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1
Concurrent (India) Infrastructure Limited
DARK HORSE & MULTI BAGGER
BUY Target price: Rs.40.00 CMP: Rs.8.90 Market Cap. : Rs.119.26mn. Date: January 19th, 2010.
Key Ratios:
Particulars FY09 (12 m)
FY10E (12 m)
FY11E (12 m)
OPM (%) 1 3 3
NPM (%) 0 2 2
ROE (%) 0 3 3
ROCE (%) 2 4 4
P/BV(x) 0.82 0.80 0.77
P/E(x) 917.38 29.16 25.62
EV/EBDITA(x) 10.13 23.30 23.15
Key Data:
Sector Infrastructure
Face Value Rs.10.00
52 wk. High/Low Rs.11.91/2.10
Volume (2 wk.
Avg.) 99000
BSE Code 531261
SYNOPSIS • We initiated the coverage of concurrent India
Infrastructure Ltd and set a target price of Rs.40.00.
• Concurrent (India) Infrastructure Ltd operations cater around two businesses Viz Power and
Construction. It also has a significant presence in construction of Hospitals, Roadways, commercial complexes, Erection, Material
handling, Engineering and power generation projects viz. Thermal power, Hydro power and windmills.
• The company has launched its official website www.concurrentindia.com in an effort to bring
important news and details of the projects for providing the user with better information about overall activities of the company.
• The company has bagged EPC contract from Pennant Penguin Holdings in Kandy, Srilanka.
• The company has signed agreement with Ellis Richardson Inc (ERI) on an exclusive basis for Indian markets and on a non-exclusive basis for
the overseas markets. • The company’s Operating profit and Net profit is
expected to grow at a CAGR of 11% and 200% over FY08 to FY11E.
Share Holding Pattern:
V.S.R. Sastry Vice President Equity Research Desk 91-22-25276077 [email protected]
Dr. V.V.L.N. Sastry Ph.D. Chief Research Officer [email protected]
2
Table of Content
Content Page No.
1. Investment Highlights 03
2. Company Profile 07
3. Company products 07
4. Peer Group Comparison 09
5. Key Concerns 09
6. Financials 10
7. Charts & Graph 12
8. Outlook and Conclusion 14
9. Industry Overview 15
3
Investment Highlights • Result Updates (Q2FY10) (standalone):
For the second quarter, the top line of the company increased 28%QoQ
and stood at Rs.45.26mn against Rs.35.26mn of the Previous Quarter. The bottom line of the company for the quarter stood at Rs.0.35mn from
Rs.0.21mn of the previous quarter i.e., an increase of 67%QoQ.
EPS of the company for the quarter stood at Rs.0.03 for equity share of
Rs.10.00 each.
4
Expenditure for the quarter stood at Rs.45.09mn, which is around 28%
higher than the previous quarter. Raw material cost of the company for
the quarter accounts for 90% of the sales of the company and stood at Rs.40.51mn. Employee cost stood at Rs.1.64mn. and accounts for 4% of
the revenue of the company for the quarter.
OPM and NPM for the quarter stood at 1% and 1% respectively from 1%
and 1% respectively of the June quarter.
5
• Concurrent India launches its official website
The company has launched its official website www.concurrentindia.com
in an effort to bring important news and details of the projects
for providing the user with better information about overall activities of the
company.
With the help of this website, the company is planning to widen its reach
to its shareholders and create awareness among them.
• Concurrent India receives EPC contract from Pennant Penguin Holding
The company has bagged EPC contract from Pennant Penguin Holdings
in Kandy, Srilanka. The contract involves setting up of 30 MW power
project which is expected to be executed in over a span of 24 months.
• Concurrent India plans to float a preferential issue
The company is looking to float a preferential issue at Rs 15 per share for
the purpose of acquisition of land for logistics business. The company has
identified land of 25 acres near Hyderabad City for the purpose of setting
up logistics supply chain.
• Concurrent India bags Rs. 22crore worth order from Sreenidhi Constructions
The company has bagged a sub-contract worth Rs 22crore from Sreenidhi
Constructions, Belgaum, Karnataka. The contract involves execution of
modernization of distributaries and lateral lining and rehabilitation of
structures coming under Davangere branch canal (30 kilometer). The
project is expected to be completed in 12 months.
