Sunday, March 21, 2010

Stock Idea: Tantia Constructions Ltd.

Tantia Constructions Ltd. (Code: 532738) Rs.118.50
Established in Kolkata in 1964, Tantia Construction Ltd (TCL) has evolved over the years from a pure railway construction company to a full-fledged infrastructure company executing various diversified projects. Today, it is into construction of roads & highways, railways, tunnels, bridges & flyovers, urban infrastructure, sewerage & drainage, civil & housing construction etc. Lately, the company has also ventured into the lucrative marine infrastructure, power transmission & distribution segment and aviation infrastructure. It is among the few companies that has almost five decades of domain expertise in servicing the Indian Railways. In fact, TCL is among the five Indian companies capable of providing ‘foundation-to-finish’ for mega railway bridges spanning 2-km or more. Importantly, TCL has a very strong presence in the eastern and north-eastern regions, which gives it an edge as very few players are interested in bidding in these regions due to the difficult terrain. Its expertise can be ganged by the fact that it has executed 600 projects which include construction over 250 km of roads in the hilly areas of Mizoram, coastal areas of Kerala, plains of Punjab/Haryana and plateaus of Karnataka. For power projects, it has garnered the capability of in-house manufacturing and erecting transmission towers within a very short time. Notably, TCL has an impeccable track record of completing every single assignment since inception. Although its clientele is skewed towards PSUs, it has diversified customer base including NHAI, State Public Works Departments (PWDs), NTPC etc.
The contribution of the various business segments, domains and verticals are:
􀂄 Roads & Highways (50%): TCL ventured into advanced mechanised road construction in compliance with specifications set by the Ministry of Surface Transport in 1990. Since then, it has established its credentials in the field of construction, widening, conversion, maintenance, strengthening and beautification of roadways, road bridges, highways and flyovers. It is the only Indian company to have fabricated a 100 metre spans steel girders onsite, 4,000 mtrs above sea-level. With over 50% of total sales coming from this segment, it is the largest contributor of revenue.
􀂄 Urban infrastructure (25%): TCL established its credentials in this segment through its Kolkata improvement projects. Its expertise in soil re-engineering, mechanised earthwork, hauling for large-scale land development, sewerage & drainage projects, electrification and lighting systems and construction of college & hospital buildings. Today, the company is well acknowledged by large municipal corporations for its competence in the timely commissioning and completion of urban projects that minimise public inconvenience. TCL is now eyeing urban infrastructure projects in Punjab, Orissa, Delhi and Haryana from their PWDs.
􀂄 Railway infrastructure (20%): TCL is one of the oldest railway contractors in India with the experience of having completed assignments across diverse terrains for the Eastern Railway, North Eastern Railway, South Eastern Railway and North East Frontier Railway. It provides end-to-end solutions right from survey, designing of track embankment, earthwork, track laying, bridges, tunnels, electrification and signalling, maintenance of rail road/infrastructure, constructing railway stations and terminals, railway bridges etc. This division enjoys a pre-qualification for projects up to Rs.450 cr. when
engaged in overseas joint ventures. Some of its joint venture partners comprise reputed international names like Road Builder, Malaysia and TSO, France.
􀂄 Aviation/Marine Infrastructure (4%): TCL diversified into marine infrastructure in 2003 and now possesses proven capabilities in building tunnels, jetties and steel girders along rivers. Subsequently, it ventured into aviation infrastructure in 2005 through the Dibrugarh Airport project.
􀂄 Power Transmission projects (1%): TCL entered the power T&D solutions segment in 2005 and is now executing projects involving beam foundation, lattice structure erection, conductor stringing and cable-laying systems. To enhance its presence, TCL is planning to set up a design department to include plant design engineering.
In recent years, TCL has executed various prestigious and large scale projects in West Bengal, Assam, Bihar, Uttar Pradesh, Tamil Nadu, Kerala and Mizoram, and in neighboring countries like Bangladesh, Nepal and Bhutan. Since over 90% of its revenue comes from government projects, it caters to several government bodies including Indian Railways, Kolkata Metro Railway, NHAI, State PWD, Central PWD, State Electricity Boards, HUDCO, KMC, Airport Authority of India apart from NTPC, Ircon International, SAIL, RITES, IOC etc. It enjoys excellent business relations with them and has good direct contacts within government resulting in repeat orders of similar nature, extension of projects of a higher value and listing among preferred partner. Presently, TCL has a diversified and huge order in hand position of over Rs.1500 cr. to be executed in the next 24-36 months. It bagged over Rs.450 cr. worth of orders in the last twelve months, which gives strong revenue visibility in coming years.
Going forward, TCL is planning to bid for bigger projects in the power transmission segment as it has executed a few power projects and is now qualified to bid for the same. In the near future, it also intends to foray into BOT & BOOT projects to boost margins. It usually takes up complex projects, which are insulated from competition. It is also looking to bag airport projects coming up in non-metro cities. To cash in on the boom in civil construction, it is even contemplating to enter into real estate development. As a long-term strategy, TCL intends to enter in logistics sector by constructing and owning warehouses at strategic location across India. Water treatment, solid waste management and sewage treatment are also being considered to widen its projects profile.
In the recent 2010-11 budget, the government has provided over Rs.1,70,000 cr., which accounts for over 46% of the total plan allocations, for infrastructure development in the country. For road transport, the allocation was raised by over 13% from Rs.17,500 cr. to almost Rs.20,000 cr. It has provided nearly Rs.17,000 cr. to Railways, which is 1000 cr. more than last year. Further, it has doubled the plan allocation for power sector from Rs.2200 cr. in 2009-10 to Rs.5100 cr. in 2010-11. On the other hand, development of rural infrastructure remains a high priority area and so it has decided to allot Rs.66,000 cr. for Rural Development alone. All these developments augur well for infra companies like TCL. With a fat order book of Rs.1500 cr., the company can easily grow at 30-50% CAGR over the next couple of years. In order to fund its projects & working capital, TCL had raised around Rs.30 cr. through the FCCB route in FY08, to be converted into equity shares at Rs.140 each. For FY10, it is expected to clock a turnover of Rs.475 cr. with PAT of Rs.18.50 cr. This translates into EPS of Rs.13.50 on its current equity of Rs.15.60 cr. and EPS of Rs.11 on its fully diluted equity of Rs.18.50 cr. Although its valuations does not look cheap at an EV of Rs.450 cr., still long-term investors can buy at corrections as this infra company is expected to record healthy double digit growth in coming years.
Source: Internet (Moneytimes)

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