Simplex Infrastructure Ltd- Final Report - Bombay … Infrastructures Limited Source: Annual Report,...

Construction

Company Overview Simplex Infrastructures Limited is one of the premier infrastructure solution providers in India, with diversified project expertise spanning design, engineering and construction. It became an ISO 9001:2000 certified company in 2004. Incorporated as Simplex Concrete Piles (India) Limited in 1924, the company changed its name to the current form in 2005. In recognition of its commitment to quality, leadership, technology and innovation, the company received the prestigious ‘International Quality Summit Award’ 2009, organised by Business Initiative Directions (BID) at New York in the Gold category.

Key Business Highlights Wide reach in India and abroad

The company through its subsidiary and joint ventures undertakes a whole gamut of infrastructural civil construction projects in nine sectors, viz. ‘Piling and Ground Engineering’, ‘Industrial’, ‘Power’, ‘Urban Infrastructures’, ‘Building and Housing’, ‘Marine’, ‘Roads’, ‘Railways’ and ‘Bridges’ in India, Middle-East Asia and Sri-Lanka.

Momentum in order booking and turnover

Order book of the Company stands at Rs.11,491 crores as of March 2010. Order intake grew at a CAGR of 30 per cent, while revenues grew at CAGR of 35.72 per cent during FY06-10.

Recent significant business achievements

The company commissioned a large port and container terminal at Kochi, a large elevated road corridor at Hyderabad and a cement plant of 5000 TPD at Qatar. It has installed steel piles for jetties, using the latest vibro technology at Dahej.

Growth opportunities of infrastructure driven construction

With an increase in the Union Budget 2010 allocations for infrastructure to meet the targets of the 11th Five-Year-Plan, the company is suitably placed with its proven track record in all civil construction sectors to participate in the continuing thrust on development, maintenance and modernisation of infrastructural facilities in India. Key Risks

Economic slowdown could lead to scaling down of infrastructure related activities.

Execution delays may result in cost overruns and may attract penal provisions of the contracts.

As a substantial number of infrastructure projects are funded by the Government and its agencies, any slow-down in Government spending could affect future cash flows

Inflation could adversely affect the cost of construction materials, interest costs and capital expenditures.

Valuations The stock is currently trading at a P/E multiple of 18.6x on its FY10 EPS of Rs. 25.7 and 7.9x EV/EBITDA multiple based on FY10 EBITDA of Rs. 454 crores.

August 05, 2010

BSE Code 523838BSE ID SIMPLEXINHigh/Low 1Y (Rs.) 563 / 343Avg. vol (3m) 6,727Market Cap (Rs Cr) 2,378Net IB Debt (Rs Cr) 1,190Enterprise value(Rs Cr) 3,568

Shareholding % Mar-10 Jun-10Promoters 54.74 54.74MFs/ Fis/ Banks 19.89 20.87FIIs 11.8 11.77Public & Others 13.57 12.62

Stock Chart ( Relative to Sensex)

Stock Perfm.(%) 1M 6M 1YrAbsolute 3.7 14.2 25.2 Rel. to Sensex (0.5) (0.9) 10.9

Financials (Rs.Cr) 03/08 03/09 03/10Revenue 2,812 4,713 4,564 y-o-y 64.4% 67.6% -3.1%EBITDA 267 404 454 y-o-y 65.2% 51.0% 12.5%PAT 90 123 127EPS (Dil.) 19.8 25.0 25.7y-o-y 57.7% 26.3% 3.0%EBITDA Margin 9.5% 8.6% 9.9%PAT Margin 3.2% 2.6% 2.8%D/E(x) 1.0 1.3 1.3 P/E(x) 24.2x 19.2x 18.6xEV/EBITDA(x) 13.3x 8.8x 7.9xROCE 13.5% 12.8% 13.0%ROE 12.0% 13.6% 13.0%

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SIMPLEXIN SENSEX

Financial Year ends at March 31 Qtry Fin 06/09 09/09 12/09 03/10Revenue 1131 1056 1100 1281PAT 28 29 26 45EPS 5.6 5.9 5.3 9.0All figures in Rs. crores except for per share data

CMP Rs. 479 Simplex Infrastructures Limited

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Simplex Infrastructures Limited

