Gayatri Projects Ltd - Rs 70.00
Incorporated in 1989, Gayatri Projects Ltd (GPL) a Hyderabad based infrastructure company 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 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. However off late GPL has started to de-risk its business model and is aggressively foraying into new ventures like urban infrastructure, real estate development, water transport, power plant setup, airport runway & industrial construction.
Earlier GPL was more of a smaller regional contractor but in the last couple of years it has not only become a bigger player but also undertook projects in various states including Assam, UP, MP, Karnataka, Gujarat, Maharashtra, Orissa etc. It has formed several subsidiaries to execute various projects and has even entered into JVs with some big players like Simplex Infrastructure, DLF, Ion Exchange, Nagarjuna Construction Company, IDFC, and Maytas Infra to enhance its financial and technical qualification. Moreover it has moved up the value chain and is executing five BOT road projects of which four are annuity based and one is tolled based. The total cost of these BOT projects is Rs 2200 cr and is expected to start generating cash flow from March 2010. GPL is having 51% share in each of the four annuity projects, while its share in the toll road project is 40%. In order to focus on BOT segment and smooth execution of projects, company has set up a subsidiary named Gayatri Infrastructure Venture Ltd and has transferred the 5 BOT projects into it. For future growth this subsidiary is targeting to win Rs 2000~5000 cr of orders in next 5 years. On the other hand, GPL has formed a 50:50 JV with the largest real estate developer i.e. DLF group, to develop roads, highways and bridges across the country. To start with, the joint venture would initially look for BOT road projects in Maharashtra, Orissa and Andhra Pradesh.
Apart from road projects, GPL is also executing few irrigation projects and has recently bagged two huge orders worth Rs 2132 cr from AP Govt for construction of canals. The order is to be completed in 4.5 years and for this GPL has formed an 80:20 JV with Ratna Infrastructure. In the water business, the company has tied up with Ion Exchange which will jointly bid for contracts for water and sewerage treatment plants and desalination plants. Besides GPL is contemplating to develop an integrated township along with DLF and is in midst of acquiring around 1,000 acres, close to the Shamshabad international airport. Moreover it is actively exploring the opportunities to get into setting up of Greenfield power plant and bidding for airport runway tenders in foreseeable future. As on date, GPL boast of having a massive unexecuted order book position of Rs 5000 cr against its FY08 turnover of Rs 750 cr. This ensures the strong revenue visibility for next three years. Notably, the order book is almost equally divided between the irrigation & road projects.
However there are few concerns with respect to execution of projects and raising of finance to fund the projects. Incidentally, company’s three of the five BOT projects are in consortium with Maytas Infra whose fate is in doldrums, which may eventually delay the project execution. Secondly company already has a high debt of more than Rs 450 cr (Rs 750 cr on consolidated basis) including FCCB to the tune of Rs 100 cr making it difficult for the company to raise more debt. And with the current market sentiment, raising money thru equity route is equally hard. Third concern is the management’s adoption of aggressive accounting policy by not providing for the loss in one its JV namely IJM-Gayatri. As per unconfirmed reports GPL’s share of loss till date in JV is nearly Rs 80 cr, which is twice of FY08 standalone profits. It is claiming this loss from NHAI and the final decision by NHAI is yet to be taken.
Sarcastically the share price which hit a high of Rs 700 in Jan 2008 tumbled down to Rs 40 in March 2009 before recovering to Rs 70 currently. Fundamentally, GPL has done well and for the nine months ending Dec 08 on a standalone basis, its topline has increased by 40% to Rs 670 cr and PAT has also risen by 15% to Rs 30.50 cr thereby posting an EPS of Rs 30 till date. Accordingly for entire FY09 it may clock a turnover of Rs 975 cr and PAT of Rs 40 cr leading to an EPS of Rs 40 for the year on the current equity of Rs 10.10 cr. Considering the high conversion price for FCCB, they may come up for redemption in 2012. But there is the risk of equity dilution in future; as GPL may again look to raise capital thru equity route once the market sentiment improves. Having a book value of Rs 177 and order book of Rs 5000 cr, aggressive investors can buy at current market cap of Rs 70 cr for handsome gain in short to medium term.
