`  

18th April, 2011 
Initiating Coverage

Infrastructure IL&FS Transportation Networks Ltd BUY

IL&FS  Transportation  Networks  Ltd  (ITNL),  India’s  largest  road  infrastructure 
developer in terms of lane km is expected to report robust revenue CAGR of 41% 
CMP Rs 234 in  FY10‐13E  driven  by  strong  contribution  from  EPC  revenue  and  contribution 
Target Price Rs 295 from new projects getting operational. In the past two years ITNL has bagged Rs 
156.6 bn of new projects in the area of roads, metro rail, bus services, stadium, etc 
and  has  achieved  8‐10%  market  share  in  terms  of  value  of  awards  (in  NHAI 
Key Data
projects).  Presently  it  has  9  road  SPVs  which  are  operational  and  further  we 
Face Value (Rs) 10
expect  seven  more  projects  to  be  operational  in  FY12E  &  FY13E.  Strong 
Market Cap (Rs in mn) 45459
promoter’s  background,  experienced  management  team  and  robust  balanced 
Total O/s Shares in (in mn) 194.3
Free Float 24.9%
sheet  give  ITNL  a  competitive  edge  in  terms  of  bagging  projects  and  arranging 
52 Week High / Low 313/186 funds.  Based  on  SOTP  valuation  we  arrive  at  target  price  of  Rs  295.  We  assign 
Avg. Monthly Volume (BSE) 47719 BUY rating on the stock.    
Avg. Monthly Volume (NSE) 143008
BSE Code 533177
Key Highlights
NSE Code IL&FSTRANS Largest player in BOT road projects in terms of lane km: ITNL is the largest player in 
Bloomberg Code ILFT IN BOT road projects in India (in terms of lane km) with ~12000 lane km of projects 
Beta 0.55 under operation or development. It has achieved a market share of 8‐10% of total 
Date of Incorporation 11/29/2000 project  awards  (by  NHAI  in  value  terms)  in  the  past  two  years.  Strong  track 
Last Dividend Declared 30% record of executing road projects helps ITNL in meeting prequalification for new 
Six month return -20.8% projects.  
Indices BSE500
Strong parental support & internal resources mitigates dilution risk: ITNL’s promoter, 
FCCB’s outstanding N.A.
IL&FS  has  over  two  decades  of  track  record  of  promoting  and  financing 
Warrants outstanding N.A.
infrastructure  projects.  Such  background  supports  ITNL  in  arranging  funds  for 
its  infrastructure  projects.  It  has  already  achieved  financial  closure  (FC)  for  the 
projects where LOA is signed except few where FC is in process. There is lesser 
One Year Price Chart risk of equity dilution in the near term as it has met 70% of equity commitment 
for current projects on hand and balance 30% (~Rs 5 bn) would be  met through 
400 1800000 internal accruals or debt in FY12‐14E.   
1500000
300
1200000 Robust capital work order entails strong revenue growth:  ITNL  has  a  robust  capital 
200 900000
work order in hand which would translate into revenue in the next three years. It 
600000
100
300000 has an order backlog of Rs 106 bn excluding L1 order of Rs 16.6 bn. Most of these 
0
Apr-10 May-10 Jun-10 Aug-10 Sep-10 Nov-10 Dec-10 Jan-11 Mar-11
0 orders are to be executed in the next three years. Besides this it is participating in 
Close Price Total Volume Rs 929 bn of projects which opens opportunity for the company in terms of new 
order inflows.  
Source: Capitaline
Project awarding to pick up pace in FY12:  The  government  plans  to  start  bidding 
process for 100 projects of over 11000 km and total estimated cost of approx. Rs 1 
Share Holding Pattern (31st Mar’ 2011) trillion in FY12E. In FY11 (till Feb‐11) NHAI had awarded 46 projects of 4427 km 
Public & Others Non Promoters  length  which  is  31.8%  higher  than  what  it  had  awarded  in  FY10  (3360  km).  On 
3.5% (Body Corporate)
1.1%
Banks/MFʹs/Instit
conservative  basis  NHAI  targets  to  award  7300  km  of  projects  in  FY12E  giving 
FIIʹs
utions/Ins
16.1%
4.3% opportunity for road developers such as ITNL.     

Financial Snapshot (Consolidated) (Rs in mn)

Promoters  Particulars FY09 FY10 FY11E FY12E FY13E

75.1%
Net Revenue 12254 24029 32278 58970 67743
Revenue Growth (YoY %) 238.9% 96.1% 34.3% 82.7% 14.9%
Source: Company, KJMC Research
EBITDA 1933 7941 10223 11441 15744
EBITDA Margins (%) 15.8% 33.0% 31.7% 19.4% 23.2%
PAT Aft Minority Int 262 3444 4551 5343 5430
Pankaj Kumar PAT Margins (%) 2.1% 14.3% 14.1% 9.1% 8.0%
Sr. Research Analyst EPS 1.4 17.6 23.3 27.4 27.9
Phone-022 4094 5500 Ext. 227 PE 164.7 13.3 10.0 8.5 8.4
Email - pankaj.kumar@kjmc.com EV/EBITDA 29.1 9.1 9.6 11.6 9.2
RONW (%) 3.5% 23.9% 22.3% 21.3% 16.4%
Source: Company, KJMC Research
IL&FS Transportation Networks Ltd 1
 Disclaimer / Important disclosures  
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Analyst Certification 
I hereby certify that the views expressed in this document reflect my personal views. I also certify that no part of my respective compensation was, 
is,  or  will  be,  directly  or  indirectly,  related  to  the  views  expressed  in  this  document.  I  do  not  own  any  amount  of  stock  in  the  company 
recommended/covered in this report. 

General data sources 
Company, Capitaline, Public domain, Bloomberg. 

