Currently, roads are operated and developed in seven states of India including Maharashtra, Gujarat, Rajasthan, Karnataka, Haryana, Madhya Pradesh and Telangana and border check posts in Maharashtra. The operational projects cover around 1,531 lane km and the projects under development cover around 1,061 lane km. Of the 22 Maharashtra check posts orders, about 13 were operational and nine in the developmental stage end May 2015.

The National Highway Authority of India (NHAI) has pre-qualified SEL to bid either directly or through joint venture projects up to Rs 2650 crore per annum up to December 2015.

The total toll collection from operational and partial operational projects was Rs 215 crore in the four months ended July 2015. The average daily toll collection stood at around Rs 1.85 crore per day in the June 2015 quarter.

Apart from these 10 projects, the intention is to buy two more Bot road projects from SEL at par value. This is in line with the overall growth strategy to consolidate all Bot road projects to be developed by SIPL. Acquisition of about 60% of the outstanding equity in one of the Bot projects will be purchased from HCC. The cost is about Rs 140 crore. A line of credit was arranged in January 2015. Subsequent to the acquisitions of these two projects, the road Bot portfolio will comprise 12 projects.

total debt was Rs 6340 crore end March 2015. Around Rs 1725 crore was invested in subsidiaries till March 2015. Capital expenditure including investments made in subsidiaries stood at Rs 1025 crore in the fiscal ended March 2015 (FY 2015).

The Offer and the Objects

The issue comprises fresh offer of Rs 425 crore. The issue size at the lower price band of Rs 100 per share works out to 4.25 crore shares and at the higher price band of Rs 103 per share 4.13 crore shares. In addition, there is an offer for sale of 64.70 lakh shares by the selling shareholders, Xander Investment Holding XVII and Nonvest Venture Partners VII-A-Mauritius. Each will be offloading 32.36 lakh shares. The size of the offer for sale at the lower price band of Rs 100 per share works out to Rs 64.72 crore and at the upper price band of Rs 103 per share Rs 66.66 crore.

The minimum bid lot is 145 equity shares and in multiples of 145 equity shares thereafter. The issue, to be made through a book-building process, will open on 31 August and close on 02 September.

About Rs 264.80 crore will be used for repayment and pre-payment of loans availed from ICICI bank and from SEL, Rs 82 crore towards equity investment and for advancing of sub-ordinate debt to subsidiary Shreenathji – Udaipur Tollway Pvt Ltd for part-financing of the project, and rest for general corporate purpose.

The average project residual life is around 18.7 years, providing long revenue and cash flow visibility

NHAI is expected to award about 15,300 km of projects for bidding via Bot over FY 2015-FY 2019.

There is reduction in competition in NHAI's Bot projects. Most of the irrational bidders are gone. Thus, returns for the new project bids are expected to improve.

Financial closure has been achieved for all the projects and the balance equity commitment required is of Rs 69.10 crore for own project.

A majority of the projects in the portfolio are operational and covers urban and rural vehicular traffic. It includes a mixture of national and state highways.

There is no-compete agreement with SEL for Bot road projects. The entire engineering, procurement and construction related work including design will be undertaken by SEL, while the ownership of roads will be with SEL. Such an arrangement, with better transparency, will result in better execution and efficiency of costs of the Bot projects. Four of the operational projects have been completed before schedule.

There was debt of around Rs 6340 crore end March 2015. It will go to Rs 8200 crore on completion of all the 12 projects. Interest payment was Rs 525.92 crore end March 2015. Although, some of the debt was refinanced at lower rates, high interest payments will continue to hurt the bottom line in the near term.

In the event of slow economy, there is not much growth in commercial traffic. Generally, 85% of any toll operator's revenue is determined by commercial traffic. Any slide in toll revenue collections will hurt the projected cash flows.

Funds will be inevitably raised either via securitization, debt syndication equity or any other mode for future Bot road projects.

External factors such as public stirs, change in state laws, political events, interest rates and inflation rates have a significant effect on the earnings.

About 32.8% of promoters' total shareholding of 24.29 crore shares have been pledged.

Valuation

Net sales grew 35% to Rs 500.30 crore and operating profit (OP) was lower by 340 basis points, restricting the OP growth to 28% to Rs 308.83 crore in FY 2015. Other income was up 29% to Rs 27.75 crore and profit before interest, depreciation and tax 28% to Rs 336.58 crore. After increasing provision of interest 48% to Rs 525.92 crore and depreciation 54% to Rs 140.61 crore, loss at the profit before tax level stood at Rs 329.95 crore. After providing for total tax of Rs 2 lakh and minority interest and share from associates at Rs 28.41 crore, loss at the profit after tax level stood at Rs 301.56 crore.

Post-issue equity share capital at the higher price band of Rs 103 stands at Rs 352.26 crore of face value of Rs 10 each. Due losses, there is no EPS. The book value (BV) pre-IPO on the existing equity share capital of Rs 310.96 crore stands at Rs 23.5. Post IPO, the BV on equity share capital of Rs 352.26 crore stands at Rs 32.8. At the higher price band of Rs 103, the issue is offered at 3.1 times BV. IL&FS Transportation, which is in similar business and had consolidated BV of Rs 217 end March 2015, is trading at 0.4 times consolidated BV.