• Concurrent India ties up with ERI
The company has signed agreement with Ellis Richardson Inc (ERI) on an
exclusive basis for Indian markets and on a non-exclusive basis for the overseas markets.
Under this collaboration ERI will transfer and impart technical know-how
for turnkey implementation of power plant to Concurrent. ERI will also offer
6
technical and commercial assistance in initial phase of this collaboration.
The agreement is for the duration of three years and also has scope to be
extended for further period.
• Concurrent India plans to acquire 4.15 MW power project
The company has submitted its bid for acquisition of 4.15 MW power
project in the state of Andhra Pradesh. The project is a Mini Hydro Electric
Power Plant. The cost of the project is Rs. 23crore.
• Concurrent India looking to acquire 320 perches land in Sri Lanka
Concurrent (India) Infrastructure (earlier Kushagra Software) is looking to
acquire 320 perches land in Sri Jayewardenepura Kotte, Colombo, Sri
Lanka.
The company has entered into a transaction with Sino-Lanka, a local
entity, for the said acquisition. Further, Sino-Lanka has agreed to transfer
the rights of the land to the company and has also agreed to co-operate
in the necessary documentation and expressed its willingness to assist with
the government authorities namely UDA and BOI.
• Concurrent India receives project from Sreenidhi Constructions
Concurrent (India) Infrastructure (earlier Kushagra Software) has bagged
a deal worth Rs 20crore for waterways works from Sreenidhi Constructions.
The contract involves designing, supply, erection, testing, commissioning
and construction of canal works of Gddada Mallapur UN-Irrigation
scheme in Bydagi Taluq in Haven district of Karnataka. The contract is
expected to be completed within 12 months.
• Concurrent India bags work order worth $3.5 million
Concurrent (India) Infrastructure (earlier Kushagra Software) has bagged
a power project works order worth $3.5 million. The order is scheduled for
completion over a period of next 12 months.
• Kushagra Software pilot power project in Sri Lanka meets with success
7
Concurrent (India) Infrastructure (formerly known as Kushagra Software),
which launched a pilot project for power generation in the Negombo
beach region of Sri Lanka, has announced that the pilot was successful.
As per the technology used, one wind wheel is capable of illuminating
fifty/sixty watt bulbs. In the case of domestic needs, one wind wheel is
capable of supplying electricity needs of two bedroom rural houses. The
technology used by Concurrent is environmental friendly as there is no
pollution involved in it. Also, a distinct feature of this technology used by
Concurrent is that power could be generated with low speed winds unlike
in the usual wind power generation technology where high speed winds
are needed to generate power.
• Kushagra Softwar receives court’s nod for merger
Kushagra Software has received the Bombay High Court’s approval for
merger of Concurrent Infrastructure -- a private limited company -- with
Concurrent (India) Infrastructure.
Concurrent (India) Infrastructure was formerly known as Kushagra
Software. This merger will bring into the fold of the company, the order
book pipeline for infrastructure projects and developmental rights. The
company received a letter of intent for doing a pilot project for area
Negombo Beach Project from the Ministry of Road Development, Housing
& Construction of Western Provincial Council, Sri Lanka
Company profile Concurrent (India) Infrastructure Ltd operations cater around two businesses Viz
Power and Construction. Concurrent is a diversified business entity with a
predominant focus on urban infrastructure projects. It also has a significant
presence in construction of Hospitals, Roadways, commercial complexes,
Erection, Material handling, Engineering and power generation projects viz. Thermal power, Hydro power and windmills. Concurrent was incorporated in the
year 1994, it started as a real estate developer and majority diversified into
infrastructure in the year 2007. The company, formerly known as Kushagra
Software Limited, is based in Navi Mumbai, India.
Business Areas
8
• WindMill
• Hydeo Power
• Engineering
• Real Estate
Power Hydropower
Concurrent has established a leadership position in the Hydro Power sector.
Concurrent diversified its construction capabilities to build and serve the entire
segment viz. Dams, Barrages, Tunnels, Underground Power Stations, Surface
Power Stations along with Water conductor Systems like Surge Shafts, Pressure
Shafts and Penstocks are all now part of the Concurrent repertoire.
Concurrent has unrivalled expertise in large power production, where precision
of the work is a vital factor along with the quality of concrete used. With its
thorough knowledge and commitment to quality Concurrent undertakes such
projects on Engineering Procurement and Construction (EPC) basis as well.
