india | infrastructure initiating coverage pnc infratech · pnc infratech is an engineering,...

Adhidev Chattopadhyay • adhidev.chattopadhyay @elaracapital.com • +91 22 6164 8526

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Elara Securities (India) Private Limited

Straight drive

Trifacta of success: low debt, captive quarries, own equipment

PNC Infratech (PNCL) has a low standalone net debt-equity ratio of

0.1x, with a controlled working capital cycle, a strong order book of

INR 35.8bn as on September (2.3x FY15 EPC revenue) and additional

L1 of INR 8.1bn. The company follows an integrated business model,

preferring to own equipment and do in-house design & engineering

to reduce cost and ensure timely completion of projects.

In the right place at the right time: INR 2.5tn roads opportunity

We envisage INR 2.5tn of ordering in this segment over the next 3

years. The Ministry of Road Transport and Highways (MoRTH) has a

target of awarding 9,000km of roads in FY16 and 10,000km in FY17

despite land acquisition and environmental issues. PNCL’s strong

balance sheet should enable it to selectively bid for hybrid annuity

projects, likely to come up for bidding from December 2015.

No hiccups: a fully funded BOT portfolio

PNCL has a portfolio of eight BOT projects, mostly in Uttar Pradesh, on

toll and annuity bases. Of these, seven are operational, with the

company having infused its entire equity share of INR 4.9bn into them.

With the Raibareli-Jaunpur project likely to start operations in FY17, we

expect PNCL to post gross toll revenue of INR 8.2bn in FY17E and INR

9.1bn in FY18E. In our view, management does not need fresh

infusion of equity from its standalone balance sheet from FY17, if we

assume traffic growth of 5% over the life of these projects.

Long play on infra boom: revenue CAGR of 18% over FY15-18E

We expect total order wins of INR 25.0bn in FY16E, of which PNCL has

already won INR 17.4bn YTD. We estimate order wins of INR 27.5bn in

FY17E and INR 30bn in FY18E. We expect standalone revenue CAGR

of 18% over FY15-18E to INR 25.9bn on ramp up in execution. The key

projects expected to contribute to revenue growth over FY15-18

include Agra-Firozabad, Bhojpur-Baxar and Koilwal-Bhojpur.

Valuation We initiate coverage of PNC Infratech with a Buy rating and a SOTP-

based TP of INR 706 (CMP: INR 533). We assign INR 554 per share

to the standalone EPC business at 15x FY18E standalone EPS of INR

37.0 and the BOT business at INR 7.8bn (INR 152 per share) on a

FCFE basis at a 15% cost of equity (implied valuation of 1.6x PNCL’s

invested equity of INR 4.9bn). The next key triggers are a higher

number of hybrid annuity & BOT projects and large orders from

other segments, such as the Railways and waste management.

Price performance

Source: Bloomberg

Key standalone financials YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

RoE (%)

RoCE (%)

P/E (x)

EV/EBITDA (x)

FY15 15,610 35.5 2,166 13.9 1,004 43.1 25.2 14.9 11.2 21.2 11.2

FY16E 18,732 20.0 2,487 13.3 1,311 30.6 25.5 13.1 9.9 20.9 11.0

FY17E 22,478 20.0 3,097 13.8 1,615 23.2 31.5 12.0 10.2 17.0 9.0

FY18E 25,850 15.0 3,690 14.3 1,896 17.4 37.0 12.5 10.9 14.5 7.6

Note: pricing as on 11 December 2015; Source: Company, Elara Securities Estimate

India | Infrastructure 14 December 2015

Initiating Coverage

PNC Infratech

Rating: Buy Target Price: INR 706

Upside: 32%

CMP: INR 533 (as on 11 December 2015)

Key data

Bloomberg /Reuters Code PNCL IN/PNCI.NS

Current /Dil Shares O/S (mn) 51/51

Mkt Cap (INR bn/USD mn) 27/409

Daily Volume (3M NSE Avg) 34,088

Face Value (INR) 10

1 USD = INR 66.9

Note: *as on 11 December 2015; Source: Bloomberg

Price & Volume

Source: Bloomberg

Shareholding (%) Q1FY16 Q2FY16

Promoter 56.1 56.1

Institutional Investor 28.8 20.2

Other Investor 11.7 22.4

General Public 3.5 1.3

Source: BSE

Price performance (%) 3M 6M 12M

Sensex (2.2) (5.0) (9.3)

PNC Infratech 12.8 42.2 -

KNR Constructions 15.1 16.3 92.4

Source: Bloomberg

75

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125

150

May-15 Jul-15 Sep-15 Nov-15

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PNC Infratech Sensex

0

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4

5

350

400

450

500

550

May-15 Jul-15 Sep-15 Nov-15

Vol. in mn (RHS) PNC Infratech (LHS)

PNC Infratech

2 Elara Securities (India) Private Limited

Valuation trigger

Source: Bloomberg, Company, Elara Securities Estimate

Valuation overview – SOTP

Segment Valuation method Valuation (INR mn)

Value (INR)

Standalone EPC 15 x FY18E P/E 28,444 554

BOT portfolio FCFE March 2017E 7,803 152

SOTP value 36,248 706

Source: Elara Securities Estimate

Valuation driver – key assumptions

YE March (INR bn) FY14 FY15 FY16E FY17E FY18E

Closing order book 28.0 34.4 40.7 45.7 50.1

New order wins 13.8 18.5 25.0 27.5 30.3

EPC revenue 11.5 15.6 18.7 22.5 25.9

Order book-to-bill (x) 2.4 2.2 2.2 2.0 1.9

Source: Company, Elara Securities Estimate

Investment summary

Low debt, strong working capital cycle

and order book of INR 35.8bn as on

September 2015. Additional L1 of INR

8.1bn

Strategic shift via an integrated

business model

Fully funded BOT portfolio, which

consists of eight projects in Uttar

Pradesh; seven projects are already

operational

Valuation trigger

1. Higher number of hybrid annuity &

BOT projects and large orders from

other segments, such as the Railways

and waste management

2. Standalone revenue CAGR of 18% and

a PAT CAGR of 24% over FY15-18E on

ramp up in execution

3. Gross toll revenue of INR 8.2bn in

FY17E and INR 9.1bn in FY18E as the

Raibareli-Jaunpur project is expected to

commence operations in FY17

Key risks

Delay in execution of key projects, such

as the Agra-Firozabad lane (INR 14.1bn

balance order book) and the

commencement of tolling on the

Raibareilly-Jaunpur project

Slowdown in industrial activity in areas

where toll booths are located

No fresh orders from the Central and

State governments

Our assumptions

We expect total order wins of INR

25.0bn in FY16E, INR 27.5bn in FY17E

and INR 30.3bn in FY18E

We assume traffic growth of 5% across

the BOT portfolio from FY17 once the

Raibareilly-Jaunpur project becomes

operational

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Standalone revenue CAGR of 18% and a PAT CAGR of 24% over FY15-18E on ramp up in

execution

Gross toll revenue of INR 8.2bn in FY17E and INR 9.1bn in FY18E as the Raibareli-Jaunpur project

is expected to commence operations in FY17

Higher number of hybrid annuity & BOT projects and

large orders from other segments, such as the

Railways and waste management

PNC Infratech

Infr

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Standalone Financials (YE March) Income Statement (INR mn) FY15 FY16E FY17E FY18E

