IL&FS Transportation Networks Limited

IL&FS Transportation Networks Limited
Price band Rs 242 – Rs 258
Largest BOT road operator in private space.…


Incorporated in 2000, IL&FS Transportation Network Ltd (ITNL) is one of
the largest private sector BOT road operators in India. The company
currently has a portfolio of 17 transportation projects aggregating 9397
lane km (4086 lane km operation and ~5300 lane km under
development). Given the early mover advantage in this vertical, ITNL is
likely to be a key beneficiary of the huge opportunities in road verticals.

�� Largest BOT road project operator in India:

ITNL currently has eight operational projects aggregating 4086 lane
km making it a bigger player than IRB infrastructure (3404 lane km
operational). Additionally, ITNL is looking to develop projects
aggregating 5316 lane km over the next two or three years, which is
again higher than IRB (1646 lane km). ITNL, being the largest BOT
road project operator, is likely to be a key beneficiary of the huge
opportunities in the road vertical.

�� Fitch & CARE assign IPO grade of 4/5:

Fitch and CARE have assigned the IPO a grade of 4 on a scale of 1 to 5
indicating that the fundamentals of the issue are above average. The
rating reflects its established presence in India’s transportation sector.
Concerns

�� There are a lot of outstanding litigations again ITNL, its promoter, its
subsidiaries & group companies and there are off-balance sheet items
(contingent liabilities). Any unfavourable court ruling against litigation
or materialisation of contingent liabilities could affects its financial
performance significantly, going forward

�� ITNL derived 61.6% and 43.4% of its revenues in FY09 and H1FY10,
respectively, from the Elsamex acquisition, which is into the very low
margin maintenance business. Elsamex has already incurred losses in
the past

Valuations

At the IPO price band of Rs 242-Rs 258, ITNL is available at 2.9x P/BV (post
IPO BV) at the lower price band and 3.1x P/BV (post IPO BV) at the higher
price band. Furthermore, EV/operational lane km works out to Rs1.95 crore,
which is at a discount to its closest peer (IRB Infra). Hence, we recommend
investors SUBSCRIBE to the issue for listing gains.
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ICICI