Ramky Infrastructure: Building a better future

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The large opportunity in the infrastructure space has helped many companies grow faster and bigger. This trend, many experts believe, will continue in the near future, too, considering that the government has outlined huge infrastructure spends in the country.

Incorporated in 1994, Ramky Infrastructure has seen its revenue growing five-fold in the last four years to Rs 2,251 crore in 2009-10. The company has come out with an initial public offer (IPO) of Rs 530 crore, which includes Rs 180 crore on account of an offer for sale. Of the Rs 350 crore Ramky will receive, Rs 80.4 crore will be spent on equipment, Rs 175 crore towards working capital and Rs 25 crore on repayment of debt.

Visible growth
The growth from current levels may not be as fast as the historical annual growth of over 50 per cent seen in the last four years. However, considering its current order book and opportunities in the infrastructure sector, the company’s revenue and profits should grow about 40 per cent annually over the next two years.

ROBUST GROWTH
In Rs croreFY 08FY 09FY10
Revenue112816012251
Ebitda (%)10.913.213.8
Net profit6398149
Net worth255426555

At present, the company has an order book of over Rs 10,000 crore, which is almost five times its 2009-10 revenue and provides visibility for the next two-three years.

ISSUE DETAILS
Price band (Rs )405-468
Size (Rs cr)530
Opened on21-Sep
Closes on23-Sep
Crisil grading3/5

Key advantages
Ramky Infrastructure is primarily into the construction of water and waste water projects, buildings, irrigation and road projects. It is a well-diversified player in terms of segments. But its key strength lies in water and waste water projects, which also enjoys high margin and contributes almost 33 per cent of the company’s revenues.

Further, it is also well-diversified in terms of geographical presence, which lowers its dependence on a particular region.

Valuable assets
In 2006-07, the company ventured into development activity (asset-based business), where it executes projects on a public-private partnership as well as BOT (build-operate-transfer) basis. This segment has grown fast with revenues rising from Rs 212 crore in 2007-08 to Rs 383 crore in 2009-10. It currently has about five road projects. While one of the road projects is operational (annual annuity of Rs 60 crore), others will be operational over the next three years.

It also has five industrial park projects, where it aims to generate revenues from land sales and thereafter from operation and maintenance charges. This includes a 2,143-acre integrated industrial park, which is expected to earn revenues for the company over the next five years.

Ramky is also active in the real estate space, where it has two ongoing projects over 50 acres in all. Notably, the company has already sold 60-80 per cent of the saleable area in these projects. That apart, it has three other projects. Its biggest project is Ramky Integrated Township, spread over 574 acres, where Ramky Infra holds 29.19 per cent. This project is expected to be complete in phases over the next five-six years.

Outlook & valuations
At the upper price band of Rs 405-468 a share, Ramky’s market capitalisation works out to Rs 2,660 crore. Excluding the value of its assets business, which is estimated to be about Rs 650-700 crore, the value of the engineering, procurement and construction (EPC) business works out to Rs 1,960 crore.

Based on estimated 40 per cent growth in revenue and about Rs 15 crore savings in interest cost (led by prepayment of debt), this business is expected to report a profit of Rs 180 crore in 2010-11, resulting in a price-to-earning (PE) ratio of 11 times. Compared to listed companies, like IVRCL Infra and others which are trading at about 13-15 times one-year forward earnings, valuations look reasonable

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