Business Description Simplex Infrastructures Limited is one of the leading construction companies in India. It has a proven track record of over 85 years in construction of infrastruture facilities in India and has also made inroads into SriLanka, UAE, Qatar, Bahrain and Oman. The company undertakes project contracts starting from design to complete execution and commissioning on turnkey basis and also accepts orders on sub-contracts and joint ventures. The company has access to latest technologies and has a strong technically competent workforce to cater to a diverse clientele, ranging from private and public institutions, Government and various international conglomerates. Simplex Infrastructures Ltd. became an ISO 9001:2000 certified company in 2004. Incorporated as Simplex Concrete Piles (India) Limited in 1924, the company changed its name to the current form in 2005. In recognition of its commitment to Quality, Leadership, Technology and Innovation, the company received the prestigious ‘International Quality Summit Award’ 2009, at New York organised by Business Initiative Directions (BID) in the Gold category.

The company has a diversified construction and engineering business spread across nine Strategic Business Units (SBU) “Piling and Ground Engineering”, “Industrial”, “Power”, “Urban Infrastructures”, “Building and Housing”, “Marine”, “Roads”, “Railways” and “Bridges”. It has executed over 2300 projects and is presently operating on about 150 projects in India and abroad. Among the recent significant business achievements, the company commissioned a large port and container terminal at Kochi, a large elevated road corridor at Hyderabad and cement plant of 5000 Tonnes per day at Qatar. It has installed steel piles for jetties using the vibro technology at Dahej.

Revenue Composition Simplex Infrastructures reports its revenues under two segments, namely, construction and others. The ‘construction’ segment contributes 99.7 per cent to the revenues. The revenue from the ‘other’ segment includes income from wind mill, plant and equipment including oil drilling rig. The revenue from the ‘other’ segment grew from Rs. 3 crores in FY08 to Rs. 11.8 crores in FY10. Simplex Infrastructures has earned a PAT of Rs.127 crores, on total operating revenues of Rs. 4,564 crores during FY10 from nine of its Strategic Business Units (SBU). The details of the business of the SBUs are discussed below

FY10 revenue break-up of Rs. 4,564 crores

23%

15%

11%

10%

9%

9%1%2%

20%

Power

Industrial

Bridges

Bldg. & Hsg.

Urban Utilities

Piling & Ground Engg.

Marine

Roads

Railways Source: Corporate Presentation FY10 Results

Diversified business with presence in all construction verticals

FY10 revenues derived from nine lines of businesses aligned as SBUs

The company has access to latest technologies and has a strong technically competent workforce

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Simplex Infrastructures Limited

Piling and Ground Engineering

The ‘Piling and Ground Engineering’ SBU derives revenues from piling works including cast-in-situ driven, bored, pre-cast jointed piling works, etc. and ground engineering works which include soil investigation, soil compaction, diaphragm walls, grouting, stone columns etc. The company has over 85 years of experience in this segment. Revenues of Piling and Ground Engineering segment grew at a CAGR of 32 per cent during FY06-10. The SBU earned Rs.411 crores during FY10 which was 46 per cent less than FY09 revenues of Rs.754 crores. As of March 2010, Piling and Ground Engineering SBU’s order book stood at Rs. 344.73 crores.

Industrial SBU

In the ‘Industrial’ segment, Simplex Infrastructures has been participating in greenfield and brownfield development, and modernisation projects in steel, cement, aluminium, copper, engineering, automobiles, refinery, petrochemicals, fertilizers, paper, textiles and pharmaceuticals. Each type of plant construction requires typical expertise in the niche field. Revenues of Industrial segment grew at a CAGR of 43.47 per cent during FY06-10. The SBU earned Rs.913 crores during FY10 which is about 19 per cent less than FY09 revenues of Rs.1,131 crores.The order book as of March 2010 stood at Rs. 2,183.29 crores, with overseas orders of Rs. 804.37 crores.

Building and Housing SBU

Simplex Infrastructures is a pioneer in design and construction of RCC framed structures in Asia and has executed many prestigious projects such as the Hilton Hotel at Doha and International Hotels at Tashkent and Uzbekistan under the ‘Building and Housing’ segment. Revenues of Building and Housing segment grew at a CAGR of 35.71 per cent during FY06-10. The SBU earned Rs.502 crores during FY10, which is about 11 per cent less than FY09 revenues of Rs.566 crores.The order book as of March 2010 stood at Rs. 2,528.02 crores, with overseas orders of Rs.1,149.10 crores.