Net Revenue 15,610 18,732 22,478 25,850

EBITDA 2,166 2,487 3,097 3,690

Add:- Non operating Income 138 136 134 133

OPBIDTA 2,304 2,623 3,231 3,823

Less :- Depreciation & Amortization 364 435 512 608

EBIT 1,941 2,188 2,719 3,216

Less:- Interest Expenses 462 231 308 385

Less; Exceptional items - - - -

PBT 1,478 1,956 2,411 2,830

Less :- Taxes 475 646 796 934

PAT 1,004 1,311 1,615 1,896

Less : Minority Interest - - - -

Add/Less: - Extra-ordinaries - - - -

Adjusted PAT 1,004 1,311 1,615 1,896

Balance Sheet (INR mn) FY15 FY16E FY17E FY18E

Share Capital 398 513 513 513

Reserves 6,786 12,239 13,764 15,570

Net Worth 7,184 12,752 14,277 16,083

Borrowings 3,240 1,740 2,240 2,740

Minority Interest - - - -

Deferred Tax (Net) 4 4 4 4

Total Liabilities 10,429 14,496 16,521 18,828

Net Block 2,103 2,418 2,706 3,099

Add:- Capital work in progress 70 70 70 70

Investments 4,235 4,884 5,134 5,384

Cash 212 1,747 1,770 2,066

Net Working Capital 3,809 5,377 6,841 8,208

Total Assets 10,429 14,496 16,521 18,828

Cash Flow Statement (INR mn) FY15 FY16E FY17E FY18E

Cash profit adjusted for non cash items 1,344 1,746 2,127 2,504

Add/Less : Working Capital Changes (1,062) (1,569) (1,464) (1,367)

Operating Cash Flow 282 177 663 1,137

Less:- Capex (993) (750) (800) (1,000)

Free Cash Flow (711) (573) (137) 137

Financing Cash Flow 649 2,757 410 410

Investing Cash Flow (726) (649) (250) (250)

Net change in Cash (787) 1,535 23 297

Ratio Analysis FY15 FY16E FY17E FY18E

Income Statement Ratios (%)

Revenue Growth 35.5 20.0 20.0 15.0

EBITDA Growth 52.7 14.8 24.5 19.2

PAT Growth 43.1 30.6 23.2 17.4

EBITDA Margin 13.9 13.3 13.8 14.3

Net Margin 6.4 7.0 7.2 7.3

Return & Liquidity Ratios

Net Debt/Equity (x) 0.5 0.1 0.2 0.2

ROE (%) 14.9 13.1 12.0 12.5

ROCE (%) 11.2 9.9 10.2 10.9

Per Share data & Valuation Ratios

Diluted EPS (INR) 25.2 25.5 31.5 37.0

EPS Growth (%) 43.1 1.3 23.2 17.4

DPS (INR) 1.0 1.5 1.5 1.5

P/E (x) 21.2 20.9 17.0 14.5

EV/EBITDA (x) 11.2 11.0 9.0 7.6

EV/Sales (x) 1.6 1.5 1.2 1.1

Price/Book (x) 3.0 1.7 1.5 1.3

Dividend Yield (%) 0.2 0.3 0.3 0.3

Note: pricing as on 11 December 2015; Source: Company, Elara Securities Estimate

Revenue & margin growth trend


Adjusted profit growth trend


Return ratios


13.9

13.3

13.8

14.3

12

13

14

15

0

10,000

20,000

30,000

FY15 FY16E FY17E FY18E

(%)

(IN

R m

n)

Net Revenues (LHS) EBITDA Margin (RHS)

43.1

30.6

23.2

17.4

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20

30

40

50

0

500

1,000

1,500

2,000


(%)

(IN

R m

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Adjusted PAT (LHS) PAT Growth (RHS)

14.9 13.1

12.0 12.5

11.2 9.9 10.2 10.9

0

5

10

15

20


ROE (%) ROCE (%)

Revenue CAGR of 18% over FY15-18E, driven by strong order intake

from road EPC projects

ROE to trend in the range of 12-13% over FY16-18E

PNC Infratech


Strong regional player

PNC Infratech is an engineering, procurement &

construction (EPC) contractor and build, operate &

transfer (BOT) asset developer with expertise in road

construction. It primarily operates in and around North

India. The company has completed 48 major

infrastructure projects across 13 states, of which 28 are

road-based EPC projects. It is currently executing 20

projects across sectors and trying to build expertise in

other verticals, such as the Railways and waste

management. As on September 2015, the company had

an unexecuted order book of INR 35.8bn (2.3x FY15 EPC

revenue & 99% in roads) and is L1 in INR 8.1bn of

projects.

Exhibit 1: PNCL – key road projects

Project Authority State Completion

Etawah Bypass on NH 2 NHAI Uttar Pradesh

May 2008

Sagar Beena Road MPRDC Madhya Pradesh

April 2007

Porsa‐Mehgaon‐Mau‐Seonda section, Package 6, Phase II

UPSHA Uttar Pradesh

June 2008

Agra-Gwalior stretch on NH 3 NHAI

Uttar Pradesh

January 2005

Various sections on SH 44, SH 15 and SH 19 MPRDC

Madhya Pradesh

January 2011

Gurgaon-Nuh-Rajasthan Border

HSRDC Haryana June 2011

Garhmukhteshwar to Moradabad and some ROBs NHAI

Uttar Pradesh

October 2012

Section 3, Jaora section MPRDC Madhya Pradesh

May 2011

Agra-Gwalior section on NH 3 -Package NS 4 NHAI

Uttar Pradesh

July 2001

Source: Company, Elara Securities Research

Exhibit 2: PNCL – key ongoing road projects

Project Authority State Contract value

(INR mn)

Agra-Firozabad UPEIDA Uttar Pradesh 14,080

Bhojpur-Buxar NHAI Bihar 4,770

Koilwal-Bhojpur NHAI Bihar 4,540

Sonauli-Gorakhpur

MoRTH Uttar Pradesh 4,080

Barabanki-Jarwal MoRTH Uttar Pradesh 2,180


Prefers own equipment, quarries to lower cost

PNCL has an integrated business model wherein it

prefers to own equipment and does in-house design &

engineering that offset costs and ensures timely

completion of projects. As on September 2015, the

company has gross block of INR 4.5bn and more than

4,000 employees (>300 are engineers). PNCL targets

projects where it has easy access to quarries to source

aggregates required for construction. It has received an

early completion bonus from the NHAI for its Agra-

Gwalior project in Uttar Pradesh and also commenced

collection of toll three months earlier than the scheduled

COD in the Gwalior-Bhind project.

Exhibit 3: PNCL’s in-house equipment bank

Machinery OEM Quantity

Heavy duty vehicles Ashok Leyland, Tata Motors 493

Diesel generators Cummins/Jackson, Sudhir, Kirloskar, A/L, Greaves, Prakash, Escorts

200

Light duty vehicles and attachments

M&M, Tata, Farm Trac, John Deere 168

Storage tanks - 103

Passenger vehicles Toyota, Mercedes, Tata, M&M, BMW 69

Backhoe loaders CAT, JCB 63

Soil compactors Escorts, Greaves, IR, Volvo, HAMM 66

Compressors IR, Local 54

Wheel loaders CAT, HM, SEM, Liugong 53

Concrete mixing & batching plants

Schwing Stetters, Universal, Allen Buildwell

39

Paver finishers IR, Apollo, Voegele, Wirtgen, Multiquip

47

Motor graders CAT, Volvo, Sany 45

Excavators Komatsu, CAT, Volvo, Dozco 36

Tandem rollers IR, HAMM 36

Static rollers/plate compactors

Local 28

Hot mix plants Apollo, Linnhoff, Speco, Shiv Shakti 20

Cranes Alpha, CAT, Escorts 18

Wet mix plants Apollo, Everest, Shiv Shakti 15

Broomers Apollo, Allwin 14

tar boiler/bitumen Distributors

Local, Apollo, Allwin 33

Crusher plants Metso, Terex, Local 13

Tower lights Bellstone, IR, Akshay Patra, Prakash 11

Pneumatic Tire Rollers

HAMM, IR, Greaves 10

Concrete pumps & placers

Schwing Stetter, Putz, Greaves, Surilla

11

Kerb pavers Apollo, Arrow, Roadtech 10


PNC Infratech

Betting on an integrated business model

Keeping it all in-house: equipment, quarries, design & engineering

Being in the right place: INR 2.5tn roads opportunity

No need for capex, fresh equity infusion from FY17: a fully funded BOT portfolio

The way to grow: revenue CAGR of 18% and PAT CAGR of 24% over FY15-18E

PNC Infratech

Infr

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Exhibit 4: PNCL employees (September 2015)


Believes in low debt, controlled working capital cycle

PNCL had a standalone net debt of just INR 1.4bn as on

September 2015 with a net debt-equity ratio of just 0.1x.