IL&FS Transportation Networks Ltd 2

 Contents

Investment Highlights ............................................................................. 4

Risk & Concern........................................................................................ 10

Company Background ........................................................................... 11

Outlook..................................................................................................... 13

Valuation.................................................................................................. 15

Peer Comparison..................................................................................... 16

Consolidated Quarterly Performance .................................................. 17

Financial Summary................................................................................. 18

IL&FS Transportation Networks Ltd 3

 Investment Rationale
Largest player in BOT road projects in terms of lane km: ITNL is the largest player 
in BOT road projects in India (in terms of lane km) with ~12000 lane km of 
projects  under  operation  or  development.  Out  of  12000  lane  km,  4329  lane 
km of projects are operational. It has maintained a market share of 8‐10% of 
total project awards (by NHAI in value terms) in the past two years. These 
projects  are  spread  across  all  regions  in  India.  It  has  a  mix  of  projects  in 
terms of national highways, state highways, expressways, non road projects, 
etc bagged from NHAI or state government authority. Strong track record of 
executing road projects helps ITNL in meeting prequalification for new road 
projects.   
 
Present across geography Diversifying project mix  
Meghalaya Karnataka Kerala
3.1% 1.5% 0.5%
 
Spain
Non NHAI Roads
Rajasthan  
0.1%
18%
MP 2.9%
  J&K
Haryana 4.3%
41.6%
4.8%  
AP
 
6.6% Non Road
  Projects
9%
 
 
Jharkhand  
9.7%
NHAI
73%
Maharashtra
UP
11.4%
13.4%

Sources: KJMC Research

Strong parental support & experience management team:  ITNL  is  promoted  by 
IL&FS who has over two decades of track record of promoting and financing 
infrastructure  projects  in  India.  The  strong  promoter  background  supports 
ITNL  in  arranging  funds  for  its  infrastructure  projects.  The  promoter 
background also strengthens ITNL position while bidding for a project.  

ITNL board comprises of high profile names with vast experience in various 
government  departments,  multilateral  agencies,  financial  institutions,  etc. 
Besides this it has professional team of senior managers with vast experience 
of  over  15  years  in  the  field  of  surface  transportation  and  infrastructure 
space. The experienced management team and high profile board provides 
expertise  in  bagging  and  developing  projects  in  surface  transport  and 
infrastructure space.    

 
 
 
 
 
 
 
 

IL&FS Transportation Networks Ltd 4

 Board of Directors

Name Designation Background

Deepak Dasgupta Chairman & Independent Director Retired IAS, MSc from Delhi University, Ex NHAI Chairman, Ex advisor ADB

RC Sinha Independent Director Retired IAS, PG in Urban development from London University, Ex VC&MD of MSRTC

B. Tech IIT Bombay, MBA from US, Ex MD & CEO of HDFC Standard Life, Consultant to
Deepak Satwalekar Independent Director
ADB, World Bank

HP Jamdar Independent Director Civil Engineer, Ex Secretary in various departments of Government of Gujarat

Ravi Parathasarathy Non-Executive Director PGDBM IIM-A, Presently Chairman of IL&FS

Hari Sankaran Non-Executive Director MA Economics from London School of Economics, Presently MD & CEO of IL&FS

Arun K Saha Non-Executive Director CA & CS, Joint MD of IL&FS

Vibhav Kapoor Non-Executive Director MBA, Group CIO of IL&FS, Ex UTI & ANZ Grindlays

Pradeep Puri Non-Executive Director Retired IAS, Currently CEO & President of Noida Toll Bridge

MBA from Harvard Business School, Ex McKinsey, Currently Managing Partner of Bessemer
R S Chandra Non-Executive Director
Venture Partners
Civil Engineer, Masters in Development planning, 30 yrs experience in Urban Infra &
K Ramchand Managing Director
Transportation sector, Associated with IL&FS since 1994

Mukund Sapre Executive Director Civil Engineer & diploma in Financial Management, associated with IL&FS group since 1992

                Source: Company & KJMC Research

Projects added in past two years to fuel BOT revenue: In the past two years ITNL 

has bagged Rs 156.6 bn of new projects in the area of roads, metro rail, bus 
services,  stadium,  etc.  In  FY10  it  bagged  8  projects  of  Rs  82.3  bn  and  has 
achieved financial closure for all the projects. Further in FY11, ITNL bagged 
4  BOT  project  of  Rs  74.285  bn  cost  and  successfully  achieved  the  financial 
closure  in  all  except  MP  Entry  Point.  Besides  this  in  FY11,  it  has  been 
declared  L1  in  three  other  projects  costing  Rs  115  bn  which  includes  one 
project in Kazakhstan with total cost of Rs 98.4 bn where it has 37% stake. It 
is also L1 in one of the NHAI projects of Rs 15 bn in J&K. Cash flows from 
recently  added  new  project  would  start  flowing  from  FY13E  onwards  and 
would result in strong growth in financials.  

Projects added during FY10

Project Authority Stake Project Type Length (Lane km) Estimated cost Financial Closure
Ranchi to Hazaribagh NHAI 74% BOT Annuity 319 8,692 FC Achieved
Pune to Sholapur NHAI 100% BOT Toll 571 14,027 FC Achieved
Moradabad to Bareilley NHAI 100% BOT Toll 522 19,836 FC Achieved
Three stretches under JARDP* GoJ 100% BOT Annuity 466 14,078 FC Achieved

Mega Highways Rajasthan 2 GoR 50% BOT Toll 698 7500 FC achieved
Chandrapur Warora GoM 35% BOT Toll 275 7000 FC Achieved
Gurgaon Metro Rail HUDA 70% BOT 4.8 km 11000 FC Achieved
Nagpur City Bus NMC 90% BOT 300 nos 180 FC Achieved
Source: Company & KJMC Research

 
 
 