Power SBU

The ‘Power’ SBU derives its revenue from construction of various thermal, hydel and nuclear power plants all over India and abroad. The company holds a record in the installation of the largest number of turbo generator foundations ranging from 10MW to 1000MW. The major activities include civil works including TG and boiler foundation and other ancillary structures, design and construction of coal handling plants, water and effluent treatment plants, RCC chimneys and structural steel fabrication and erection of mechanical equipment. Revenues of Power segment grew at a CAGR of 21 per cent during FY06-10. The SBU earned Rs.1,050 crores during FY10 which is 86 per cent higher than FY09 revenues of Rs.566 crores.The order book status as of March 2010 stood at Rs. 3,102.57 crores, with overseas orders of Rs.344.73 crores.

Piling and Ground Engineering SBU is a pioneer in its field

Industrial SBU is a one stop solution provider in industrial constructions

Pioneer in large RCC framed structures and has constructed multistoried buildings of International Standards.

Power SBU is engaged in construction of all types of power facilities including nuclear power.

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Simplex Infrastructures Limited

Marine SBU The ‘Marine’ SBU has garnered immense experience in executing contstruction projects at ports and various coastal infrastructures in adverse sea conditions. Revenues of Marine segment grew at a CAGR of 26.97 per cent during FY06-10. The SBU earned Rs.411 crores during FY10 which is 9 per cent higher than FY09 revenues of Rs.377 crores.The order book status of this segment as of March 2010 stood at Rs.344.73 crores, with overseas orders of Rs.114.91 crores.

Roads, Railways and Bridges SBUs

The three segments of Roads, Railways & Bridges derive reveues from various highway projects, flyovers, and elevated road corridors across Tier I and Tier II cities apart from comisioned work from the Indian Railways. It is one of the few construction companies capable of automatic track-laying for Railways. The company has successfully finished trial runs for a 120 km/hr high speed railway track on the Gooty-Pullampet section. Revenues of Roads, Railways & Bridges segment grew at a CAGR of 50.22 per cent during FY06-10. These SBUs earned Rs.822 crores during FY10, which is 9 per cent higher than FY09 revenues of Rs.754 crores.The order book status of this segment as of March 2010 stood at Rs.1,264.01 crores, with overseas orders of Rs.114.91 crores.

Urban infrastructures SBU

The Urban infrasructures SBU is mainly engaged in construction of airports, MRTS, metro, rail, water supply and sewerage facilities. Revenues of Urban infrasructures segment grew at a CAGR of 29.73 per cent during FY06-10. The SBU earned Rs.456 crores during FY10 which was 19 per cent less than FY09 revenues of Rs.566 crores. The order book status of this segment as of March 2010 stood at Rs.1,723.65 crores. Order Book Composition Simplex Infrastructure’s order book as of March 2010 stood at Rs.11,491 crores with 83 per cent of the orders concentrated in four SBUs, ‘Power’ ‘Building and Housing’, ‘Industrial’ and ‘Urban Utilities’. This indicates intensive ongoing activity in these SBUs. Nearly 90 per cent of the orders are obtained from direct tenders and rest from sub-contracts.

Order Book Position of Rs.11,491 crores (March 2010)

27%

19%

15%

9%3%

2%3%

22%

Power

Bldg. & Hsg.

Industrial

Urban Utilities

Bridges

Piling & Ground Engg.

Marine

Others (Roads & Railways)

Source: Corporate Presentation FY10 Results

Marine SBU largely dependent on Government sponsored projects

Roads, Rail and bridges sectors depend on projects from NHAI and Indian Railways

Order Book status shows four SBUs will drive revenue growth in the coming year

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Simplex Infrastructures Limited

Steady order inflows and revenues During FY06-10 order inflow grew at a CAGR of 30 per cent, revenues grew at 35.72 per cent and order book grew at 28.23 per cent.

