IL&FS Trans

IL&FS Transportation Networks is entering the capital market on 11^th March 10, with a public issue of Rs.700 crores, in the price band of Rs.242 to Rs.258 per share. This comprises of an offer for sale of 42.79 lakh shares, while balance is through fresh issue.

The company is into surface transportation infrastructure and is one of the largest private sector BOT road operator in the country. The company acts as developer, operator and facilitator taking projects from conceptualising through commissioning to operations and maintainance. The company has a pan-India presence, with 17 road projects, comprising of 9,397 lane kms., of which 4,086 lane kms. are under operation and maintainance and 5,311 lane kms. are under development, with 1,244 lane kms. under construction. About 35% of these are annuity project, while, about 65% are toll based. The company has also acquired Elsamex a company engaged in maintainance of roads, buildings and petrol stations mainly in Spain, with additional operations in Portugal in Europe and Columbia and Mexico in South America. Elsamex also provides consulting services for roads and water supply projects in the areas of quality control, safety health and environment.

However the financial performance of the company, took a beating in FY09, due to increase in staff costs, O&M expenses and administrative and general expenses. Though total income of the company, on consolidated basis, grew to Rs. 1,332 crores in FY09 from Rs. 437 crores in FY08, PAT fell sharply to Rs. 31 crores against Rs. 86 crores in FY08.

But it managed to recoup during its 6 months performance, for period ending Sept. 09. It posted a total income of Rs.980 crores with PAT at Rs.123 crores. This translates into an EPS of Rs.7.17 for the half year. Net worth of the company as at 30-09-09, has been at Rs.1,017 crores, with paid up equity, placed at Rs.171 crores. The paid up equity is likely to get increased to about Rs.195 crores, taking issue price at its upper band of Rs. 258 per share. Consolidated debt of the company has been at Rs.2,417 crores as at 30-09-09.

IRB Infra a sizeable and comparable company, listed on exchanges, which is now ruling at Rs.255 with market capitalization of about Rs.8,500 crores with EV of about Rs.11,000 crores. IRB had total income of Rs.1,203 crores for 9 months ending Dec. 09, with PAT at Rs.243 crores, resulting in an EPS of Rs.7.33 for the period, on an equity of Rs.333 crores. If we expect an EPS of Rs.11 for FY10, share is now ruling at a PE of about 23 times. However, IRB is also having realty parcel, due to which market cap and EV of the company is higher.

Considering this, IL&FS is capable to post an EPS of Rs.16 for FY10, which translates into a PE of about 16 times, at the upper band of Rs.258 per share. Promoters of the company are a leader in infrastructure field, for the last over 2 decades, due to which, they enjoy better valuations and discounting.

Hence, it is strongly advised to apply in the issue even at the upper price band of Rs.258 for listing gain as well as investment gains.