Even prior to its IPO in FY16, the company had a tight

rein over debt levels, with a net debt-equity ratio in the

range of 0.2-0.5x over FY11-15.

Exhibit 5: PNCL net debt levels at an all-time low


The low debt levels are a result of a controlled working

capital cycle along with a higher share of revenue of

60% from PNCL’s own BOT projects up to FY15.

Exhibit 6: PNCL working capital cycle expands

marginally


Keeps robust order book providing revenue visibility

We expect PNCL to maintain healthy order intake over

FY16-18, as the focus of the Central Government is firmly

on scaling up awards and execution of road projects.

While historically captive BOT projects have accounted

for a large share of the company’s order book, going

forward a majority share would come from external EPC

road projects.

Exhibit 7: PNCL order book to pick up steam


Airport infra emerging as a “super specialty” focus

PNCL has gained significant experience in building

airport runways and executed 19 projects across India. It

also has received “super special class” certification from

Military Engineer Services (MES) — a unit of the Corps of

Engineers of the Indian Army — which enables the

company to bid for runway projects at military airports.

Exhibit 8: PNCL – key airport projects

Project State Completion Strengthening of main runway and other works at the NSCBI Airport, Kolkata

West Bengal

May 2005

Upgradation of airstrips for operations of Boeing 737 aircraft at the Saifai Etawah Airport

Uttar Pradesh

February 2007

Resurfacing and extension of existing runway and allied works at AFS Jorhat under MES

Assam April 2014

Extension and strengthening of the runway and construction works at Devi Ahilyabai airport, Indore

Madhya Pradesh

July 2009

Repairs, resurfacing and other works at AFS Yelahanka, Bangalore of MES

Karnataka January 2005

Resurfacing of hard standing at AFS Chakeri, Kanpur of MES

Uttar Pradesh

March 2004


Exhibit 9: PNCL – key ongoing airport projects

Project Authority State Contract value (INR mn)

AFS, Gorakhpur MES Uttar Pradesh 975 AFS, Panagarh MES West Bengal 745 AFS, Kanpur* MES Uttar Pradesh 1,673

Note: *L1 status; Source: Company, Elara Securities Research

Projects/ Execution

667 Admin & HR 60

Finance & Accounts

105

Others 3,234

0.2

0.5

0.4 0.4 0.5

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3,500

FY

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FY

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FY

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H1

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(x)

(IN

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Net Debt (LHS) Net Debt/Equity (RHS)

57

59

11

5

12

4

10

9

86

11

1

65

97

12

8

12

2

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2 1

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100

150

200

FY

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FY

11

FY

12

FY

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FY

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FY

15

H1

FY

16

(no

. o

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Debtors Net Working Capital

2.6 2.4 2.4

2.2 2.2 2.0

1.9

1.0

1.5

2.0

2.5

3.0

0

10

20

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40

50

60

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FY

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FY

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Order Book (LHS) OB/Sales (RHS)

PNC Infratech


Cashing in: INR 2.5tn roads opportunity

Moving to the EPC solution

During FY13-15, road projects awarded on a BOT basis

saw limited interest, owing to stressed financials of most

infra companies. Hence, the National Highways

Authority of India (NHAI) and the State governments

started awarding projects through the EPC mode from

FY16. The agencies will consider BOT projects only when

balance sheet of road developers becomes stronger.

Target set at 9,000km in FY16 & 10,000 by FY17

Further, the Union Government has announced its

intent of awarding ~10,000km of road projects annually.

Although it remains to be seen whether this ambitious

target is achieved in the face of challenges on land

acquisition and environmental clearances, we believe

NHAI’s target of awarding ~5,400km and MoRTH’s

overall goal of 9,000km (including NHAI awards) in FY16

is achievable. In FY17, MoRTH wants to award another

10,000km of road projects. Apart from the NHAI, the

States also are issuing fresh tenders for road EPC

contracts. We envisage INR 2.5tn of ordering in this

segment over the next 3 years.

Exhibit 10: MoRTH projects awards (including NHAI)

Source: Government documents, Elara Securities Research

In YTD FY16, the NHAI awarded more than 2,700km of

contracts worth ~INR 300bn, of which a majority

(>1,900km) have been in the EPC mode. For the rest of

FY16, we expect at least another 2,000km of NHAI road

awards worth INR 200bn.

Way forward: hybrid annuity model

While the BOT model has taken a backseat, the

government has come up with the hybrid annuity model

wherein the concessionaire receives 40% of the quoted

“bid project cost” from the authority during the

construction period. The concessionaire will then fund

the balance on its own, which will be recovered, with

interest, through annuity payments over the operating

period (15 years). The concessionaire will have to

separately quote O&M charges for each year of the

operating period and the same will be paid by the

authority. The bids will be evaluated on a lifecycle cost

basis (NPV of bid project cost + O&M cost).

We believe this is a better approach than a traditional BOT

model as toll collection is taken care of by the

MoRTH/NHAI and developer’s equity commitment is

effectively limited to ~15-20% of overall project cost. We

initially expect ~600km of project awards in FY16. The

NHAI has lined up four major projects for bidding in

December 2015, which are in PNCL’s focus geography of

Uttar Pradesh.

Exhibit 11: PNCL – key upcoming hybrid annuity bids

Project Authority State Contract value

(INR mn)

Four-lanes of Meerut-Bulandshahar section NHAI Uttar Pradesh 6,804

Delhi-Meerut Expressway Package 1

NHAI Uttar

Pradesh/Delhi 6,636


NHAI Uttar

Pradesh/Delhi 13,765


NHAI Uttar

Pradesh/Delhi 10,237

Source: NHAI, Elara Securities Research

Ornery regulations on their way out

MoRTH recently approved several amendments to the

model concession agreement for all MoRTH and NHAI

projects under the EPC and BOT modes. These revisions

would ease the financial burden on developers and put

the onus on obtaining land & environmental clearances

on MoRTH & NHAI. It also would facilitate faster project

execution and proper roads maintenance.

The key amendment for EPC projects is the extension of

maintenance & defect liability period, from 2 to 4 years.

The contractor would be paid 0.5%, 1.0%, 1.5% and 2.0%

of the contract value from the first to the fourth year post

completion. Further, advance payments made by MoRTH

& NHAI to the contractor of 10% (unchanged) will be

paid in two installments of 5% each vs three installments

earlier (2%, 3% & 5%). The advance payment would be

deducted from milestone payments vs earlier practice of

repaying the advance to NHAI.