Revenue vs. Order Book Position

5,9845,6906,696

2,5562,094

4,5644,713

2,8121,7111,345

11,49110,059

8,986

5,1004,250

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

FY06 FY07 FY08 FY09 FY10

Rs. i

n Cr

ores

Order Inflow Revenues Order Book

Source: Company Financials , Corporate Presentation FY10 Results Order intake in FY08 witnessed a phenomenal increase of about 162 per cent over FY07. The company matched this with about 67 per cent increase in revenues in FY09 over FY08. Such increase in order intake was sustained in FY09 and FY10, however, on the delivery side the top line sustained a (3 per cent) decline in FY10 revenues over FY09 mainly due to slower recovery of the dues owing to recession. With recovery of economy the company expects to book around Rs.5,500 crore revenues during FY11.

In addition to accumulation of order book of Rs. 11,491 crores, the company has pending bids tendered of over Rs. 38,730 crores including Rs.1,334 crores in L1 status. Considering the success rate of the company of 15-20 per cent in materializing the tender bids, Simplex expects a further Rs.5,800 to Rs.7,700 crores of orders. There is a strong visibility of sustained growth in order intake in the near term under favourable economic conditions. The company would need to employ adequate resources to meet the challenges and capitalise on these opportunities. In FY11 budgeted capex is estimated at around Rs. 200 crores which is almost double of FY10 levels this capex will be funded by internal accruals and borrowings. Overseas revenues provide additional growth impetus In the past five years conscious efforts to make inroads into overseas market has yielded a growth of overseas order book and revenues. Domestic revenues grew at a CAGR of 28.94 per cent and overseas revenues grew at a CAGR of 78.67 per cent during FY06-10. Although there is a slow down in revenues during FY10, the impressive growth rate of overseas revenues would continue to provide additional momentum to the growth of total revenues.

Order intake was sustained in FY09 and FY10, however, top line sustained a decline

Order intake and revenues grew at a CAGR of 30 per cent and 35.7 per cent respectively during FY06-10

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Simplex Infrastructures Limited

Revenue distribution across geographies and overseas order book

3,4053,367

2,363

1,4701,232

1,1721,389

476251115

29%25%

7%

14%

22%

0

1,000

2,000

3,000

4,000

FY06 FY07 FY08 FY09 FY10

Rs. I

n Cr

ores

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Perc

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ge

Domestic Revenues Overseas Revenues % of overseas order book

Source: Annual Report, Corporate Presentation FY10 Results Growth Drivers Robust reputation of undertaking large scale projects: Simplex Infrastructures

has a proven track record to execute large scale construction projects. Currently, the company employs 7,728 permanent employees of which about 81 per cent operate in technical capacity. The company’s continued efforts to employ the best technocrats and invest in technologically advanced machinery, add to their growth in niche fields.

GoI thrust on infrastructure development presents opportunities: With Union

Budget 2010 allocation of Rs. 1,73,552 crores (46 per cent of total planned allocation), for infrastructure development there are all-round growth opportunities for Simplex Infrastructures to excel in all its verticals. The allocation to road infrastructure has been raised to Rs. 19,894 crores, which is a 13 per cent increase over last year’s Rs.17, 520 crores. Additionally, a full exemption from import duties for specified machinery for road construction projects has been awarded. For the development of the railways Rs.16,752 crores has been allocated, which is Rs.950 crores more than last year. Furthermore, budgetary allocations have been doubled for power infrastructure. Almost 40 per cent of the company’s contracts are from government sponsored projects.

Networking ensures consistent flow of JV contract/ subcontract opportunities:

Simplex Infrastructure has a long standing business relationship with the players in various niche fields and continues to bid for the contracts on JV in domestic and in overseas markets.

Investment in infrastructure development drives demand: With a general

improvement in the living conditions in urban as well as in rural cities there is an increase in demand for better infrastructure facilities.

Overseas revenues grew at an accelerated rate during FY06-10

Known as a capable player to undertake large scale constructions

Government thrust drives revenue growth

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Simplex Infrastructures Limited

Wear and tear on existing infrastructure would require replacement: The daily wear and tear of existing infrastructure by a large Indian population would generate continuing demand for expansion and development in infrastructural facilities.

Key Risks

Economic slowdown: Economic slowdown could lead to scaling down of infrastructure related activities.

