JMC Projects (India) Ltd - Rs 155.00

Founded in 1982, JMC Projects (India) Ltd (JMC) was originally promoted by Mr. Suhas Joshi & Mr. Hemant Modi as Joshi & Modi Construction Pvt Ltd. Later it was renamed as JMC Projects Ltd and subsequently in 2004 was taken over by the renowned and well diversified Kalpataru group. Since then, under the new corporate leadership JMC has been growing leaps and bounds and today it is among the top seven players for building and factory construction in India. It provides all types of construction services including fabrication and erection of structural steel components, pre-casting and allied works. It has successfully ventured into fields of turnkey execution involving civil, mechanical, electrical, HVAC, fire fighting, architectural and landscaping works. Over the years JMC’s major thrust has been setting up industrial plants for automobiles, textiles, heavy engineering, chemicals, cement, pharmaceuticals, sugar, power etc, and institutional building comprising hospitals, software parks, hotels, educational institutes etc. It boasts of several landmark projects such as construction of IIM Ahmedabad campus, three elevated Delhi Metro railway station, Software Park for Infosys in Bangalore, residential/commercial complex at Bhopal for MP housing Board, Vardhman Medical College at Delhi, Software development centre in Pune for Syntel Int apart from constructing factory/plant for Nirma, Arvind Mills, Maruti Udyog, Hindustan motors, Indian Rayon, Alstom Projects etc.

However in the last few years JMC has started focusing on infrastructure and power projects. It now undertakes several projects to construct bridges & flyovers, roads & highways, railways stations, marine work, water supply & irrigation projects and construction of power plants. It is aggressively bidding for government contracts and is even executing big road projects for NHAI. Because of its excellent track record, technological & execution capabilities and strong backing by the parent company i.e. Kalpataru Power Transmission Limited, JMC has been successful in getting some major orders from prestigious clients such as BHEL, Godrej, Brigade Ent, Wipro, MPRDC, NHAI, Vedanta Aluminium, JP Associates etc. It has been hardly two year that JMC ventured into power sector and it is already getting repeat orders from biggies like Reliance Energy, Reliance Infrastructure, BHEL, Alstom, Elecon Engineering etc. It has also achieved a major breakthrough during the first year of operation, in the Eastern India region, in terms of securing and successfully executing large value projects. However due to economic & political factors, JMC received new contracts of approx. Rs. 1030 cr during the entire FY09 (against Rs 1840 cr for FY08). Despite this it boasts of having order book position of Rs 2200 cr (i.e. 1.7x times its FY09 turnover) of which nearly 50% consists of industrial construction/buildings segment, 30% of infrastructure related and 12% of power projects. JMC is also executing major fast track projects in Delhi for the Commonwealth Games 2010. For future growth, it is focusing on the infrastructure sector especially roads, urban infrastructure and power Sector which are relatively less affected by the economic slowdown. It also intends to take up railways, airports and water management projects on an EPC basis which will further add to its execution capabilities.

Since the beginning of the last year construction industry has been affected to a major extent due to the economic meltdown. Infrastructure projects are witnessing a slow down and the real estate sector is in a slump. Private investors have pushed back several big projects planned earlier, either due to lack of funds or these becoming unviable. But in the view of the latest developments, it appears that the situation might begin to look positive by the end of the year 2009-10. Moreover sustained focus of the government to improve infrastructure especially roads, ports, power, housing and increased allocation to various schemes such as NHDP, Bharat Nirman, RIDF, Jawaharlal Nehru National Urban Renewable Mission (JNNURM) would result in continued growth for the construction industry. Some areas like roads, rail lines, ports and airports are already operating at saturation, so further expansion is inevitable for economic growth. As per Eleventh Five Year Plan, more than US$ 500 billion worth of investment is planned to flow into India’s infrastructure by 2012. And the construction industry accounts for a significant portion of the proposed investments. So construction and modernization of airports, Urban Development Projects, Bus Rapid Transit System (BRTS) and Metro Rail Projects in mega cities, major power projects and SEZs has opened up a plethora of business opportunities for construction companies in general and JMC in specific. Thus except for the ailing real estate sector, the overall scenario for the construction industry looks to be optimistic.

Fundamentally, JMC is doing well as it clocked 45% growth in topline to Rs 1309 cr and 20% rise in PAT to Rs 37 cr for FY09 posting an EPs of Rs 19 on equity of Rs 18 cr. Incidentally, company’s bottomline was affected on stoppage of work in Agra Bypass Road Project of NHAI due to non-availability of land. Meanwhile for the recent Q1FY10, its revenue declined by marginally to Rs 292 cr but net profit remained flat at Rs 6.50 cr. Recently, JMC converted the 12,50,000 Optionally Convertible Preference Shares of Rs. 202/- each into Non-Cumulative Redeemable Preference Shares as the holders didn’t exercise their option for conversion into equity shares. Further company has decided to redeem these preference shares of Rs 25 cr for which it is coming out with a right issue of Rs 40 cr in the ratio of 1:5 @ Rs 110/- per share. The issue has been priced in line with FY09 book value which is Rs 111 as on 31st March 2009. Unfortunately, the issue will be EPS dilutive as most of the money will be utilized to redeem the preference shares and rest will utilized for working capital. The scrip has already gone ex-right on 24th July 2009. For FY10 company is expected to clock a turnover of Rs 1500 cr and NP of Rs 42 cr i.e. EPS of Rs 19 on diluted equity of Rs 21.75 cr. Looking at the market dynamics its possible that scrip may see a correction upto Rs 125~130 where investors can accumulate for a price target of Rs 210 in 15~18 months.

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