Changes for the better, less draining financially

While EPC project awards have seen a pickup in FY16,

road developers’ appetite for BOT projects has waned,

owing to delay in approvals, lack of financing and lower

toll collections. The recent amendment seek to address

these issues: 1) the onus has shifted on MoRTH & NHAI

to obtain land, right-of-way and other clearances before

project commencement. If approvals are not obtained

within a year of signing the concession agreement, the

project will be deemed terminated. If developers are

unable to start work, they will forego the security

deposit, which would act as a deterrent for delaying

financial closure, 2) premium payable by the developer

9,900

2,000

3,621

7,980 9,000

0

2,000

4,000

6,000

8,000

10,000

12,000

FY12 FY13 FY14 FY15 FY16E

(km

s)

PNC Infratech

Infr

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will now start from the fourth year after obtaining the

commencement date (premium to increase 3% annually

until the 10th year and 10% thereafter) vs the existing

practice wherein premium payment begins from the first

year, and 3) toll collections can only commence after full

completion of the project (earlier toll collection was

allowed on partial completion, which led to dispute over

payment by commuters).

Exhibit 12: Details of road project awards by NHAI in FY16

EPC project Bidder Length

(km)

Type Work cost

(INR mn)

Award

(INR mn)

% Bidding

above/below benchmark cost

Madurai-Ramanathapuram (NHDP - 3) KNR Construction 115 EPC 9,371 9,371 0.0

UP/Haryana border-Yamunanagar-Saha-Barwala-Panckula Section (Pckg 1) Sadbhav Engg 44 EPC 4,800 4,680 (2.5)

UP/Haryana border-Yamunanagar-Saha-Barwala-Panchkula Section (Pckg 2) Sadbhav Engg 45 EPC 4,500 4,365 (3.0)

Four lanes of existing Thiruvananthapuram Bypass from Kazhakkoottam KNR Construction 27 EPC 6,212 6,691 7.7

Balance work of four lanes of Gorakhpur - Gopalganj Section Punj Lloyd 41 EPC 4,838 5,418 12.0

Four lanes of Ghoshpukur – Salsalabari Section (Pckg - 1) L&T 84 EPC 10,830 11,330 4.6

Two lanes with PS of Gulabpura to Uniara Section Dilip Buildcon -

Ranjit Buildcon JV

204 EPC 5,707 5,970 4.6

Four lanes of Koilwar to Bhojpur PNC Infratech 110 EPC 8,140 8,250 1.4

Four lanes of Bhojpur to Buxar PNC Infratech 48 EPC 6,420 6,810 6.1

Eastern Peripheral Expressway (6 lanes) Pckg 1 Sadbhav Engg 22 EPC 7,712 7,920 2.7

Eastern Peripheral Expressway (6 lanes) Pckg 2 Sadbhav Engg 25 EPC 7,858 7,560 (3.8)

Eastern Peripheral Expressway (6 lanes) Pckg 3 JP Associates 25 EPC 7,885 7,470 (5.3)

Eastern Peripheral Expressway (6 lanes) Pckg 4 Ashoka Buildcon 22 EPC 7,893 7,899 0.1

Eastern Peripheral Expressway (6 lanes) Pckg 5 Oriental Infra 21 EPC 6,645 6,589 (0.9)

Eastern Peripheral Expressway (6 lanes) Pckg 6 Gayatri Projects 22 EPC 7,686 6,750 (12.2)

Four lanes of Ghaghra Bridge to Varanasi section (package 1,2 & 3) Gayatri Projects 60 EPC 6,670 7,410 11.1

Four lanes of Ghaghra Bridge to Varanasi section (package 1,2 & 3) Gayatri Projects 59 EPC 6,869 7,850 14.3

Four lanes of Sultanpur to Varanasi [Package-I] Gayatri Projects 75 EPC 10,275 9,860 (4.0)

Four lanes Of Sultanpur-Varanasi [Package-II] Gayatri Projects 58 EPC 8,153 8,060 (1.1)

Four lanes of Baharagora to Singhara Section L&T 112 EPC 9,087 7,435 (18.2)

Section D-E, D-G JNPT Phase-II (Package IV) Ashoka Buildcon 11 EPC 3,955 4,140 4.7

Amra Marg JNPT Phase II (Package III) J Kumar Infra - JM

Mhatre JV

12 EPC 5,000

Gavanphata Interchange JNPT Phase-II (Package –II) J Kumar Infra - JM

Mhatre JV

24 EPC 5,947

Karalphata Interchange JNPT Phase-II, (Package-I) J Kumar Infra - JM Mhatre JV

10 EPC 5,390

Four lanes of Islampur Bypass from Km. 0.0 (existing chainage Km. 498.500) to km 10.31 (Existing Chainage Km. 506.950)

Ashoka Buildcon 10 EPC 2,385 2,770 16.1

Rehab & upgradation of existing road to two lanes with PS config in Jowai –

Meghalaya/Assam Border section from 69.200km to 173.200km

GR Infraprojects 102 EPC 4,792 4,683 (2.3)

Rehabilitation and Augmentation of four lanes of Kharar-Kurali Section MG Contractors 14 EPC 2,392 2,122 (11.3)

Improvement of Amritsar bypass by construction of additional structures

and service road on NH-1 between km 448+510 to km 473+068

Varaha Infra 25 EPC 2,731 2,293 (16.0)

Two lanes with PS Chhapra-Rewaghatmuzaffarpur section GR Infraprojects 73 EPC 3,370

Two-lane with PS of Biharsharifbarbigha-Mokama (2nd Call) GR Infraprojects 55 EPC 2,301

Four lanes of Patna to Koilwar Madhucon Projects

44 EPC 4,919

Two lanes with paved shoulder of Chhapra–Gopalganj GR Infraprojects 94 EPC 6,407

Four lanes of Forbesganj to Jogbani Section from 0km to 9,260km (ICP at

Jogbani)

JKM Infraprojects 9 EPC 2,581

Two lanes with PS of Uncha Nagla-KhanuawaRoppas-Dolpur HG Infra Eng 75 EPC 2,759

Aligarh Moradabad PNC Infratech 146 EPC 5,033 6,445 28.1

EPC total 1,921 191,176 186,478

BOT

Six lanes of Agra–Etawah Bypass Section IRB Infra 124.5 BOT(Toll) Pre. of 810

Four as well as six lanes of Solapur-Bijapur Section Uniquest 109.1 DBFOT (Toll) Pre of 70

Four lanes of Guna-Biora Dilip Buildcon 93.5 BOT(Toll) Grant 270mn

Four lanes of Biora–Dewas Oriental Infra 141.3 BOT(Toll) Grant 2529mn

Four and six lanes of Fagne–MAH/Guj Border (Pckg-III) ITNL 140.8 DBFOT Grant

2450mn

Four and six lanes of Amravati-Chikli (Pckg-I) ITNL 194 DBFOT Grant 1835mn

803

Total (kms) 2,725

Source: NHAI, Industry Sources, Company, Elara Securities Research

PNC Infratech


Fully funded BOT portfolio

PNCL has a portfolio of eight BOT projects in Uttar

Pradesh on a toll and annuity basis. Of these, seven are

operational, with PNCL having infused its entire equity

share of INR 4.9bn into these projects.

PNCL’s major road projects, such as Ghaziabad-Aligarh

and Bareilly-Almora, are a part of highly industrialized

corridors in Uttar Pradesh. They have strong traffic

potential coupled with a long residual concession period

of 17 years across projects.