IL&FS Transportation Networks Ltd 5

 Project added during FY11
Project Authority Stake % Project Type Length (Lane km) Estimated cost Financial Closure
Chenani Nashri Tunnelway Limited NHAI 100% BOT Annuity 38 37500 FC Achieved
Jorabat Shillong Expressway Limited NHAI 50% BOT Annuity 262 8240 FC Achieved
NAM Expressway Limited Govt of AP 50% BOT Toll 888 17605 FC Achieved
Madhya Pradesh Entry Point Project Govt of AP 51% BOT (Entry Fee) 0 10940 FC In process
Almaty to Khorgos in Kazakhstan Govt of Kazakhstan 37% Toll/ Annuity 1212 98400 L1/Preferred Bidder
Udhampur to Ramban in Jammu & Kashmir NHAI 100% BOT Annuity 186 15000 L1/Preferred Bidder
Outdoor Stadium at Karyavattom, Kerela National Games Sectt 100% BOT Annuity - 1610 L1/Preferred Bidder
Source: Company & KJMC Research

Participating in new projects: ITNL is well placed to add new BOT  projects in 

the next two‐three years. The achievement of financial closure in the projects 
bagged  in  the  past  two  years  would  strengthen  ITNL’s  position  in  adding 
new projects. Besides this, internal generation of cash flows and comfortable 
debt  equity  ratio  would  leave  headroom  to  bag  new  projects  and  fund  the 
same. In terms of project pipeline it has participated in Rs 929 bn of project 
of  which  Rs  172  bn  is  at  RFP  stage  and  Rs  757  bn  is  at  RFQ  stage.  The 
company expects completion of award for these projects in FY12.   

Details on project pipeline

RFP RFQ
Projects Length (Km) Cost (Rs Mn) Projects Length (Km) Cost (Rs Mn)
NHAI 6 713 78549 62 7113 569040
MORTH 6 1370 48990 1 80 1600
State Projects 11 1589 44498 25 2724 186394
Total 23 3672 172037 88 9917 757034
Source: Company

Parental support and internal cash generation mitigates dilution risk:  Strong 
parental  support  and  internal  cash  generation  strengths  ITNL  position  in 
bagging  and  achieving  financial  closure  for  new  projects.  It  has  already 
achieved  financial  closure  for  the  projects  where  LOA  is  signed  except  MP 
Border Check post which is in process. Till FY11E, it has already met 70% of 
total  equity  requirement  in  the  BOT  projects  (excluding  L1)  and  rest  30% 
(~Rs 5 bn) would be infused in FY12‐14E. We expect that the rest of equity 
requirement would be met by internal accruals. Hence there is a lesser risk 
of equity dilution in the near term for funding existing projects. In addition 
the standalone debt equity of 1x also leaves some headroom to meet funding 
through borrowings. 

Adopted asset light business model: ITNL  has  adopted  asset  light  business 
model by doing design and engineering work by itself and outsourcing civil 
work  to  other  subcontractors.  This  helps  ITNL  in  saving  investment  in 
equipment  and  site  related  work.  This  also  reduces  the  issues  related  to 
labour management, site work and other resource mobilization. Hence ITNL 
focuses more towards engineering, design and bidding related work.   

IL&FS Transportation Networks Ltd 6

 Robust capital work order entails strong revenue growth: ITNL has a robust capital 
work  order  in  hand  which  would  translate  into  revenue  in  the  next  three 
years. It has an order backlog of Rs 106 bn excluding L1 order of Rs 16.6 bn. 
Most of these orders are to be executed in the next three years. Besides this it 
is  participating  in  Rs  929  bn  of  projects  which  opens  more  opportunity  for 
the company in terms of new order inflows. The company has adopted new 
model  for  order  booking.  Earlier  it  was  booking  only  design  and 
consultancy  work  in  the  standalone  revenue  and  revenue  from 
subcontracting of civil work was booked at SPV level. Now the whole EPC 
order  including  design  and  construction  work  has  been  included  in  the 
order book. Hence there would be sudden jump in the revenue in FY12. But 
at the same time the EBITDA margin would decline from over 35‐65% to 16‐
18% range.   

EPC revenue to grow fast while EBITDA margin would decline

60000 70%

50000 60%
50%
40000
40%
30000
30%
20000
20%
10000 10%
0 0%
FY10 FY11E FY12E FY13E

Standalone revenue EBITDA margin%

Source: Company & KJMC Research

Ventured into other transportation verticals: ITNL has entered into new vertical in 

transportation segment such as Metro Rail, Airport, border entry points, Bus 
services, etc.  Bus service is a small venture made through its SPV.  

Metro Rail –  ITNL  is  developing  a  metro  rail  project  in  Gurgaon  bagged 
from  Haryana  Urban  Development  Authority  in  JV  with  DLF.  It  is 
developing  4.8  km  metro  rail  link  in  Gurgaon  with  project  cost  of  Rs  10.88 
bn and concession period of 99 years with 54% stake. It has tied up funds at 
the cost of 10.5%. The project is scheduled to be operational by January 2013.  

Airport – ITNL has also forayed into development of airport projects in JV 
with  Comet  Group.  It  was  awarded  the  development  of  two  regional 
airports  at  Gulbarga  and  Shimoga  by  Government  of  Karnataka.  The  total 
cost  of  the  project  is  Rs  4000  mn  with  concession  period  of  30  years.  ITNL 
has  40%  stake  in  the  project.  The  revenue  source  for  the  project  would  be 
airport fees, vendor space revenue and land side development rights.     

Border Entry Point –  ITNL  has  taken  up  a  different  assignment  in 
transportation projects business by venturing into Border entry point. It has 
bagged  Rs  10940  mn  project  from  Government  of  Madhya  Pradesh  in 
consortium  with  Spanco  (51%:49%)  for  development  of  24  border  check 
post.  The  project  has  concession  period  of  12.5  years  with  2  years  of 
construction  period.  The  revenue  source  for  the  project  would  be  entry  fee 
from commercial vehicles, parking fee, loading and unloading, etc. 

