Gayatri Projects - Rs.238.00

Incorporated in 1989, Gayatri Projects Ltd (GPL) is engaged in the execution of major civil works including national highways, irrigation projects, mass excavation, bridges, ports, airports and industrial civil works. It has a rich experience of completing projects worth Rs.2500 cr. in the last 16 years and has successfully accomplished around 650 kms of highways, 1000 kms of irrigation canals, 21 irrigation projects, 7 projects of dams and reservoirs, 9 highways and runway projects, 8 site leveling projects and 3 industrial projects. It has also executed various site preparation and grading, construction of roads, drains, ponds, reservoirs and industrial structures for reputed companies like Nagarjuna Fertilizers, Reliance Petroleum, Jindal Vijzayanagar Steel, Visakhapatnam Steel Plant, HPCL, etc. Moreover, it has done specialized works for Indian Railways, Port Trusts and Airport Authorities. GPL also provides design, engineering, procurement, construction and project management services for various infrastructure projects. Although the company has executed various projects in different sectors of infrastructure, its expertise lies mainly in the road and irrigation sectors.

Since inception, GPL has built a huge fleet of construction equipments including heavy earth moving machines, concrete mixers, batching plants, road equipments, quarry equipments, transportation equipment and various other equipments for fabrication and erection plants. Presently, GPL has projects worth more than Rs.1000 cr. of Public Works/ Irrigation departments of various State governments namely Andhra Pradesh, Madhya Pradesh, Chattisgarh and Gujarat apart from other clients. Of these, highway projects constitute around 40% and the rest 60% are irrigation projects. In addition, it has to execute projects worth Rs.1400 cr. in a joint venture with other prominent construction companies. Thus, it has pending orders of Rs.2400 cr. to be completed over the next 3 years. Importantly, GPL has bagged one toll project and two annuity based projects under the BOT format from National Highways Authority of India (NHAI). To maintain growth, the company intends to expand its execution capabilities in industrial construction and focus on pursuing EPC contracts as they enable it to become the main contractor and bid for a higher number of critical projects.

To fund the execution of the Meerut-Muzaffnagar BOT project and for repayment of debt, GPL came out with an IPO of 29 lakh shares including sale of 19 lakh shares by Videocon group at Rs.295 per share. Thus it raised about Rs.29.50 cr. from which Rs.20 cr. went into creating a SPV for BOT project and around Rs.7 cr. was kept for repayment of debt. GPL is now planning to raise further capital of around Rs.130 cr. through the FCCB route. As per the recent budget, Section 80(I)A exemptions have been withdrawn for sub contractors with retrospective effect from FY 2000. Since GPL did not take the benefit, it will not have any major impact. But it was planning to take the benefit from FY07, so its tax outgo will be affected to that extent. However as GPL enjoys one of the best margins in the industry, for FY07 it is expected to register a turnover of Rs.500 cr. and PAT of Rs.28-30 cr. i.e. EPS of Rs.28-30 on its equity of Rs.10 cr. And considering its huge order book position, it may report a top-line of Rs.650 cr. and PAT of Rs.45 cr. for FY08. This works out to an EPS of Rs.45 for FY08. On an expected diluted equity of around Rs.13.50 cr., the EPS will work out to Rs.33. Still GPL is trading grossly cheap compared to its peers. Despite promoter concerns and high debts, investors are strongly recommended to buy GPL for a price target of Rs.400 (70% appreciation) in 12-15 months.