Slowdown in Government spending: As a substantial number of infrastructure projects are funded by the Government and its agencies, a commitment to reduce its fiscal deficit could lead to a slowdown in Government spending, which will affect future cash flows.

Bottlenecks in execution: Execution delays may result in cost overruns and may trigger penal provisions of the contracts.

Pressure of Inflation: Inflation could adversely affect the costs of construction

materials, interest costs and capital expenditures. With a recovery in the global economy underway, cost of materials is likely to increase.

Increasing competition: Although infrastructure construction segment

characteristically possesses a high entry barrier and the reputation of execution is important, in the long run increase in number of players could put pressure on margins.

Political risk: Change in Governments may adversely affect the Government

order inflows.

Profitability Margins show an improving trend Simplex Infrastructures’ FY10 EBIT and EBITDA margins show considerable improvements in FY10 due to vigilance over costs and selection of high margin projects.

Margin trends

454404267

162118

29727220312395

9.9%8.6%9.5%9.5%

8.8%

6.5%5.8%

7.2%7.2%

7.1%

0

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500

FY06 FY07 FY08 FY09 FY10

Rs.

in C

rore

s

0%

2%

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12%

Mar

gins

(%

)

EBITDA EBIT Profi t EBITDA Margi n (%) EBIT Margin (%)

Source: Company Financials, ICRA Online Research

EBIT & EBITDA margins considerably improved in FY10

High dependence on Government spending causes business risk

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Simplex Infrastructures Limited

Return Ratios Among the return ratios, Return on Capital employed (ROCE) and Return on Equity (ROE) remained stable during FY08-10. The company had a healthy debt and equity mix during this period.

Trends of Return ratios

14.0% 12.7%13.5%

12.8% 13.0%

17.9%

19.5%

12.0%

13.6%13.0%

5%

10%

15%

20%

25%

FY06 FY07 FY08 FY09 FY10

Rati

os

ROCE (%) ROE (%)

Source: Company Financials, ICRA Online Research

Input Cost During FY10 Simplex Infrastructures selected high margin and cost plus (inflation insulated) projects and also controlled construction costs by implementing technologically advanced procedures and equipments, which led to a decline in overall comparative costs, resulting in improvement of EBITDA margins over FY09 levels.

Break up of input costs

Particulars FY06 FY07 FY08 FY09 FY10

Cost of purchased goods & services 769.7 963.1 1592.8 2696.9 2435.8

% of sales 57.25% 56.29% 56.64% 57.23% 53.37%

Employee costs 428.9 541.4 891.3 1498.7 1561.1

% of sales 31.90% 31.64% 31.69% 31.80% 34.20%

EBITDA Margin (%) 8.8% 9.5% 9.5% 8.6% 9.9%

Source: Company Financials, ICRA Online Research

Dividend The company paid 100 per cent dividend on equity share of Rs.2.00 each during FY08 and FY09, the same is proposed for FY10 also.

Return ratios have remained stable with growth in capital

Considerable improvement of EBITDA margins over FY06-09 levels

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Simplex Infrastructures Limited

Competitor Analysis We have compared Simplex Infrastructures with its closest peers in the same industry. The comparison shows EBIT margin of the company is bit lower than the industry peers. On the valuation front based on EV/ EBITDA, Simplex trades at a discount compared to its peer group.

Particulars Year End CMP M Cap Revenue EBIT

Margin P/E EV/EBITDA

Simplex Infrastructures Mar-10 479 2,378 4,564 6.5% 18.6x 7.8x Nagarjuna Construction Co. Ltd. Mar-10 167 4,293 5,897 7.3% 14.5x 10.9x IVRCL Infrastructures & Projects Ltd. Mar-10 175 4,677 5,831 9.9% 62.6x 10.4x Hindustan Construction Co. Ltd. Mar-10 139 4,219 3,975 9.7% 632.5x 17.7x

Source: Company Financials, BSE, Capitaline, ICRA Online Research Market cap and Revenue in Rs. crores @P/E and EV/EBITDA is based on FY10 EPS and EBITDA