Earlier GPL was more of a smaller regional contractor but in the last couple of years it has not only become a bigger player but also undertook projects in various states including Assam, UP, MP, Karnataka, Gujarat, Maharashtra, Orissa etc. It has formed several subsidiaries to execute various projects and has even entered into JVs with some big players like Simplex Infrastructure, DLF, Ion Exchange, Nagarjuna Construction Company, IDFC, and Maytas Infra to enhance its financial and technical qualification. Moreover it has moved up the value chain and is executing five BOT road projects of which four are annuity based and one is tolled based. The total cost of these BOT projects is Rs 2200 cr and is expected to start generating cash flow from March 2010. GPL is having 51% share in each of the four annuity projects, while its share in the toll road project is 40%. In order to focus on BOT segment and smooth execution of projects, company has set up a subsidiary named Gayatri Infrastructure Venture Ltd and has transferred the 5 BOT projects into it. For future growth this subsidiary is targeting to win Rs 2000~5000 cr of orders in next 5 years. On the other hand, GPL has formed a 50:50 JV with the largest real estate developer i.e. DLF group, to develop roads, highways and bridges across the country. To start with, the joint venture would initially look for BOT road projects in Maharashtra, Orissa and Andhra Pradesh.
Apart from road projects, GPL is also executing few irrigation projects and has recently bagged two huge orders worth Rs 2132 cr from AP Govt for construction of canals. The order is to be completed in 4.5 years and for this GPL has formed an 80:20 JV with Ratna Infrastructure. In the water business, the company has tied up with Ion Exchange which will jointly bid for contracts for water and sewerage treatment plants and desalination plants. Besides GPL is contemplating to develop an integrated township along with DLF and is in midst of acquiring around 1,000 acres, close to the Shamshabad international airport. Moreover it is actively exploring the opportunities to get into setting up of Greenfield power plant and bidding for airport runway tenders in foreseeable future. As on date, GPL boast of having a massive unexecuted order book position of Rs 5000 cr against its FY08 turnover of Rs 750 cr. This ensures the strong revenue visibility for next three years. Notably, the order book is almost equally divided between the irrigation & road projects.
However there are few concerns with respect to execution of projects and raising of finance to fund the projects. Incidentally, company’s three of the five BOT projects are in consortium with Maytas Infra whose fate is in doldrums, which may eventually delay the project execution. Secondly company already has a high debt of more than Rs 450 cr (Rs 750 cr on consolidated basis) including FCCB to the tune of Rs 100 cr making it difficult for the company to raise more debt. And with the current market sentiment, raising money thru equity route is equally hard. Third concern is the management’s adoption of aggressive accounting policy by not providing for the loss in one its JV namely IJM-Gayatri. As per unconfirmed reports GPL’s share of loss till date in JV is nearly Rs 80 cr, which is twice of FY08 standalone profits. It is claiming this loss from NHAI and the final decision by NHAI is yet to be taken.
Sarcastically the share price which hit a high of Rs 700 in Jan 2008 tumbled down to Rs 40 in March 2009 before recovering to Rs 70 currently. Fundamentally, GPL has done well and for the nine months ending Dec 08 on a standalone basis, its topline has increased by 40% to Rs 670 cr and PAT has also risen by 15% to Rs 30.50 cr thereby posting an EPS of Rs 30 till date. Accordingly for entire FY09 it may clock a turnover of Rs 975 cr and PAT of Rs 40 cr leading to an EPS of Rs 40 for the year on the current equity of Rs 10.10 cr. Considering the high conversion price for FCCB, they may come up for redemption in 2012. But there is the risk of equity dilution in future; as GPL may again look to raise capital thru equity route once the market sentiment improves. Having a book value of Rs 177 and order book of Rs 5000 cr, aggressive investors can buy at current market cap of Rs 70 cr for handsome gain in short to medium term.
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Your blog keeps getting better and better! Your older articles are not as good as newer ones you have a lot more creativity and originality now keep it up!
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