IL&FS Transportation Networks Ltd 7

 Development of road infrastructure through PPP is among top priority: To achieve a 
sustainable  growth  of  9‐10%  in  GDP,  India  needs  to  ramp  up  its 
infrastructure  primarily  power  and  transportation.  11th  plan  envisage 
investment of Rs 20.56 trillion (USD 514 bn) in infrastructure out of which Rs 
2.78  trillion  (13.57%  of  total)  has  been  allocated  for  the  development  of 
roads.  The  Government  has  launched  National  Highway  Development 
Program  (NHDP)  for  widening  and  strengthening  of  55000  km  of  national 
highways  involving  a  total  investment  of  Rs  3  trillion  (US$  60  billion). 
NHDP  is  being  implemented  by  National  Highway  Authority  of  India 
(NHAI) in seven different phases.  

The  government  has  adopted  Public  Private  Partnership  (PPP)  model  to 
execute  NHDP  projects.  In  Union  Budget  2011‐12  the  government  allowed 
NHAI  to  raise  Rs  100  bn  through  tax  free  bonds  for  implementing  road 
development projects.   

NHDP Projects at a glance

NHDP Total
Port
Others by
NS - EW Phase Phase Phase Phase Phase NHDP Connectivity
GQ SARDP NHAI
Ph. I & II III IV V VI VII Total
Total Length (Km.) 5846 7300 12109 14799 6500 1000 700 388 48642 380 1383 50405
Already 4-Laned (Km.) 5821 5560 2135 - 490 - - - 13212 291 924 14427
Under Implementation (Km.) 25 1161 5669 765 1922 - 41 112 9107 83 439 9629
Contracts Under Implementation (No.) 8 96 80 5 17 - 2 2 217 6 7 230
Balance length for award (Km.) - 421 4305 14034 4088 1000 659 276 26165 6 20 26191
Source: Company & KJMC Research

IL&FS Transportation Networks Ltd 8

 Awarding picked up but was below target in FY11: The  Work  Plan  I  (2009‐10) 
envisaged  awarding  of  about  11,618  km  whereas  Work  Plan  II  (2010‐11) 
talked about awarding of 11775.5 km of projects under NHDP. In FY11 (till 
February), NHAI awarded 46 projects of 4427 km length and project cost of 
Rs 393.5bn. This was below the original plan of 11000 km and revised plan 
of 7000 km. However, the project awarding in FY11 (till Feb‐11, 4427 km) is 
31.8%  higher  than  what  it  awarded  in  FY10  (3360  km).  Further  recently 
NHAI official in an interaction with media stated that it would be finishing 
with 5100 km of award in FY11 which is higher by 51.8% over FY10. 
Projects awarded by NHAI
Year Numbers Length (km) Total Project Cost (Rs bn)
FY02 3 279 1,360
FY03 11 542 3,860
FY04 2 120 772
FY05 7 455 2,272
FY06 29 1,686 10,605
FY07 24 1,395 10,779
FY08 9 1,145 8,263
FY09 8 643 8,591
FY10 38 3360 33311
FY11 (Till February 2011) 46 4,427 39,350
Source: NHAI website & KJMC Research

IL&FS Transportation Networks Ltd 9

 Project awarding to pick up pace in FY12E:  The  union  ministry  for  surface 
transport plans to award over 11000 km of projects for which it has released 
a comprehensive list of projects. As per that list there would be 100 projects 
of total investment of approximately Rs 1 trillion. Majority of these projects 
in terms of numbers would come from NHDP Phase IV which includes two 
laning of single lane roads. However the plan looks someway optimistic as 
the  government  failed  to  achieve  similar  kind  of  targets  in  the  previous 
work  plan.  On  conservative  basis  NHAI  targeted  to  award  7300  km  of 
projects  in  FY12E.  In  Q1FY12E  the  project  awarding  would  pick  up  pace 
with 2000 km of projects.   

Plan for future bidding

Scheme Numbers Length (km)
NHDP Phase V 27 2,561
NHDP Phase III 15 1,274
Special accelerated road dev. prog - Northeast 1 81
NHDP Phase IV 57 7,235
Total 100 11151
Source: NHAI website & KJMC Research

Key Risk & Concerns

Traffic risk: The IRR in BOT road projects are based on assumption in traffic 
growth. Any major deviation in the same would make the project unviable 
or would affect our projected cash flows. 
Regulatory risk: The  bidding  process  of  BOT  road  projects,  toll  rates,  etc  is 
regulated by government. Any major change in regulatory norms may affect 
the awarding and viability of projects. 
Interest rate volatility: Any major volatility in the interest rate may increase the 
interest cost and provides risk to the cash flows estimation.  

Funding constraints: Funding  of  road  projects  requires  huge  debt  which  is 
financed by financial institution and banks. Any major liquidity crunch with 
these institutions may impact the funding of future road project

Execution risk: ITNL is totally dependent upon third party contractors for the 

construction  activity.  Any  failure  on  timely  completion  of  work  by 
subcontractors may affect the returns on the project.  

Slowdown in awarding projects: The BOT road projects are awarded by NHAI 

and  other  government  agencies.  Any  major  delay  in  awarding  the  project 
would affect the future growth of the company. 

Negative value of some of the projects: Based on our estimation four of ITNL’s 

projects are giving negative or negligible value. Out of these four three are 
annuity  projects.  We  believe  that  higher  composition  of  debt  in  financing 
structure and high interest cost impacted the viability of these projects. 

  

IL&FS Transportation Networks Ltd 10

 Company Background
IL&FS  Transportation  Networks  (ITNL)  is  India’s  largest  BOT  road  project 
developer  with  ~  12000  lane  km  of  projects  at  various  stages  of  operation 
and development. It was incorporated in 2000 and was promoted by IL&FS; 
India’s  leading  infrastructure  development  and  financing  company.  In 
March 2010, the company came with IPO to raise Rs 7 bn at issue price of Rs 
258  per  share  for  funding  prepayment/  repayment  of  debt  and  for  other 
corporate purposes.  

