Another brick in the wall

Written by Rahul Jain | Updated: Sep 30 2007, 08:15am hrs
Maytas Infra is into the construction business and it has recently diversified into infrastructure development. The company wants to raise funds to invest in its associate companies, which are into power and roads. Maytas Infra has good experience in irrigation projects, which is reflected in the various projects executed over the years. The irrigation projects have made the highest contributions to the revenues (48.4%) in the FY 2006-07. It has started undertaking civil construction projects in the power, industrial structures, oil & gas, and railway sectors. Its operations in the power sector started in 2006.

Objects of the issue

The company will be utilising maximum funds from the issue in three infrastructure projects, two are in power, and one is a road project. Of Rs 189.4 crore allocated for three projects, Rs 127.44 crore will be invested in KVK Nilachal power; a 300 MW coal-based plant in Orissa, Rs 34.25 crore will be utilised SV power by setting up a 56 MW coal washery reject based power plant in Chhattisgarh. And the remaining Rs 27.71 crore will be invested in Bangalore for an elevated Tollway for the Construction of Elevated highway project of the Bangalore-Hosur section, on a built, operate, and transfer (BOT) basis. Lastly Rs 33.29 crore will be used to buy construction equipment.

Financials

Over the coming years, the company will derive revenues from various sectors looking at the order book position. Currently it has 33 projects in irrigation, 12 in roads and bridges, 6 in building, 18 in civil construction projects in the power sector.

Its stand-alone and jointly held order book as of June 30, 2007 is Rs 2699.92 crore and Rs 889.41 crore respectively. Its joint project is conducted only in irrigation and the remaining projects will be independently developed. Its order book on a stand-alone basis reflects that 41.76% will come from roads and bridges, buildings (16.91%), irrigation (15.91%), oil & gas (12.04%), power (7.25%), railways (6.10%).

Of the total revenues, irrigation (Rs 381.55 crore) contributes the highest followed by roads and bridges (Rs 232.31 crore), buildings and structures (Rs 123.35 crore) and power, oil & gas, and railways contributing a remaining percentage. The percentage in these sectors will improve over the years.

The company's topline had grown at 15.38% CAGR from FY 2001-02 to FY 2004-05. But in the last two financial years the topline has grown at a CAGR of 65.18% due to increase in the number of orders. The revenues including the joint ventures and net profit in the FY 2006-07 is Rs 787.67 crore, Rs 55 crore.

Valuation

Maytas is relatively smaller in comparison to the listed peers. Its twelve-month fully diluted earning per share ended March 2007 is Rs 9.34. Considering the lower and upper price band, the P/E comes to 34.23(x) and 39.58(x) respectively. The issue is well-priced looking at the size of the company and compared with peers like Gammon (85.05), IVRCL Infrastructure (37.73), Hindustan construction (44.54), Patel Engineering (24.95). The projects undertaken by the company have a relatively long gestation period and there is a risk of escalation in cost due to various reasons while it is under production. This may reduce the returns in the long run. Investors must consider the above factors before investing.