Windmill
The Wind energy industry is currently characterized by growing demand, limited
by a restricted supply. With the windmills steadily increasing their stake in the
energy sector, coupled with hike in electricity tariffs and escalating energy
consumption, the market of customized small-windmill makers for households
9
has approximate 30 per cent annual growth, and is likely to throw a huge
market across the country.
Concurrent explores new grounds and taps into this developing segment.
Concurrent’s turnkey services range from complex front-end engineering design,
construction, installation and commissioning to long-term operations and
maintenance as well as the length breadth and depth of customer
requirements across the wind energy value chain. Prior to chat Concurrent
performs Viability Study on location, geographical condition and feasibility of
the project. The key difference lies in having both strong front-end engineering
and the benefit of local experience, interface management and construction
know how.
Construction Concurrent undertakes turnkey projects of Design and Construction of
commercial complexes, Centres like Shopping Malls and Retail outlets and large
residential & commercial complexes. Its capability encompasses design and
construction. Concurrent takes pride in its structural framework including finishing
and interior works and electro-mechanical services. Concurrent offers
Engineering, Procurement and Construction (EPC) Services include terminal
buildings, visitor’s lounges, etc. Concurrent specializes in building all types of
bridges in various span ranges, using innovative and sophisticated construction
techniques.
Which include: • Incremental Launching
• Segment construction • Cables stayed
• Pre-cast, pre-stressed
• Steel, concrete composite construction
Engineering: The Engineering Procuring and Construction market in India has undergone
significant changes and it has affected both government agencies and private
investment projects. Concurrent will continue to grow its successful construction
operations profitably whilst expanding its EPC capabilities and acquitting/
executing in an increasing number. These projects will come from the key
sectors currently addressed by Concurrent including Hydro, Water, Nuclear and
Thermal as well as Transport and Integrated Infrastructure projects. These EPC
10
skills and capabilities will also be utilized to support Concurrent’s own investment
projects on Build, Operate & Transfer (BOT) basis.
A Key feature of large and complex EPC projects is the requirement to integrate
the right partners to tackle the engineering, equipment and material supply and
specialized construction subcontractors to meet the project objective.
Commercially this may feature joint ventures or consortia but the key is for the
Concurrent project management team to integrate with the partners to tackle
the challenges of shorter schedules and tighter budgets along with the key
requisites of safety, quality and sound environmental practice as well as
increased interface management.
Peer Group Comparison Name of the company
CMP(Rs.) (As on January 19th,2010)
Market Cap.
(Rs. Mn.)
EPS (Rs.)
P/E (x)
P/BV (x)
Dividend (%)
Concurrent
infrastructure Ltd 8.90 119.26 0.01 - 0.86 0.00
GMR Infrastructures Ltd 67.65 247913.2 0.13 520.00 4.34 0.00
Unitech Ltd 87.30 208900.7 1.22 71.88 6.93 5.00
Era Infra Engineering Ltd 210.70 37655.9 16.70 12.62 4.30 20.00
Key Concerns
� Heightened competition
� Increasing cost of the product
11
Financials Results Update 12 months ended Profit and Loss A/C (Standalone):
Value(Rs. in million) FY08 FY09 FY10E FY11E
Description 12m 12m 12m 12m
Net Sales 518.03 460.75 221.16 265.39
Other Income 8.00 7.35 3.68 4.04
Total Income 526.03 468.10 224.84 269.43
Expenditure -521.19 -464.62 -218.95 -262.74
Operating Profit 4.84 3.48 5.89 6.70
Interest -4.63 -3.31 0.00 0.00
Gross Profit 0.21 0.17 5.89 6.70
Depreciation -0.05 -0.04 -0.04 -0.05
Profit before Tax 0.17 0.13 5.84 6.65
Tax 0.00 0.00 -1.75 -1.99
Net Profit 0.17 0.13 4.09 4.65
Equity Capital 134.00 134.00 134.00 134.00
Reserves 11.80 11.80 15.89 20.54
Face Value (Rs) 10.00 10.00 10.00 10.00
Total No. of Shares 13.40 13.40 13.40 13.40
EPS (Rs) 0.01 0.01 0.31 0.35
12
Quarterly ended Profit and Loss A/C (Standalone):
Value(Rs. in million) 31-Mar-09 30-Jun-09 30-Sep-09 31-Dec-09E
Description 3m 3m 3m 3m
Net Sales 95.73 35.26 45.26 49.79
Other Income 0.00 0.25 0.35 0.42
Total Income 95.73 35.51 45.61 50.21
Expenditure -96.85 -35.19 -45.09 -49.29
Operating Profit -1.12 0.32 0.52 0.92
Interest 0.00 0.00 0.00 0.00
Gross Profit -1.12 0.32 0.52 0.92
Depreciation -0.02 -0.01 -0.01 -0.01
Profit before Tax -1.14 0.31 0.51 0.91
Tax 0.00 -0.10 -0.16 -0.27
Net Profit -1.14 0.21 0.35 0.64
Equity Capital 134.00 134.00 134.00 134.00
Face Value (Rs) 10.00 10.00 10.00 10.00
Total No. of Shares 13.40 13.40 13.40 13.40
EPS (Rs) -0.09 0.02 0.03 0.05
15
Outlook and Conclusion
• At the market price of Rs.8.90, the stock is trading at 29.16 x and 25.62 x for
FY10E and FY11E respectively.