ITNL  was  incorporated  with  objective  to  consolidate  IL&FS’  existing  road 
projects and to further add new road projects. It has expanded its business 
in international market by acquiring Spain based Elsamex SA which is into 
the  business  of  maintenance  services  for  roads  and  highways  in  Europe. 
Currently  ITNL  is  operating  and  developing  over  22  road  projects  spread 
across  India.  It  has  mix  of  road  projects  based  on  BOT  annuity  as  well  as 
BOT toll. Besides roads, it is also developing other transportation projects. It 
is developing 4.5 km of metro rail project in Gurgaon in JV with DLF. It has 
also  ventured  into  airport  projects  by  bagging  development  of  regional 
airport projects in Gulbarga and Shimoga. It is in JV with Nagpur Municipal 
Corporation  for  operating  300  buses  in  Nagpur.  It  has  recently  bagged 
project in MP for the development of entry points in the state. 

IL&FS Transportation Networks Ltd  

Roads 
BOT Road Assets 

EPC  ITNL Standalone 

Airport  Regional Airport Development ‐ Gulbarga and Shimoga

Metro Rail  Gurgaon Metro Rail Link 

Nagpur City Bus Project 
Bus Services 

Source: Company

IL&FS Transportation Networks Ltd 11

 In terms of key activity, ITNL is involved in development, implementation, 
operation and maintenance of the road project. The company has adopted a 
different  business  model  against  other  road  project  developers.  It  does 
design  and  engineering  work  inhouse  and  subcontract  the  construction 
work to third party. This reduces the issues such as labor management, site 
work and other resource mobilization related issues. Thus ITNL deploys its 
resources  towards  project  procurement,  design,  engineering  and  financing. 
Currently  it  has  outstanding  capital  work  order  of  Rs  122.6  bn  which 
includes  Rs  16.6  bn  of  L1  orders.  These  capital  works  are  spread  across 
India.   

BOT Project details

Concession End of
SPV/BOT Project Stake Cost Equity Grant Debt Status
Period (yrs) Concession
Operational Road Projects

North Karnataka Expressway Limited 74.5% 5423 1006 0 4417 Operational 17.5 Dec-19

Thiruvananthapuram Road Development Company Limited 50.0% 1098 301 0 797 Operational 17.5 Sep-24

Andhra Pradesh Expressway Limited 49.0% 8629 337 0 8292 Operational 20 Sep-26

Ramky Elsamex Hyderabad Ring Road Limited 26.0% 3994 450 665 2879 Operational 15 Oct-22

West Gujarat Expressway Limited 49.0% 2758 400 180 2178 Operational 20 Sep-25

NOIDA Toll Bridge Company Limited 25.4% 5888 3308 0 2580 Operational 30 Nov-28
May-28 &
Gujarat Road and Infrastructure Company Limited 83.6% 4657 2315 0 2342 Operational 30
Oct-29
Road Infrastructure Development Company of Rajasthan Ltd 50.0% 16180 1000 2150 13030 Operational 32 Jan-38

ITNL Road Infrastructure Development Company Limited 100% 3550 400 755 2395 Operational 11 Mar-20

Under Construction Road Projects

East Hyderabad Expressway Limited 74.0% 4,278 293 776 3,209 Under Construction 15 Aug-22

Thiruvananthapuram Road Development Company Limited 50.0% 2626 1250 0 1376 Under Construction 17.5 Nov-26

Hazaribagh Ranchi Expressway Limited 73.9% 8692 1,310 0 7382 Under Construction 18 Apr-28

Pune Sholapur Road Development Company Limited 100% 14027 1600 2850 9577 Under Construction 20 Mar-30

Jharkhand Road Projects Implementation Company Limited 100% 14078 1702 0 12376 Under Construction 18 Feb-28

Chhattisgarh Highway Development Company Limited 74.0% 23,000 - - - At DPR stage 17.5 -

Chenani Nashri Tunnelway Limited 100% 39842 6092 0 33750 Under Construction 20 Oct-30

Jorabat Shillong Expressway Limited 49.9% 8240 840 0 7400 Under Construction 20 May-30

Warora Chandrapur Ballarpur Toll Road Company Limited 35% 7000 3640 0 3360 Under Construction 30 Feb-40

Road Infrastructure Development Company of Rajasthan Ltd 2 50.0% 7500 2250 460 5250 Under Construction 32 Feb-42

Moradabad Bareilly Expressway Limited 100% 19836 2,217 4,433 13187 Under Construction 25 Aug-35

NAM Expressway Limited 50.0% 17605 7005 0 10600 Under Construction 24 Jan-35

Udhampur to Ramban in Jammu & Kashmir 100% 15000 - - - L1(FC Not Achieved) - -

Almaty to Khorgos in Kazakhstan 37.0% 98400 - - - L1(FC Not Achieved) - -

Other Projects

Nagpur City Bus Project 90.0% 180 18 0 162 Operational 10 Feb-17

Gurgaon Metro Rail Link 54.0% 10880 3264 0 7616 Under Construction 99 Jan-2109

Madhya Pradesh Entry Point Project 51.0% 10940 - - - Under Construction 12.5 -

Regional Airport Development - Gulbarga and Shimoga 40.0% 4000 - - - Under Construction 30 -