Industry Overview Given the derived nature of demand in the infrastructure sector, the global economic slow down during FY08-09 had an adverse impact on the otherwise robust growth in infrastructure development. Presently, India’s position as one of the fastest growing economies, with accelerated growth in the manufacturing sector has resulted in an upsurge in investment in key infrastructure facilities. A large deficit in key infrastructure requirements coupled with inefficiencies in the delivery of critical infrastructure services are key issues for the industry. Moreover, the Government has been giving major thrust to infrastructure creation, expansion and maintenance, primarily of Roads, Bridges, Railways, Airports and Seaports. The planning commission of India has emphasised that the pattern of inclusive growth of the economy projected for the 11th Five-Year-Plan (2007-12), with GDP growth averaging 9 per cent per year can be achieved only if this infrastructure deficit can be overcome. Adequate investments are required to support higher growth and an improved quality of life for both urban and rural communities. Amidst fears of fiscal consolidation and withdrawal of support provided during economic slowdown, the Government has allocated a fund injection of Rs. 1,73,552 crores in the infrastructure sector, which is 46 per cent of the total planned allocations of the Union Budget 2010. In terms of sector wise investments, power, roads and bridges, railways, telecommunication and water & irrigation are likely to see higher allocation in the XIth Five Year Plan. Simplex being associated with power companies for civil and structural construction for their plants, is likely to be the key beneficiary of the sharp increase in the power vertical.

Government has been giving major thrust to infrastructure creation, expansion and maintenance

Based on EV/ EBITDA, Simplex trades at a discount compared to its peer group.

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Simplex Infrastructures Limited

Sector- Wise Investment in XIth Plan

73

3626 30 28

164 2 1 2

167

7965 65 63

3622

8 6 40

50

100

150

200

Pow er Road &Bridges

Telecom Railw ays Irrigation WS &Sanitation

Ports Airports Storage Gas

$ in

bill

ions

Xth Plan -$217.86 billion (Anticipated Investment) XIth Plan -$514.04 billion - (Projected Investment)

Source: Planning Commission, ICRA Online Research Piling and Ground Engineering SBU At the initial stage of all large construction activities ground engineering is a prerequisite and the company is a pioneer in this field, hence the company will benefit from all construction activities. Industrial SBU Industrial SBU will be benefitted by newer development and capacity expansion, modernisation and replacement of old manufacturing facilities. Investment will continue to flow into this sector by way of capacity expansion and creation of new plants as India is one of the fastest growing economies especially in the manufacturing sector. Simplex Infrastructures has proven track record to carry out industrial constructions with specialized industry specific expertise.

Building and Housing SBU The real estate industry has grown rapidly in India. High demand growth has led to prices doubling over three years in many cities. Commercial and office complexes are mushrooming in major Indian metros. There is an opportunity of over 20 million new housing units required in the next five years. Large demand-supply gap in affordable housing, with demand being fuelled by tax incentives as well as a growing number of middle class with higher savings, has set the stage for an uptake in housing requirements. There is rise in demand for commercial and office space especially from the rapidly growing Retail, IT/ ITeS and Hospitality sectors.

Power SBU The Government of India (GoI) has undertaken a number of initiatives to meet the large power deficit faced by the country over the years. As per the “Power for all by 2012” initiative, GoI has revised the target for electricity generation from 147,702 MW currently to 200,000 MW by 2012 and further to 3,05,623 MW by 2016-17. In line with the increased power generation targets, there has been significant expansion of the regional transmission network and inter-regional capacity to transmit power. The Government is planning to increase the reach to rural areas through expansion of transmission lines

There exists a large demand-supply gap in affordable housing, commercial and office space

Government of India (GoI) has undertaken a number of initiatives to meet the large power deficit

Overseas revenues grew at an accelerated rate during FY06-10

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Simplex Infrastructures Limited

from 198,089 circuit kilo meters (CKM) to 293,372 CKM by the end of 11th Five-Year-Plan. Within the broader purview of improving the power deficit, rural electrification has also found importance. This in turn will translate into large requirements from the power generation, transmission, components, power equipment and services businesses over the next decade. Marine SBU Sea is the most important corridor for goods. To accommodate a growing number of vessels, ports and terminals have to be expanded and adapted to match the growing requirements. Peninsular coastline of India stretches over 7,500 km, with a large marine infrastructure in place through 12 major ports, 185 minor ports, jetties, wharves, terminals, light houses, breakwaters, quays etc. All major ports have embarked on a 20 year business plan for expansion and upgradation, under the guidance of Shipping Ministry. The 11th Five-Year-Plan targets 485 million MT for all major ports and 345 million MT in minor ports at an investment of Rs. 87,995 crores.