No new capex or fresh equity infusion

With the Raibareli-Jaunpur project expected to

commence operations in FY17, we expect PNCL to

achieve gross toll revenue of INR 8.2bn in FY17E and INR

9.1bn in FY18E. As per our estimates, PNCL would not

need any incremental equity from its standalone balance

sheet from FY17, assuming traffic growth of 5% over the

life of these projects.

We present a brief profile of PNCL’s BOT projects that

gives a picture of the traffic potential of the company’s

BOT projects:

Bareilly-Almora: This project involves constructing

four lanes of a 54km stretch in Uttar Pradesh. It was

awarded by the Uttar Pradesh State Highway

Development Authority (UPSHA) for a period of 25

years beginning in March 2013. The project has

been recently completed and achieved CoD in

October 2015. This road connects four key industrial

areas of Uttar Pradesh: Rudrapur, Pantnagar,

Haldwani and Sitarganj to Agra and Lucknow.

Commercial vehicles account for 50% of traffic on

this stretch.

Kanpur-Kabrai: This project involves building two

lanes of a 123km stretch in Uttar Pradesh. It was

awarded by the NHAI for a period of 12 years

starting in January 2013. The project achieved CoD

in May 2015 and is important for transportation of

aggregates and construction materials (granite and

stone crushing) from Kabrai to Kanpur and

Lucknow. Commercial vehicles account for more

than 80% of traffic on this stretch.

Gwalior-Bhind: This project involves constructing

two lanes of a 108km stretch in Madhya Pradesh. It

was awarded by the Madhya Pradesh Road

Development Corporation (MPRDC) for a period of

14 years, starting in June 2011. The project achieved

CoD in January 2013 and traffic collection to date

Exhibit 13: PNCL – BOT portfolio summary (as on September 2015)

Project State Authority PNCL

stake (%) Type

Length (km)

Total project cost

(INR mn)

Grant (INR mn)

Debt (INR mn)

Invested equity

(INR mn)

PNCL equity

invested (INR mn)

Concession period (years)

Bareilly-Almora UP UPSHA 100.0 Toll 54 6,050 500 4,300 750 750 25

Kanpur-Kabrai UP NHAI 100.0 Toll 123 4,590 1,230 2,680 680 680 12

Gwalior-Bhind MP MPRDC 100.0 Toll 108 3,400 270 2,350 780 780 14

Ghaziabad-Aligarh UP NHAI 35.0 Toll 125 20,190 3,110 14,420 1,940 680 24

Jaora-Nayagaon* MP MPRDC 8.5 Toll 128 9,070 - 6,200 2,949 240 25

Raibareilly-Jaunpur UP NHAI 100.0 Annuity 166 8,370 - 6,980 1,400 1,400 17

Narela Industrial Estate Delhi DSIIDC 100.0 Annuity 33 1,750 - 1,160 350 350 15

Kanpur-Ayodhya UP NHAI 100.0 OMT# 217 - (1,557) - - - 9

Total 954 53,420 3,553 38,090 8,849 4,880

Note: *PNCL recently sold its stake for INR 342mn in the Jaora-Nayagaon project; OMT stands for operations, maintenance and tolling; Source: Company, Elara

Securities Research

Exhibit 14: PNCL – BOT portfolio sales over FY16-18E Exhibit 15: PNCL – FCFE over FY16-18E (PNCL share)

(INR mn) CoD FY16E FY17E FY18E

Bareilly-Almora October 2015 400 762 840

Kanpur-Kabrai May 2015 616 673 735

Gwalior-Bhind January 2013 376 418 465

Ghaziabad-Aligarh June 2015 1,620 2,555 2,817

Raibareilly-Jaunpur June 2016 - 1,046 1,286

Narela Industrial Estate October 2013 425 438 466

Kanpur-Ayodhya August 2013 2,035 2,265 2,521

Total Revenue 5,472 8,158 9,130

(INR mn) CoD FY16E FY17E FY18E

Bareilly-Almora October 2015 (143) 174 231

Kanpur-Kabrai May 2015 258 273 181

Gwalior-Bhind March 2013 16 44 85

Ghaziabad-Aligarh July 2015 (218) 117 35

Raibareilly-Jaunpur June 2016 (697) 234 43

Narela Industrial Estate October 2013 66 61 75

Kanpur-Ayodhya August 2013 (46) (13) 20

Total Revenue (763) 890 670

Source: Elara Securities Estimate Source: Elara Securities Estimate

PNC Infratech

Infr

ast

ructu

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has been below expectations, owing to traffic

leakages along the stretch.

Ghaziabad-Aligarh: This project involves

constructing four lanes of a 126km stretch along the

NH 91 in Uttar Pradesh. It was awarded by the NHAI

for a period of 24 years, starting in February 2011.

The project achieved CoD in July 2015 and this

stretch connects four key industrial areas of Uttar

Pradesh: Gautam Budh Nagar, Ghaziabad,

Bulandshahar and Aligarh, which have industrial

activities spread across steel, chemicals and food

processing. Commercial vehicles account for 50% of

the traffic on this stretch.

Raibareilly-Jaunpur: This project involves building

two lanes of a 166km stretch along NH 231 in Uttar

Pradesh. It was awarded by the NHAI on annuity

basis. Although this project was initially awarded in

July 2012, delays in clearances from NHAI resulted in

the appointed date for the project being shifted to

June 2014 with a concession period of 17 years.

Narela industrial area: The Delhi State Industrial and

Infrastructure Development Corporation (DSIIDC)

awarded the Narela Industrial Area redevelopment

contract for a concession period of 15 years, starting

from December 2011. The project achieved CoD in

October 2013 and PNCL is entitled to receive an

annuity of INR 215mn from the DSIIDC and also

collect maintenance charges from plot owners and

users in the complex. This project requires PNCL to

upgrade and maintain the existing basic

infrastructure, including roads, stormwater drainage,

sewerage system and effluent treatment, water

supply, solid waste, parking, horticulture and street

lighting.

Kanpur-Ayodhya: This project involves operations

and maintenance of the Kanpur-Lucknow stretch

along NH 25, Lucknow Bypass stretch of NH 56A

and NH 56B and Lucknow-Ayodhya stretch on NH

28. The project was awarded by the NHAI on an

OMT basis in February 2013 for a concession period

of nine years, starting in August 2013.

Exhibit 16: Bareilly Almora Exhibit 17: Ghaziabad Aligarh

Exhibit 18: Kanpur Ayodhya Exhibit 19: Narela Industrial Area

Source: Company

PNC Infratech


In the driver’s seat

PNCL has a strong repertoire in the roads segment

across Uttar Pradesh, Bihar and Central India. With the

Centre and State governments now focused on

augmenting India’s roads infrastructure, we believe

PNCL is in a strong position to capitalize on the

opportunities from this sector.

Strong balance sheet adds to appeal

Over FY11-15, PNCL has maintained a low standalone

net debt-equity ratio in the range of 0.2-0.5x despite

having a sizeable BOT portfolio. Post the fundraising of

INR 4.35bn through the IPO route earlier this year, this

has fallen further to 0.1x as on September 2015.

Build it and they will come

We expect a standalone revenue CAGR of 18% and a

24% adjusted PAT CAGR over FY15-18E, with a closing

order book of INR 35.7bn (2.3x FY15 EPC revenue) and

further L1 orders of INR 8.1bn. We build in order inflows

of INR 25.0bn in FY16E, INR 27.5bn in FY17E and INR

30bn in FY18E.

PNCL’s BOT portfolio of eight projects is fully funded,

with INR 4.9bn of total investment. Seven projects are

already operational and the Raibareilly-Jaunpur project is

expected to commence operations in FY17, which offset

execution risks.