Outdoor Stadium at Karyavattom, Kerala 100% 1610 - - - Under Construction 15 -

*estimated, Source: Company & KJMC Research

IL&FS Transportation Networks Ltd 12

 Outlook
Expect revenue CAGR of 41.3% during FY10-13E
We expect the consolidated revenue of ITNL to grow at a CAGR of 41.3% in 
FY10‐13E  led  by  62.2%  CAGR  in  construction  revenue  and  9.5%  CAGR  in 
BOT revenue and 16% CAGR in Elsamex. We expect traction in EPC revenue 
from FY12E on execution of strong order book and new order inflows.  We 
expect  that  the  new  projects  would  strengthen  BOT  revenue.  While 
estimating  toll  revenue,  we  have  assumed  1)  6.5%  average  growth  rate  in 
traffic  and  2)  5%  WPI  linked  toll  rate  hike.    While  assuming  traffic  growth 
we  have  factored  in  strong  growth  in  domestic  automobile  sales.  During 
FY04‐FY10 the domestic sales volume in passenger and commercial vehicles 
grew  at  a  CAGR  of  13.5%.  Owing  to  inclusion  of  construction  revenue  at 
standalone level rather than SPV level, we expect higher contribution from 
standalone revenue 

Revenue, EBITDA and PAT to maintain decent growth Revenue growth led by Standalone EPC

80000 80000

70000 70000
60000 60000
50000
50000
Rs mn

Rs mn

40000
40000
30000
30000
20000
20000
10000
10000
0
FY08 FY09 FY10 FY11E FY12E FY13E 0
FY10 Standalone BOT Elsamex FY13E
Net Revenue EBITDA PAT (Af ter minority int) EPC

Source: Company & KJMC Research

Strong growth in domestic auto sales

2500000 600000

2000000 500000
Commercial vehicles
Passenger vehicles

400000
1500000
300000
1000000
200000
500000 100000

0 0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Passenger Vehicles Commercial Vehicles

Source: SIAM & KJMC Research

IL&FS Transportation Networks Ltd 13

 Consolidated EBITDA to fall on change in revenue mix:
We  expect  consolidated  EBITDA  margin  to  decline  from  33%  to  23.2%  by 
FY13E  on  account  of  rise  in  contribution  form  the  EPC  business.  The 
consolidated  EBITDA  and  PAT  are  expected  to  grow  at  a  CAGR  of  25.6% 
and  16.4%  respectively.  We  assume  that  the  EPC  margin  to  decline  from 
64.8%  in  FY10  to  17.8%  by  FY13E  on  inclusion  of  construction  work  in  the 
order book.   

Margins to decline on higher contribution from EPC Share of E&C to increase

35% 100%
90% 17% 16%
30% 30% 28%
80% 10%
25% 18%
70%

20% 60% 22% 24%

50%
15% 40%
73%
30% 64%
10%
48% 48%
20%
5%
10%
0% 0%
FY10 FY11E FY12E FY13E FY10 FY11E FY12E FY13E

EBITDA Mgn PAT Mgn ITNL Standalone (E&C ) Toll Annuity & Others Elsamex

Source: Company & KJMC Research

Returns ratios to decline on new BOT projects getting operational

The  company  does  not  need  any  major  debt  or  equity  infusion  as  internal 
generation of cash would suffice equity need in existing project. As a result 
the  standalone  D/E  continues  at  1x  or  lesser  in  FY10‐13E.  But  the 
consolidated D/E is expected to increase on debt funding in the new projects.  
We  expect  substantial  89%  yoy  jump  in  interest  cost  in  FY13E  led  by  debt 
servicing in  the  new  projects  during  their initial  phase  of  operation.  Hence 
the RoE is expected to fall substantially in FY13E.  

Standalone v/s Consolidated D/E Consolidated Return ratios to fall on increase in debt and interest

4.0  
25%
3.5
 
3.0
20%
2.5  
2.0 15%
1.5
 
1.0 10%
 
0.5
5%
0.0  
FY10 FY11E FY12E FY13E
FY10 FY11E FY12E FY13E

RoCE RoE
Stanalone D/E Consolidated D/E

Source: Company & KJMC Research

 
 
 
 
 
 

IL&FS Transportation Networks Ltd 14

 Valuation
We  have  valued  ITNL  on  SOTP  basis  by  valuing  each  of  the  BOT  projects 
using  DCF  valuation.  The  value  from  the  BOT  projects  comes  to  Rs  154 
which  includes  1)  Rs  73  from  operational  projects  and  2)  Rs  81  per  share 
from  projects  which  are  in  construction  or  development  phase.  While 
projecting the toll revenue we have assumed 6.5% growth in traffic volume 
considering robust performance and outlook for auto sector. We have linked 
rise  in  toll  rates  to  long  term  WPI  assumed  at  5%.  We  have  taken 
discounting  rates  in  the  range  of  12‐13%  for  different  projects  considering 
the  type  and  stage  of  execution/operation.  Based  on  our  estimation  four  of 
its  projects  are  giving  negative  or  negligible  value.  Out  of  these  four  three 
are annuity projects.  

We  have  valued  EPC  business  at  FY12E  EV/EBITDA  of  6.5x  which  is  15% 
discount  to  the  core  construction  companies.  The  value  of  EPC  business 
comes  to  Rs  121  per  share.  We  have  valued  Elsamex  at  1.2x  of  value  of 
equity invested. Besides this, the other transportation businesses like metro 
and MP entry point have been valued on DCF basis at Rs 3 per share. Hence 
we arrive at a target price of Rs 296. Currently the stock is trading below its 
IPO  price  of  Rs  258.  At  CMP  of  Rs  236,  the  stock  is  trading  at    FY11E  & 
FY12E  P/E  of  10.0x  &  8.5x  and  EV/EBITDA  of  9.6x  and  11.6x  respectively. 
We give BUY rating on the stock.  