• On the basis of EV/EBDITA, the stock trades at 23.30 x for FY10E and 23.15 x
for FY11E.
• Price to book value of the company is expected to be at 0.80 x for FY10E
and 0.77 x for FY11E respectively.
• EPS of the company is expected to be at Rs.0.31 and Rs.0.34 for the
earnings of FY10E and FY11E respectively.
• The company’s Operating profit and Net profit is expected to grow at a
CAGR of 11% and 200% over FY08 to FY11E.
• The company has launched its official website www.concurrentindia.com
in an effort to bring important news and details of the projects
Concurrent India Ltd BSE SENSEX
16
for providing the user with better information about overall activities of the
company.
• The company has bagged EPC contract from Pennant Penguin Holdings
in Kandy, Srilanka. The contract involves setting up of 30 MW power
project which is expected to be executed in over a span of 24 months.
• The company is looking to float a preferential issue at Rs 15 per share for
the purpose of acquisition of land for logistics business. The company has
identified land of 25 acres near Hyderabad City for the purpose of setting
up logistics supply chain.
• The company has bagged a sub-contract worth Rs 22crore from Sreenidhi
Constructions, Belgaum, Karnataka.
• The company has signed agreement with Ellis Richardson Inc (ERI) on an
exclusive basis for Indian markets and on a non-exclusive basis for the
overseas markets.
• The company has submitted its bid for acquisition of 4.15 MW power
project in the state of Andhra Pradesh. The project is a Mini Hydro Electric
Power Plant. The cost of the project is Rs. 23crore.
• The company is looking to acquire 320 perches land in Sri
Jayewardenepura Kotte, Colombo, Sri Lanka.
• The company launched a pilot project for power generation in the
Negombo beach region of Sri Lanka, has announced that the pilot was
successful.
• We recommend ‘BUY’ with a target price of Rs.40.00 for long term.
Industry overview The Indian real estate sector plays a significant role in the country’s economy.
The real estate sector is second only to agriculture in terms of employment
generation and contributes heavily towards the gross domestic product (GDP).
Almost five per cent of the country's GDP is contributed to by the housing sector.
17
In the next five years, this contribution to the GDP is expected to rise to 6 per
cent.
According to Jones Lang LaSalle, faster economic growth in Brazil, Russia, India
and China (BRIC) could result in the property markets of those nations
recovering at a faster rate than the UK and US real estate markets. It has also
been suggested that India's property sector could begin to improve from late
2009 and may attract up to US$ 12.11 billion in real estate investment over a five-
year period.
The information technology (IT) and IT-enabled services (ITES) sector alone is
estimated to require 150 million sq ft of office space across urban India by 2010.
Organized retail is also responsible for the growth in commercial office space
requirement. The organized retail industry is likely to require an additional 220
million sq ft by 2010. Moreover, growth is not restricted to a few towns and cities
but is pan-India, covering nearly all Tier-I and Tier-II cities.
Almost 80 per cent of real estate developed in India is residential space, the rest
comprises of offices, shopping malls, hotels and hospitals. According to the
Tenth Five Year Plan, there is a shortage of 22.4 million dwelling units. Thus, over
the next 10 to 15 years, 80 to 90 million housing dwelling units will have to be
constructed with a majority of them catering to middle- and lower-income
groups. Moreover, India leads the pack of top real estate investment markets in
Asia for 2010, according to a study by PricewaterhouseCoopers (PwC) and
Urban Land Institute, a global non-profit education and research institute.