Roads, Railways & Bridges SBU The Government plans to upgrade the National Highways in a phased manner in the years to come. Ongoing work includes specific targets set and monitored in the 11th Five-Year-Plan and annual plans under the NHDP phase I to VII and Pradhan Mantri Gramin Sadak Yojana. Under the 11th plan railways would lay 8,132 km of new track and 7,148 km gauge conversion, this would be at a projected investment of Rs.216,808 crores. Allocations have been increased substantially in the Union Budgets over the years. The Company expects to increase its participation in road projects in BOT and BOOT basis. Urban Infrastructures And Utilities SBU The company benefits from modernisation and introduction of new urban facilities. 11th Five-Year-Plan targets to modernize 4 metro and 35 non metro airports and 22 railway stations.

All major ports have embarked on a 20 year business plan for expansion and upgradation

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Simplex Infrastructures Limited

Summary Financials Profit & Loss Statement

Particulars (Rs. crores) FY06 FY07 FY08 FY09 FY10 Net Sales 1342.7 1708.2 2808.1 4696.1 4552.5 Other Operating Revenue 1.8 2.8 4.0 16.5 11.8 Total Income 1344.6 1711.0 2812.1 4712.6 4564.3 Growth (%) 27.2% 64.4% 67.6% -3.1% Cost of Good Sold (769.7) (963.1) (1592.8) (2696.9) (2435.8) Gross Profit 574.9 747.9 1219.3 2015.7 2128.5 Employee Costs (428.9) (541.4) (891.3) (1498.7) (1561.1) Other Expenditure (27.9) (44.7) (60.5) (113.3) (113.3) EBITDA 118.1 161.9 267.5 403.8 454.1 Growth (%) 37.1% 65.2% 51.0% 12.5% Depreciation (22.9) (39.1) (64.3) (132.0) (157.3) EBIT 95.2 122.8 203.2 271.8 296.8 Net Interest expense (40.4) (63.2) (103.7) (142.0) (112.2) Other Income(expense) 3.3 10.6 27.6 43.4 15.9 PBT 58.1 70.2 127.1 173.2 200.6 Income Tax (16.4) (16.4) -37.0 -49.0 -71.5 Profit after Tax 41.6 53.7 90.1 124.2 129.1 Growth (%) 29.0% 67.7% 37.9% 3.9% Extra Ordinary Items 0.0 0.0 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 (0.8) (1.9) Net Profit 41.6 53.7 90.1 123.4 127.1 Growth (%) 29.0% 67.7% 37.0% 3.0% Reported Basic EPS* 10.5 12.5 20.2 25.0 25.7 Reported Diluted EPS* 10.5 12.5 19.8 25.0 25.7 DPS 5.0 1.6 2.0 2.0 2.0 Equity Capital 8.6 8.6 9.9 9.9 9.9 Face value 10.0 2.0 2.0 2.0 2.0

Ratio Analysis Particulars FY06 FY07 FY08 FY09 FY10 Margins Gross Margin (%) 42.8% 43.7% 43.4% 42.8% 46.6% EBITDA Margin (%) 8.8% 9.5% 9.5% 8.6% 9.9% EBIT Margin (%) 7.1% 7.2% 7.2% 5.8% 6.5% Net Profit Margin (%) 3.1% 3.1% 3.2% 2.6% 2.8% Valuation EPS 10.5 12.5 19.8 25.0 25.7 BVPS* 54.2 64.1 151.6 183.0 196.9 P/E (x) 45.5 38.2 24.2 19.2 18.6 P/BV (x) 8.8 7.5 3.2 2.6 2.4 EV/ EBITDA (x) 30.2 22.0 13.3 8.8 7.9 EV/ Sales (x) 2.7 2.1 1.3 0.8 0.8 Profitability ROCE (%) 14.0% 12.7% 13.5% 12.8% 13.0% ROE (%) 17.9% 19.5% 12.0% 13.6% 13.0% Solvency Ratio Deb/ Equity Ratio (x) 1.9 2.5 1.0 1.3 1.3 Interest Cover (x) 2.4 1.9 2.0 1.9 2.6 Turnover Ratio Inventory T/o Days 84 87 86 77 100 Debtors T/o Days 146 147 128 109 138 Creditors T/o Days 134 131 115 100 144 Other Ratio Dividend Payout (%) 50% 80% 100% 100% 100% Dividend Yield (%) * 0.2% 0.3% 0.4% 0.4% 0.4% * Adjusted for Stock Split of Rs 10 to Rs 2 per share in FY07