IL&FS Transportation Networks Ltd 15

 SOTP Valuation of ITNL
Value of Stake
Particulars Stake Value (Rs Mn) Value per share (Rs)
(Rs Mn)
North Karnataka Expressway Limited 94% 401 375 2
Thiruvananthapuram Road Development Company Limited 50% 3 2 0
Andhra Pradesh Expressway Limited 100% -508 -508 -3
Ramky Elsamex Hyderabad Ring Road Limited 26% 1284 334 2
West Gujarat Expressway Limited 100% 1547 1547 8
NOIDA Toll Bridge Company Limited 25% 7152 1813 9
Gujarat Road and Infrastructure Company Limited 84% 11706 9788 50
Road Infrastructure Development Company of Rajasthan Limited 84% 2167 1812 9
ITNL Road Infrastructure Development Company Limited, Baewar
50% -1911 -956 -5
Gomti
Total BOT (under operation) 73
East Hyderabad Expressway Limited 74% 474 350 2
Thiruvananthapuram Road Development Company Limited 50% -711 -355 -2
Hazaribagh Ranchi Expressway Limited 74% 222 164 1
Pune Sholapur Road Development Company Limited 100% 3889 3889 20
Jharkhand Road Projects Implementation Company Limited 100% 487 487 3
Chenani Nashri Tunnelway Limited 100% 2192 2192 11
Jorabat Shillong Expressway Limited 50% 208 104 1
Warora Chandrapur Ballarpur Toll Road Company Limited 35% 1513 530 3
Road Infrastructure Development Company of Rajasthan Limited 2 50% 3454 1727 9
Moradabad Bareilly Expressway Limited 100% 3132 3132 16
NAM Expressway Limited 50% 7030 3515 18
Total BOT (under construction/development) 81
Total Value of BOT Assets 154
Standalone/EPC ( 6.5x EV/EBITDA) 100% 23568 23568 121
Elsamex (1.2x BV) 100% 3267 3267 17
Gurgaon Metro 54% 653 353 1.8
Madhya Pradesh Entry Point Project 51% 501 255 1.3
Total Value per Share 295
Source: KJMC Research

Peer Comparison
EBITDA PAT
P/E EV/EBITDA P/BV D/E RoE%
Margin% Margin%
Particulars
FY10 FY10 FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12 FY11E FY12E

ITNL 33.0% 14.3% 10.0 8.5 9.6 11.6 2.2 1.8 2.0 2.6 22.3% 21.3%
IRB Infrastructures &
46.9% 23.7% 13.4 14.3 9.8 9.3 2.7 2.3 1.7 2.0 23.1% 17.7%
Developers
Gammon Infrastructure* 41.5% 9.0% 93.8 53.6 17.4 9.5 2.0 1.9 NA NA 1.8% 5.1%

IVRCL Infra 9.7% 3.8% 13.4 11.4 8.6 7.3 1.1 1.1 1.1 1.2 8.9% 9.7%
Hindustan Construction
11.8% 2.2% 21.7 14.5 9.5 7.9 1.4 1.3 1.8 1.8 6.7% 9.3%
Company
Nagarjuna Construction
11.2% 4.9% 14.2 12.3 8.9 7.4 1.1 1.1 NA NA 8.5% 9.1%
Company*
Source: Company, *Bloomberg & KJMC Research

IL&FS Transportation Networks Ltd 16

 Consolidated Quarterly Performance (in Rs mn)

Particulars Q3FY11 Q2FY11 Q1FY11 9MFY11

Net Sales 7308.9 8832.9 7760.4 23902.2
Expenditure 5129.3 6218.1 5146.1 16493.5
Direct Expenses 3208.4 3858.1 2714.2 9780.7
Employee Cost 3208.4 3858.1 2714.2 9780.7
O&M Expenses 434.2 780.6 816.5 2031.3
Other Expenditure 629.2 722.5 724.6 2076.3
EBITDA 629.2 722.5 724.6 2076.3
EBITDA Margin% 29.8% 29.6% 33.7% 8.7%
Other Income 201.2 186.9 172.2 560.3
PBIDT 2380.8 2801.7 2786.5 7969.0
Depreciation 158.1 141.9 130.5 430.5
PBIT 2222.7 2659.8 2656.0 7538.5
Interest 1152.9 982.8 1054.6 3190.3
PBT 1069.8 1677.0 1601.4 4348.2
Tax 447.7 564.8 541.3 1553.8
PAT 622.10 1112.20 1060.10 2794.4
Minority Interest -5.8 -37.7 -14.0 -57.5
PAT (after Minority Int.) 616.3 1074.5 1046.1 2736.9
PAT Margin% 8.5% 12.6% 13.7% 11.5%
Equity 1942.7 1942.7 1942.7 5828.1
Source: Company

IL&FS Transportation Networks Ltd 17

 Consolidated Financial Summary
Profit & Loss Statement Balance Sheet
Y/E, Mar (Rs. mn) FY09 FY10 FY11E FY12E FY13E Y/E, Mar (Rs. mn) FY09 FY10 FY11E FY12E FY13E

Net Revenue 12,254 24,029 32,278 58,970 67,743 Equity Share Capital 1,714 1,943 1,943 1,943 1,943
Reserves 7,148 14,744 18,597 23,239 27,969
Growth % 238.9% 96.1% 34.3% 82.7% 14.9%
Networth 8,862 16,686 20,540 25,182 29,911
Total Expenses 10,320 16,088 22,054 47,529 51,999 Preference Share
350 350 350 350 350
Capital
Growth % 478.0% 55.9% 37.1% 115.5% 9.4% Total Share Holders'
9,212 17,036 20,890 25,532 30,261
Fund
EBITDA 1,933 7,941 10,223 11,441 15,744
Minority Interest 774 1,118 1,089 1,111 888
Growth % 5.6% 310.8% 28.7% 11.9% 37.6% Total Loan Funds 18,996 33,665 53,905 90,164 100,708