The report, which provides an outlook on Asia-Pacific real estate investment and
development trends, points out that India, particularly Mumbai and Delhi, are
good destinations. Residential properties are viewed as more promising than
other sectors and Mumbai, Delhi and Bangalore top the pack in the hotel ‘buy'
prospects as well. The study is based on the opinions of over 270 international
real estate professionals, including investors, developers, property company
representatives, lenders, brokers and consultants. Apart from the huge demand,
India also scores on the construction front. A McKinsey report reveals that the
average profit from construction in India is 18 per cent, which is double the
profitability for a construction project undertaken in the US.
The real estate sector is also likely to get a boost from Real Estate Mutual Funds
(REMFs) and Real Estate Investment Trusts (REITs). In fact, according to a CRISIL
paper, the REITs would have the potential to hold at least 5 per cent share of the
total global real estate market by 2010, the size of which would reach US$ 1,400
18
billion in the next three years. The paper titled, ‘Indian REITs; Are We Prepared',
says that by 2010, REITs alone would hold a market size of US$ 70 billion of the
total real estate market as its concept is gaining ground in countries like India
and other developing nations.
According to the Federation of Indian Chambers of Commerce and Industry
(FICCI), the Indian real estate sector is likely to experience consolidation wherein
bigger players may opt for outright buy of smaller firms or forge joint ventures or
business alliances with them.
Foreign direct investment (FDI) into India in the real estate sector for the fiscal
year 2008-09 has been US$ 12.62 billion approximately, according to the latest
data given by the Department of Policy and Promotion (DIPP). Moreover,
buoyed by positive market sentiment and demand revival in housing, four real
estate companies—Emaar MGF Land, Lodha Developers, Sahara Prime City and
Ambience Ltd—are looking to mop-up over US$ 2.35 billion through public
offerings.
New Projects
• Zuri Group Global is planning to invest about US$ 247.5 million towards
setting up five-star business hotels and luxury residential properties over the
next three years.
• Accor Hospitality, the largest hotel chain in Europe, with 4,000 hotels in 90
countries will invest US$ 130 million to come up with 50 hotels in India by
2012.
• An investment of US$ 627.3 million will be made by industries in the
Aeropsace and Precision Engineering Special Economic Zone at Adibatla,
Andhra Pradesh.
• Shriram Properties, part of Chennai-headquartered diversified Shriram
Group, is planning to invest around US$ 1.02 billion in various residential
and commercial projects.
• Unitech will invest US$ 853.42 million in construction of up to 30 million sq ft
of residential and commercial spaces to be launched by next year.
Government Initiatives
19
The government has introduced many progressive reform measures to unlock
the potential of the sector and also meet increasing demand levels. The stimulus
package announced by the government, coupled with the Reserve Bank of
India's (RBI) move allowing banks to provide special treatment to the real estate
sector, is likely to impact the Indian real estate sector in a positive way. RBI has
decided to extend exceptional concessional treatment to the commercial real
estate exposure which are restructured, up to June 30, 2009.
• 100 per cent FDI allowed in realty projects through the automatic route.
• In case of integrated townships, the minimum area to be developed has
been brought down to 25 acres from 100 acres.
• Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed by
increasingly larger number of states.
• Minimum capital investment for wholly-owned subsidiaries and joint
ventures stands at US$ 10 million and US$ 5 million, respectively.
• Full repatriation of original investment after three years.
• 51 per cent FDI allowed in single-brand retail outlets and 100 per cent in
cash-and-carry through the automatic route.
The 2009-10 budget has also given sops to the realty sector. Developers of
affordable housing projects (units of 1,000-1,500 sq ft) have been granted a tax
holiday on profits from projects initiated in the financial year 2007-08. Such
projects would have to be completed before March 1, 2012.
At the same time, the finance minister allocated US$ 207 million to grant a 1 per
cent interest subsidy on home loans up to US$ 20,691, provided the cost of the
home is not more than US$ 41,382. This subsidy is expected to give a further
boost to the housing sector. ___________________________________________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but we do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
20
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
Firstcall India Equity Research: Email – [email protected]
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