MEP Infrast.Q3 FY16Transport Infrastructure

MEP Infrast.

Q3 FY16 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

Capex

Yes

2 of 5 growth signals are positive.

Revenue guidance

Category 3

→The company expects construction revenue from six hybrid annuity projects to start soon, with Nagpur 1 and 2 projects' construction beginning in December.
→Estimated construction revenue for FY17 is around Rs. 1,300 to 1,400 crores, increasing to Rs. 1,500 to 1,600 crores in FY18.
→The total work for these six projects is approximately Rs. 3,500 to Rs. 3,800 crores, to be completed over 2 to 2.5 years.
→Addition of six hybrid annuity projects strengthens long-term revenue visibility with a current order book of about Rs. 3,837 crores.
→The company maintains an asset-light philosophy while targeting a significant market share (14.35%) in hybrid annuity projects.
→New awards under the hybrid annuity model by NHAI and Ministry of Road Transport indicate a growing market opportunity.

Category 3

→MEP Infrastructure has a strong order book with six hybrid annuity projects valued at approx. Rs. 3,837 crores, providing long-term revenue visibility.
→Financial closure achieved for first two hybrid annuity projects; remaining four expected to close by early 2017, enabling construction revenue recognition starting FY17.
→Construction revenue for six HAM projects anticipated around Rs. 1,300-1,400 crores in FY17 and Rs. 1,500-1,600 crores in FY18.
→Equity infusion planned (~Rs. 380-400 crores total) to support project execution over FY17-FY19.
→Despite demonetization impact, operational toll revenues remained stable; commercial traffic dip is recovering.
→New accounting standards (Ind-AS) require quarterly provisioning for maintenance obligations, impacting current profitability but reflecting robust long-term policies.
→The company aims to maintain asset-light growth with increasing revenues from toll and hybrid annuity projects, positioning for steady improvements in earnings and EPS over the medium term.

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Yes

→The company does not foresee needing a Qualified Institutional Placement (QIP) currently for the balance four HAM projects; funding is expected through lenders or bankers. (Page 9)
→A preferential or rights issue is being evaluated to raise the balance equity requirement for the HAM projects. (Page 9)
→The company has already infused Rs. 120-130 crores equity and plans to infuse an additional Rs. 100-120 crores from promoters and sponsor company over the next 6-12 months for HAM projects. (Page 5)
→Bankers have mandated approximately 50% of equity infusion upfront for the first two projects prior to disbursement and monetary disbursal is also prorated to equity contribution for some lenders. (Page 6)
→Total equity requirement for the six HAM projects from the company is around Rs. 380-400 crores. (Page 5)
→There is no mention of fresh debt raising other than ongoing sanction and disbursement from existing lenders. (Pages 9 & 15)

→MEP Infrastructure has added six hybrid annuity model (HAM) projects, boosting long-term revenue visibility while staying asset-light.
→The hybrid annuity order book stands at around Rs. 3,837 crores, representing about 14.35% market share.
→The six HAM projects include Nagpur Ring Road 1 & 2, Arawali-Kante-Wakad, Talaja-Mahuva, and Mahuva-Kagavadar in Gujarat.
→Financial closure has been achieved for Nagpur 1 and 2; closure for Arawali-Kante-Wakad expected by late December 2016 or early January 2017.
→Total work across these six projects is approximately Rs. 3,500 crores EPC cost.
→Construction revenue from these projects expected to start FY17 end, with projected revenues of Rs. 1,300-1,400 crores (first year) and Rs. 1,500-1,600 crores (second year).
→Additional equity infusion planned via preferential/rights issue to meet equity requirements of Rs. 380-400 crores.
→No immediate requirement for QIP for pending four projects; internal approvals available.

Yes

→MEP Infrastructure is undertaking six HAM (Hybrid Annuity Model) projects with a total EPC (Engineering, Procurement, and Construction) value of around Rs. 3,500 to 3,800 crores, expected to be completed over 2 to 2.5 years.
→The equity requirement for these six projects is approximately Rs. 380 to 400 crores, with Rs. 120-130 crores already infused; additional equity infusion of Rs. 100-120 crores is planned over the next 6 to 12 months.
→Financial closure for Nagpur 1 and 2 projects has been completed; financial closure for Arawali-Kante-Wakad and Talaja-Mahuva to be completed by late 2016 or early 2017.
→Construction revenue from HAM projects is expected to start with Nagpur projects from December 2016; annualized construction revenue could be Rs. 1,300-1,400 crores in FY17 and Rs. 1,500-1,600 crores in FY18.
→MEP is evaluating strategic partnerships for TOT (Toll Operate Transfer) projects in response to government monetization plans and potential bundling of around 75 projects.

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