EBITDAM % 15.8% 33.0% 31.7% 19.4% 23.2% Net Deferred Tax 647 779 779 779 779
Total Liabilities 29,629 52,599 76,662 117,585 132,637
Other Income 1,066 844 747 1,158 1,354
Net Assets (incl.
15,932 28,285 54,767 84,022 97,909
Interest 1,743 2,941 3,362 3,841 7,261 CWIP & Intangibles)
Goodwill 2,855 2,710 2,710 2,710 2,710
Depreciation/
353 603 1,080 1,311 2,734 Investments 2,010 4,544 5,004 5,873 6,845
Amortization
PBT 804 5,241 6,528 7,445 7,103 Toll receivable
1,899 1,899 1,899 1,899 1,899
account
Tax 483 1,858 2,373 2,578 2,588 Current Assets 14,183 23,028 22,041 34,048 35,962
Inventories 245 292 321 359 405
PAT 321 3,383 4,155 4,867 4,515
Debtors 7,873 6,478 9,639 14,722 15,849
Growth % -63.2% 953.3% 22.8% 17.1% -7.2%
Cash & Bank 1,601 5,502 1,324 3,355 1,185
Minority Interest 31.9 26.4 -29.0 21.4 -222.2 Loans & Advances 3,436 9,709 9,709 14,563 17,476
Share of profit/loss Other Current Assets 1,027 1,048 1,048 1,048 1,048
-26.8 87.3 367.3 497.2 692.4
from Associates Current Liabilities &
PAT (After minority 7,250 7,868 9,758 10,966 12,687
262 3444 4551 5343 5430 Prov
int)
Net Current Assets 6,933 15,161 12,283 23,082 23,275
Growth % -71.9% 1212% 32.2% 17.4% 1.6%
Total Assets 29,629 52,599 76,662 117,585 132,637

Cash Flow Statement Ratios

Y/E, Mar (Rs. mn) FY09 FY10 FY11E FY12E FY13E Y/E, Mar (Rs. mn) FY09 FY10 FY11E FY12E FY13E

Pre-Tax Profit 804 5,241 6,528 7,445 7,103 Profitability/ Returns %

EBITDA Mgn 15.8% 33.0% 31.7% 19.4% 23.2%
Depreciation & Non
557 459 974 1,311 2,734 PAT Mgn 2.6% 14.1% 12.9% 8.3% 6.7%
Cash
ROCE 5.5% 17.8% 14.1% 10.4% 10.4%
Interest & others 348 1,055 2,362 3,362 3,841
ROE 3.5% 23.9% 22.3% 21.3% 16.4%
Chg in Working Cap -1,321 -3,008 -1,300 -8,768 -2,364 Per Share Data
(Rs/share)
EPS 1.4 17.6 23.3 27.4 27.9
Tax Paid -572 -1,903 -2,373 -2,578 -2,588
CEPS 3.9 20.5 26.9 31.8 37.3
Operating Cash
175 3,189 7,297 1,252 12,147 BVPS 51.7 85.9 105.7 129.6 154.0
Flow
DVPS 1.3 3.0 3.0 3.0 3.0
Capex 338 -5,372 -27,562 -30,566 -16,621
Valuations (X)

Free Cash Flow 513 -2,183 -20,265 -29,314 -4,474 PER 164.7 13.3 10.0 8.5 8.4
CPER 60.0 11.5 8.8 7.4 6.3
Investments -522 -9,214 -93 -372 -279 P/BV 4.5 2.7 2.2 1.8 1.5
EV/Sales 4.6 3.0 3.0 2.2 2.1
Equity Capital 0 5,758 0 0 0
EV/EBITDA 29.1 9.1 9.6 11.6 9.2
Net Debt 1,858 12,613 20,239 36,259 10,545 Dividend Yield % 0.5% 1.3% 1.3% 1.3% 1.3%
Turnover (X Days)
Dividend -381 -251 -698 -700 -700 Debtor Days 239.0 109.0 91.1 75.4 82.4
Inventory Days 7.9 6.1 5.1 2.6 2.7
Interest & Others -1,777 -2,894 -3,362 -3,841 -7,261
Current Liability Days 252.1 148.4 128.1 73.5 77.5
Net Change in Cash -308 3,829 -4,178 2,031 -2,170 Gearing Ratio (X)
Net Debt/Equity 1.8 1.6 2.6 3.4 3.3
Closing Cash
1,156 4,985 1,324 3,355 1,185 Total Debt/Equity 2.1 2.0 2.6 3.6 3.4
Position
Source: Company & KJMC Research

IL&FS Transportation Networks Ltd 18

 Mr. Girish Jain   Executive Director  jaingirish@kjmc.com  2288 5201 (B) 
     
Mr. Suresh Parmar   A.V.P. ‐ Institutional Equities  suresh.parmar@kjmc.com  4094 5551 (D) 
     
Mr. Vipul Sharma   A.V.P. ‐ Institutional Sales  vipul.sharma@kjmc.com  4094 5556 (D) 
   

Recommendation Parameters 
 

Expected returns in absolute terms over a one‐year period 
Buy  ‐  appreciate more than 20% over a 12‐ month period 
Accumulate  ‐  appreciate 10% to 20% over a 12‐ month period 
Hold / Neutral  ‐  appreciate up to 10% over a 12‐ month period 
Reduce  ‐  depreciate up to 10% over a 12‐ month period 
Sell  ‐  depreciate more than 10% over a 12‐ month period 
 
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leverage investments. 
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of only Liquid & Liquid Plus plans along with ranking of each fund for  Mon‐Fri 
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Data Sources: Capitaline, Companies, Bloomberg, Various Websites & publication available on Public domain.

Disclaimer:
This publication has been prepared from information available on public domain and doses not constitute a solicitation to any person to buy or sell a security. The information
contained therein has been obtained from source believed to be reliable to the best of our knowledge. KJMC Capital Market Services Ltd. dose not bear any responsibility for the
authentication of the information contained in the reports and consequently, is not liable for any decisions taken based on the same. Further KJMC only provides information
updates and analysis. All option for buying and selling are available to investors when they are registered clients of KJMC Capital Market Services Ltd. As per SEBI
requirements it is stated that, KJMC Capital Market Services Ltd. , and/or individuals thereof may have positions in securities referred herein and may make purchases or sale
thereof while this report is in circulation

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