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Simplex Infrastructures Limited

Balance Sheet Particulars (Rs. crores) FY06 FY07 FY08 FY09 FY10 Sources of Funds Equity Capital 8.6 8.6 9.9 9.9 9.9 Reserves 224.6 267.3 743.2 898.9 968.1 Shareholders Fund 233.2 275.9 753.1 908.8 978.1 Long Term Debt 445.2 687.7 749.3 1220.5 1302.4 Deferred Tax Liability, Net 12.3 18.1 37.1 57.9 88.4 Minority Interest 0.0 0.0 0.0 1.4 5.0 Total 690.6 981.6 1539.6 2188.6 2373.8 Application of Funds Net Fixed Assets 222.3 339.1 629.5 1011.1 988.1 Capital Work-in-Progress 4.8 22.8 24.3 13.9 18.7 Investments 0.3 5.3 9.9 2.1 2.8 Current Assets Inventory 180.1 285.2 474.1 679.2 671.2 Sundry Debtors 544.2 849.3 1149.7 1682.1 1806.1 Loans& Advances 78.3 177.7 283.9 338.0 397.6 Cash & Bank Balance 44.5 42.5 123.2 119.1 109.9 Other Current Assets 44.6 40.8 83.4 127.3 139.7 Total Current Assets 891.5 1395.5 2114.3 2945.6 3124.5 Current Liabilities Sundry Creditors 286.7 412.8 605.7 898.6 1049.6 Provisions 4.9 8.1 11.6 11.9 13.0 Other Current Liabilities 136.6 360.1 621.0 873.5 697.7 Total Current Liabilities 428.2 781.0 1238.3 1784.0 1760.3 Net Current Assets 463.3 614.5 876.0 1161.6 1364.2 Miscellaneous Exp not W/Off 0.0 0.0 0.0 0.0 0.0 Total 690.6 981.6 1539.6 2188.6 2373.8

Cash Flow Particulars (Rs crores) FY06 FY07 FY08 FY09 FY10 CF from Operating Activities Profit Before Tax 58.1 70.2 127.1 173.2 200.6 Depreciation 12.9 24.0 37.2 78.9 92.1 Direct Taxes paid (23.3) (21.6) (22.8) (29.8) (46.1) Others 52.6 74.1 124.1 208.1 179.9 Change in Working Cap (114.5) (160.5) (203.4) (358.1) (313.9) CF- Operating Activities (14.1) (13.8) 62.1 72.3 112.6 CF from Investing Activities Change in Fixed Assets (97.5) (179.0) (315.7) (406.9) (118.3) Change in Investments (0.8) (0.0) (4.0) (1.2) (0.7) Investment Income 2.3 1.8 4.0 6.6 9.2 Others (2.9) 3.8 (46.1) (5.7) 0.2 CF- Investment Activities (99.0) (173.4) (361.8) (407.2) (109.6) CF from Financing Activities Increase in Equity 90.1 0.0 429.3 0.0 0.0 Changes in Minority Interest 0.0 0.0 0.0 0.6 1.9 Changes in Borrowings 90.7 242.0 62.2 443.8 105.3 Dividend Paid (3.7) (4.9) (8.0) (11.6) (11.6) Others (42.7) (51.6) (102.6) (118.4) (103.1) CF- Financing Activities 134.4 185.5 380.8 314.5 (7.5) Net Change in Cash 21.3 (1.8) 81.2 (20.4) (4.5) Opening Cash & Bank Bal 23.2 44.5 42.5 124.7 119.1 Closing Cash & Bank Bal 44.5 42.5 123.20 119.06 109.9

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Simplex Infrastructures Limited

Contact Details:

Manish Kedia ICRA Online Limited, Phone: +91-22-67816163, Email: manish@icraonline.com

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