIC into IRBs private InvIT, the company not only delivered its balance sheet 64% with net debt to equity falling to 0.76x in Financial Year 2020 but also reduced start-up losses. This has helped it win the Mumbai Pune E-way concession again for 10-years. The ramp-up of its construction Earnings Before Interest, Taxation, Depreciation, and Amortization (up 31% Year on Year) helped it sustain its consolidated EBITDA despite a COVID-19 hit. IRB said traffic is back to 70% of the pre-COVID-19 level and it expects new concession awards by the NHAI from 2QFY21. Winning profitable concessions and the acceptance of its claim for the Ahmedabad NH by the NHAI, are catalysts. CLSA further said in its report that at the start of a new concession award cycle, the stock offers deep value at a 5x PE (Price Earnings Ratio) and a 0.3x P/BV (Price to Book Value).

Meanwhile, the company has posted excellent results with a Consolidated Income of Rs. 1,635 Cr. for Q4 and Rs. 7,047 Cr. for the entire FY20. The numbers include 1 month of Tolling & Operations & Maintenance (O & M) of the newly bagged Mumbai Pune Expressway concession and exclude 1 month of contribution from 9 assets transferred to IRB Private INVIT. The company has recommended Rs. 5 Dividend

For FY20, Company’s EBITDA (Earnings Before Interest, Taxation, Depreciation and, Amortization) was up by 1% at Rs. 3,166 Cr. The company registered a Q4 profit of Rs. 154 Cr. Mr. Virendra D. Mhaiskar, Chairman & Managing Director, IRB Infrastructure Developers Ltd. said, “Except last 15-20 days of March 2020, rest of FY20 brought good developments for us; especially the investment deal with GIC Affiliates, Singapore; getting re-awarded prestigious Mumbai-Pune Expressway project under TOT (Toll-Operate-Transfer) model and commissioning of Goa-Kundapura NH-17 BOT project to make all our projects revenue-generating.” He further added, “Though the ongoing scenario has a dominance of COVID-19 pandemic, we sense gradual normalization of operations, with traffic gaining pace every single day as lockdown is gradually laxed across the country.”

Recently, Singapore’s sovereign wealth fund GIC had invested Rs. 4,400 crores in a road platform set up by IRB. According to experts, Mumbai-Pune Expressway is expected to perform exceedingly well given that it is the primary route that connects the two large metros, whereby IRB would be benefitted.

IRB emerged as the winner for India’s largest single road TOT – Mumbai Pune Expressway, for the second time running, at a bid price of Rs. 8,262 Crs. Achieved financial closure and commenced tolling post receiving appointed date from the NHAI for the Hapur-Moradabad NH-9 BOT (Build-Operate-Transfer) project. All BOT projects under IRB umbrella are revenue-generating now.

The Company has a strong track record of constructing over 12,600 lanes Kms pan India in 2 decades and has an ability to construct over 500 Kms in a year. IRB Group’s portfolio comprises 21 projects including 19 BOT, 1 TOT, and 1 HAM projects. BOT segment includes 9 projects under Private InvIT with O & M contracts; 3 projects under Tolling & 7 projects under O & M contracts as a Project Manager for IRB InvIT.

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