Initiate Buy with a TP of INR 706

We initiate coverage of PNCL with a Buy rating and a TP

of INR 706 per share. We value the company on a SOTP

basis assigning INR 554 per share to the standalone EPC

business at 15x FY18E standalone EPS of INR 37.0 and

the BOT business at INR 7.8bn (INR 152 per share) on a

FCFE basis after assuming a 15% cost of equity (implied

valuation of 1.6x PNCL’s invested equity of INR 4.9bn).

Exhibit 20: PNCL SOTP valuation

Segment Valuation Methodology Valuation (INR mn)

Value (INR)

Standalone EPC 15 x FY18 P/E 28,444 554

BOT Portfolio FCFE Mar-17 7,803 152

SOTP Value 36,248 706

Source: Elara Securities Estimate

Exhibit 21: PNCL BOT portfolio valuation

Project PNCL Stake

(%)

PNCL Invested Equity

(INR mn)

NPV (PNCL Share)

INR mn

Implied P/B (x)

Bareilly-Almora 100.0 746 1,414 1.9

Kanpur-Kabrai 100.0 675 1,693 2.5

Gwalior-Bhind 100.0 780 1,060 1.4

Ghaziabad-Aligarh 35.0 679 979 1.4

Jaora-Nayagaon 8.5 244 342 1.4

Raibareilly-Jaunpur 100.0 1,395 1,291 0.9

Narela Industrial Estate 100.0 350 739 2.1

Kanpur-Ayodhya 100.0 - 286 NM

Total 4,869 7,803 1.6


Key risks to our call

Delay in execution of key projects, such as Agra-

Firozabad (INR 14.1bn balance order book) and

delay in commencement of tolling on the Raibareilly-

Jaunpur project pose downside risks to our FY16-17

revenue estimate.

Slowdown in industrial activity in areas where

PNCL’s toll BOT projects are based may lead to

lower-than-expected revenue collection, resulting in

a negative FCFE. This may cause the company to

infuse further equity from its standalone balance

sheet to support its BOT Special Purpose Vehicles

(SPVs).

No new fresh orders from the Central and State

governments in the roads sector pose as downside

risk to our order inflow assumptions over FY16-18.

Lovin’ the opportunity

Recommend Buy with a SOTP-based TP of INR 706, offering 32% potential upside

Healthy growth in EPC revenue to INR 25.9bn in FY18E from INR 15.6bn in FY15

Growth drivers include fully funded and operational BOT portfolio from FY17

PNC Infratech

Infr

ast

ructu

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Watching it grow

PNCL has a strong order book of INR 35.8bn as on

September 2015 (2.3x FY15 EPC revenue) along

with additional L1 of INR 8.1bn. With INR 17.4bn of

order wins in YTD FY16, we expect total order wins

of INR 25.0bn in FY16E, INR 27.5bn in FY17E and

INR 30bn in FY18E. We expect a standalone revenue

CAGR of 18% over FY15-18E to INR 25.9bn on ramp

up in execution.

The key projects expected to contribute to revenue

growth over FY15-18 include Agra-Firozabad,

Bhojpur-Baxar and Koilwal-Bhojpur.

Exhibit 22: Revenue CAGR of 18% over FY15-18E


We estimate an EBITDA CAGR of 19% over FY15-

18E, in line with revenue CAGR, with an EBITDA

margin of around ~13-14% over the same period,

owing to the company having its own equipment

and captive quarries near its ongoing projects.

Exhibit 23: APAT CAGR of ~24% over FY15-18E


We expect standalone PAT to grow from INR 1.0bn

in FY15 to INR 1.9bn in FY18E at a 24% CAGR on the

back of revenue & EBITDA growth and lower

interest cost.

As a result, we expect PNCL to achieve a ROE of

~13% over FY16-18E, led by ramp up in execution.

Exhibit 24: ROE of 12-13% over FY16-18E


13.9

13.3

13.8

14.3

12

13

14

15

0

5,000

10,000

15,000

20,000

25,000

30,000


(%)

(IN

R m

n)

Net Revenues (LHS) EBITDA Margin (RHS)

43.1

30.6

23.2

17.4

0

10

20

30

40

50

0

500

1,000

1,500

2,000


(%)

(IN

R m

n)

Adjusted PAT (LHS) PAT Growth (RHS)

14.9

13.1

12.0 12.5

11.2

9.9 10.2

10.9

8

10

12

14

16


ROE (%) ROCE (%)

PNC Infratech


Exhibit 25: Peer valuation

Company (Standalone)

Ticker Market cap

(INR mn) Rating

CMP (INR)

TP (INR)

Revenue (INR mn)


Sadbhav Engineering SADE IN 58,652 Accumulate 341 360 29,698 35,343 39,999 50,131

Ashoka Buildcon* ASBL IN 36,278 Buy 194 253 23,197 28,700 32,637 35,859

NCC NJCC IN 40,170 Accumulate 72 87 82,969 75,834 84,238 94,405

PNC Infratech PNCL IN 27,339 Buy 533 706 15,610 18,732 22,478 25,850

KNR Constructions KNRC IN 16,621 Buy 592 731 8,761 8,911 12,867 16,245

J Kumar Infraprojects JKIL IN 26,989 Buy 357 464 13,437 16,125 22,575 28,219

HCC HCC IN 18,579 Buy 24 52 41,267 45,162 49,678 54,646

MBL Infrastructure MBL IN 8,607 Accumulate 208 225 19,485 24,002 24,789 27,493

Simplex Infrastructure SINF IN 15,588 Accumulate 315 362 55,792 58,610 65,695 70,989

Coverage Universe 290,217 311,419 354,956 403,837


EBITDA (INR mn) EBITDA margin (%) Adjusted PAT (INR mn) EPS (INR)

FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E

Sadbhav Engineering 3,002 3,817 4,354 5,651 10.1 10.8 10.9 11.3 1,137 1,658 2,016 2,986 6.6 9.7 11.8 17.4

Ashoka Buildcon* 4,730 8,102 9,105 9,405 20.4 28.2 27.9 26.2 815 1,065 1,193 1,124 5.1 5.7 6.4 6.0

NCC 6,494 6,917 7,736 8,838 7.8 9.1 9.2 9.4 1,118 1,847 2,221 2,793 2.0 3.3 4.0 5.0

PNC Infratech 2,166 2,487 3,097 3,690 13.9 13.3 13.8 14.3 1,004 1,311 1,615 1,896 25.2 25.5 31.5 37.0

KNR Constructions 1,261 1,382 1,970 2,486 14.4 15.5 15.3 15.3 730 732 1,153 1,337 26.0 26.0 41.0 47.5

J Kumar Infraprojects 2,511 3,013 4,219 5,211 18.7 18.7 18.7 18.5 950 1,267 1,906 2,481 14.6 16.7 25.2 32.8

HCC 7,737 7,452 7,700 8,197 18.7 16.5 15.5 15.0 692 770 1,059 1,868 1.1 1.0 1.4 2.4

MBL Infrastructure 2,247 2,760 2,851 3,107 11.5 11.5 11.5 11.3 802 1,011 1,010 1,158 19.3 24.4 24.4 27.9

Simplex Infrastructure 5,580 6,095 6,832 7,383 10.0 10.4 10.4 10.4 624 885 1,518 2,024 12.6 17.8 30.6 40.8

Coverage Universe 35,728 42,026 47,863 53,969 12.3 13.5 13.5 13.4 7,871 10,547 13,691 17,668 112.6 130.2 176.1 216.8


Net debt-equity (x) EV/EBITDA (x) P/E (x) ROE (%)

FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E

Sadbhav Engineering 0.8 0.6 0.5 0.4 23.1 17.9 15.5 11.7 51.4 35.3 29.0 19.6 9.8 11.7 12.8 16.5

Ashoka Buildcon* 2.8 2.0 2.0 2.0 15.8 9.1 8.4 8.3 37.8 34.1 30.4 32.3 6.2 6.6 6.2 5.6

NCC 0.6 0.5 0.5 0.5 9.1 8.3 7.6 6.7 35.9 21.7 18.1 14.4 3.9 5.6 6.3 7.4

PNC Infratech 0.5 0.1 0.2 0.2 14.1 11.0 9.0 7.6 21.2 20.9 17.0 14.5 14.9 13.1 12.0 12.5

KNR Constructions 0.1 (0.0) (0.0) (0.0) 13.8 11.8 8.4 6.7 22.8 22.7 14.4 12.4 13.5 12.0 16.3 16.1

J Kumar Infraprojects 0.5 0.0 0.1 0.1 12.2 9.0 6.7 5.6 24.4 21.3 14.2 10.9 13.9 12.1 13.7 15.5

HCC 3.5 1.9 1.6 1.3 8.7 7.3 6.5 5.5 22.3 24.1 17.5 9.9 5.2 4.7 5.6 9.3

MBL Infrastructure 1.3 1.4 1.2 1.1 7.6 6.8 6.5 6.2 10.7 8.5 8.5 7.4 14.5 14.7 13.0 13.3

Simplex Infrastructure 2.2 2.1 1.9 1.5 8.5 7.8 6.9 6.0 25.0 17.7 10.3 7.7 4.4 6.0 9.5 11.5

Coverage Universe 1.4 1.0 0.9 0.8 12.5 9.9 8.4 7.1 28.0 22.9 17.7 14.4 9.6 9.6 10.6 12.0

Note: *Consolidated figures; pricing as on 11 December 2015; Source: Elara Securities Estimate

PNC Infratech

Infr

ast

ructu

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Board of Directors & Management

Pradeep Kumar Jain – Chairman and MD

Pradeep Kumar Jain is the Chairman and Managing

Director of PNC Infratech. He has 37 years of experience

in the construction & infrastructure sectors and allied

areas. He is responsible for overall administration and

supervision of projects and is a liaison with agencies.

Naveen Kumar Jain – Whole-Time Director

Naveen Kumar Jain is the Whole-Time Director of PNC

Infratech. He has 28 years of experience in several

industries, such as construction, cold storage

transportation, machineries and transport organization.

He has been a Director on PNCL’s Board since February

2006 and his current responsibilities include supervision

of administration, human resources and legal and

logistics-related functions.

Chakresh Kumar Jain – Managing Director

Chakresh Kumar Jain is the Managing Director of PNC

Infratech. He has 27 years of experience in development

of the infrastructure sector, such as construction of

highways, airports, and rail over bridges. His current

responsibilities include overall financial and project

management and administration.

Yogesh Kumar Jain – Managing Director

Yogesh Kumar Jain is the Managing Director of PNC

Infratech. He has 22 years of experience in planning,

execution, supervision of work from the initiation of pre-

qualification and tendering. He has expertise in

execution of highways, runways and bridge construction

projects and his current responsibilities include technical

supervision of projects up to completion stage.

Anil Kumar Rao – Whole Time Director

Anil Kumar Rao is a Whole Time Director of PNC

Infratech. He has 28 years of experience in the

infrastructure industry and allied areas. He also has

experience in executing runway-related, road-related

and other infrastructure projects. His current

responsibilities include overall monitoring and execution

of projects.

Sunil Chawla – Non-Executive Director

Sunil Chawla is a non-Executive Director of PNC Infratech

and is a qualified chartered accountant. He has 20 years

of experience in finance and consulting. He earlier

served as Head of Corporate Finance (North) with Tata

Finance.

Company Description

PNC Infratech (PNCL IN) is a North India-based infrastructure construction, development and management company

with expertise in execution of projects, including highways, bridges, flyovers, airport runways, industrial areas and

transmission lines. PNC has executed 48 major infrastructure projects across 13 states, of which 28 are road EPC

projects, and the company is currently executing 20 projects across sectors. Apart from its EPC business, PNC also has a

portfolio of seven BOT projects and one OMT projects, comprising both toll and annuity assets. It is also foraying into

newer areas, such as the Railways and waste management. As on September 2015, the company has an unexecuted

order book of INR 35.8bn (2.3x FY15 EPC revenue, 99% in roads) and is L1 in INR 8.1bn of projects.

Exhibit 26: Snapshot of PNCL’s History

Source: Company

Successful IPO and listing on NSE and BSE 2015

1st OMT project awarded – Kanpur Lucknow Ayodhya Road project

Awarded Agra-Firozabad contract for INR 16.4bn 2013 & 2014

Awarded 1st independent road project on BOT basis

NYLIM Jacob Ballas India Fund invested INR 1.5bn 2010 & 2011

Diversified into business of setting up power transmission lines on

a turn-key basis 2008

Executed 1st international airport runway project for AAI at Kolkata 2005

Received ‘Super Special’ class certification from MES

Executed 1st project with NHAI (4-laning of the Agra-Gwalior Section) 2001

Incorporated as ‘PNC Construction Company Private Limited’ 1999

PNC Infratech


Coverage History

Date Rating Target Price Closing Price

1

11-Dec-2015 Buy INR 706 INR 533

Guide to Research Rating

BUY Absolute Return >+20%

ACCUMULATE Absolute Return +5% to +20%

REDUCE Absolute Return -5% to +5%

SELL Absolute Return < -5%

1

350

400

450

500

550

600 M

ay-1

5

Jun

-15

Jul-1

5

Au

g-1

5

Se

p-1

5

Oct-

15

No

v-1

5

Not Covered Covered


Glo

ba

l M

ark

ets

Re

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rch

15 15

Disclosures & Confidentiality for non U.S. Investors

The Note is based on our estimates and is being provided to you (herein referred to as the “Recipient”) only for information

purposes. The sole purpose of this Note is to provide preliminary information on the business activities of the company and

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document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in

this document. Each recipient of this document should make such investigations as it deems necessary to arrive at an

independent evaluation of an investment in the securities of companies referred to in this document (including the merits and

risks involved) and should consult its own advisors to determine the merits and risks of such an investment. Nevertheless, Elara

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directors and the employees may from time to time, effect or have effected an own account transaction in or deal as principal

or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or

other services for or solicit investment banking or other business from any company referred to in this Note. Each of these

entities functions as a separate, distinct and independent of each other. This Note is strictly confidential and is being furnished

to you solely for your information. This Note should not be reproduced or redistributed or passed on directly or indirectly in

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for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or

other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would

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jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose

possession this document comes, should inform themselves about and observe, any such restrictions. Upon request, the

Recipient will promptly return all material received from the company and/or the Advisors without retaining any copies

thereof. The Information given in this document is as of the date of this report and there can be no assurance that future

results or events will be consistent with this information. This Information is subject to change without any prior notice. Elara

Securities (India) Private Limited or any of its affiliates reserves the right to make modifications and alterations to this statement

as may be required from time to time. However, Elara Securities (India) Private Limited is under no obligation to update or

keep the information current. Neither Elara Securities (India) Private Limited nor any of its affiliates, group companies,

directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or

consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. This

Note should not be deemed an indication of the state of affairs of the company nor shall it constitute an indication that there

has been no change in the business or state of affairs of the company since the date of publication of this Note. The

disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should

not be treated as endorsement of the views expressed in the report. Elara Securities (India) Private Limited generally prohibits

its analysts, persons reporting to analysts and their family members from maintaining a financial interest in the securities or

derivatives of any companies that the analysts cover. The analyst for this report certifies that all of the views expressed in this

report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no

part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed

in this report.

Any clarifications / queries on the proposal as well as any future communication regarding the proposal should be addressed

to Elara Securities (India) Private Limited.

Elara Securities (India) Private Limited was incorporated in July 2007 as a subsidiary of Elara Capital (India) Private Limited.

Elara Securities (India) Private Limited is a SEBI registered Stock Broker in the Capital Market and Futures & Options Segments

of National Stock Exchange of India Limited (NSE) and in the Capital Market Segment of BSE Limited (BSE).

Elara Securities (India) Private Limited’s business, amongst other things, is to undertake all associated activities relating to its

broking business.

The activities of Elara Securities (India) Private Limited were neither suspended nor has it defaulted with any stock exchange

authority with whom it is registered in last five years. However, during the routine course of inspection and based on

observations, the exchanges have issued advise letters or levied minor penalties on Elara Securities (India) Private Limited for

minor operational deviations in certain cases. Elara Securities (India) Private Limited has not been debarred from doing

business by any Stock Exchange / SEBI or any other authorities; nor has the certificate of registration been cancelled by SEBI at

any point of time.

Elara Securities (India) Private Limited offers research services primarily to institutional investors and their employees, directors,

fund managers, advisors who are registered or proposed to be registered.


16

Details of Associates of Elara Securities (India) Private Limited are available on group company website www.elaracapital.com

Elara Securities (India) Private Limited is maintaining arms-length relationship with its associate entities.

Research Analyst or his/her relative(s) may have financial interest in the subject company. Elara Securities (India) Private

Limited does not have any financial interest in the subject company, whereas its associate entities may have financial interest.

Research Analyst or his/her relative does not have actual/beneficial ownership of 1% or more securities of the subject

company at the end of the month immediately preceding the date of publication of Research Report. Elara Securities (India)

Private Limited does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the

month immediately preceding the date of publication of Research Report. Associate entities of Elara Securities (India) Private

Limited may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month

immediately preceding the date of publication of Research Report. Research Analyst or his/her relative or Elara Securities

(India) Private Limited or its associate entities does not have any other material conflict of interest at the time of publication of

the Research Report. Research Analyst or his/her relative(s) has not served as an officer, director or employee of the subject

company.

Research analyst or Elara Securities (India) Private Limited or its associate entities have not received any compensation from

the subject company in the past twelve months. Research analyst or Elara Securities (India) Private Limited or its associate

entities have not managed or co-managed public offering of securities for the subject company in the past twelve months.

Research analyst or Elara Securities (India) Private Limited or its associate entities have not received any compensation for

investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

Research analyst or Elara Securities (India) Private Limited or its associate entities may have received any compensation for

products or services other than investment banking or merchant banking or brokerage services from the subject company or

third party in connection with the Research Report in the past twelve months.

Disclaimer for non U.S. Investors

The information contained in this note is of a general nature and is not intended to address the circumstances of any

particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no

guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.

No one should act on such information without appropriate professional advice after a thorough examination of the

particular situation.


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17 17

Disclosures for U.S. Investors

The research analyst did not receive compensation from PNC Infratech Limited.

Elara Capital Inc.’s affiliate did not manage an offering for PNC Infratech Limited.

Elara Capital Inc.’s affiliate did not receive compensation from PNC Infratech Limited in the last 12 months.

Elara Capital Inc.’s affiliate does not expect to receive compensation from PNC Infratech Limited in the next 3 months.

Disclaimer for U.S. Investors

This material is based upon information that we consider to be reliable, but Elara Capital Inc. does not warrant its

completeness, accuracy or adequacy and it should not be relied upon as such.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument.

Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed

herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.

Prices, values or income from any securities or investments mentioned in this report may fall against the interests of the

investor and the investor may get back less than the amount invested. Where an investment is described as being likely to

yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.

Where an investment or security is denominated in a different currency to the investor’s currency of reference, changes in

rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The

information contained in this report does not constitute advice on the tax consequences of making any particular

investment decision. This material does not take into account your particular investment objectives, financial situations or

needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before

acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances

and, if necessary, seek professional advice.

Certain statements in this report, including any financial projections, may constitute “forward-looking statements.” These

“forward-looking statements” are not guarantees of future performance and are based on numerous current assumptions

that are subject to significant uncertainties and contingencies. Actual future performance could differ materially from these

“forward-looking statements” and financial information.


18

India Elara Securities (India) Pvt. Ltd. Indiabulls Finance Centre, Tower 3, 21st Floor, Senapati Bapat Marg, Elphinstone Road (West) Mumbai – 400 013, India Tel : +91 22 6164 8500

Europe Elara Capital Plc. 29 Marylebone Road, London NW1 5JX, United Kingdom

Tel : +4420 7486 9733

USA Elara Securities Inc. 36W 44th Street, 803, New York, NY 10036, USA

Tel :+1-212-430-5870

Asia / Pacific Elara Capital (Singapore) Pte.Ltd. 30 Raffles Place #20-03, Chevron House Singapore 048622

Tel : +65 6536 6267

Harendra Kumar Managing Director [email protected] +91 22 6164 8571

Vishal Purohit Co-Head Institutional Equities [email protected] +91 22 6164 8572

Sales

Deepak Sawhney India

[email protected] +91 22 6164 8549

Kalpesh Parekh India


Nishit Master India


Prashin Lalvani India


Sushil Bhojwani India


Parin Vora North America


Sales Trading & Dealing

Manan Joshi India


Manoj Murarka India


Sanjay Joshi India [email protected] +91 22 6164 8554

Vishal Thakkar India [email protected] +91 22 6164 8552

Research

Aarthisundari Jayakumar Analyst Pharmaceuticals [email protected] +91 22 6164 8510

Aashish Upganlawar Analyst FMCG, Media [email protected] +91 22 6164 8546

Abhishek Karande Analyst Technical & Alternate Strategy [email protected] +91 22 6164 8562

Adhidev Chattopadhyay Analyst Infrastructure, Real Estate [email protected] +91 22 6164 8526

Aliasgar Shakir Analyst Mid caps, Telecom [email protected] +91 22 6164 8516

Ashish Kejriwal Analyst Metals & Mining, Railways [email protected] +91 22 6164 8505

Ashish Kumar Economist


Deepak Agrawala Analyst Power, Capital Goods [email protected] +91 22 6164 8523

Jay Kale, CFA Analyst Auto & Auto Ancillaries [email protected] +91 22 6164 8507

Rakesh Kumar Analyst Banking & Financials [email protected] +91 22 6164 8559

Ravi Menon Analyst IT Services [email protected] +91 22 6164 8502

Ravi Sodah Analyst Cement [email protected] +91 22 6164 8517

Sumant Kumar Analyst Agri, Travel & Hospitality, Paper [email protected] +91 22 6164 8503

Swarnendu Bhushan Analyst Oil and gas [email protected] +91 22 6164 8504

Bhawana Chhabra Sr. Associate Strategy [email protected] +91 22 6164 8511

Durgesh Poyekar Sr. Associate Oil and gas [email protected] +91 22 6164 8541

Manuj Oberoi Sr. Associate Banking & Financials [email protected] +91 22 6164 8535

Harshit Kapadia Associate Power, Capital Goods [email protected] +91 22 6164 8542

Priyanka Sheth Editor


Gurunath Parab Production


Jinesh Bhansali Production


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