MEP Infrastructure Developers LtdQ4 FY18
MEP Infrastructure Developers Ltd Q4 FY18 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹0.75Market Cap: ₹19 CrSector: Transport Infrastructure
Management growth scorecard
Revenue
Category 2
Margin
Category 3
Fundraise
Yes
Order
Yes
Capex
Yes
3 of 5 growth signals are positive.
Full analysisRevenue guidance
Category 2- →The company expects significant growth in infrastructure, particularly in the road sector, supported by government budget provisions.
- →FY 2018 government budget allocates INR 64,000 crore for infrastructure, 24% higher than FY 2017.
- →NHAI plans to award 10%-15% more projects (~5,000-5,200 km) in FY 2018 compared to FY 2016.
- →Around 40% of awarded projects are under the hybrid annuity model, where MEP holds a leadership position.
- →There is a large pipeline of hybrid annuity projects, with six projects totaling ~INR 3,000+ crore under execution, with expected EBITDA margins of 12%-14%.
- →The TOT (Toll Operate Transfer) model represents a large upcoming opportunity with clusters of 75 toll projects (~4,500 km) expected to raise INR 80,000-1,00,000 crore in 1-2 years.
- →MEP is actively bidding for 6-8 out of 24 available HAM projects, maintaining consistent margin expectations.
- →Revenue from existing and new hybrid annuity projects expected to grow substantially over the next 2-3 years.
Margin guidance
Category 3- →MEP Infrastructure expects strong growth driven by a significant pipeline of projects in the road sector, including 24 HAM (Hybrid Annuity Model) projects available for bidding and plans to evaluate 6-8 projects soon.
- →The company anticipates consistent EBITDA margins of 12-14% for HAM projects.
- →Government infrastructure spend is increasing, with INR 64,000 crore budgeted for FY2018, 24% higher than FY2017, and NHAI planning to award 5,000-5,200 km of new roads.
- →TOT (Toll Operate Transfer) projects valued at INR 80,000 - 1,00,000 crore over 75 clusters present a large opportunity, with bidding starting soon and expected long concession periods.
- →Financial closure achieved for four HAM projects; remaining two expected soon, enabling project execution and revenue recognition to ramp up.
- →Management is optimistic about infra growth, with improved traffic post-demonetisation supporting toll revenues recovery.
- →Equity infusion and rights/preferential issues planned to support project funding without significantly increasing debt.
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Fundraise plans
Yes- →The company has already infused equity for the current hybrid annuity projects through rights/preferential issues approved by the board, targeting funding for the next 6 to 12 months.
- →Discussions were underway to raise preferential capital by end of March 2017 to support equity needs for hybrid annuity projects.
- →For TOT projects expected to come up starting April, actual equity infusion and fundraising are likely 9 to 12 months post bidding due to large ticket sizes.
- →Debt levels remained largely stable as of Q3 FY17 since financial closure was completed but debt drawdown for hybrid annuity projects had not yet happened.
- →Working capital was managed via monetization of receivables and promoter infusion, avoiding increased borrowing so far.
- →Incremental equity/fundraising may be required for future projects, with no specific immediate plans mentioned for new debt or equity beyond preferential issues for current projects.
Order book
Yes- →Current order book stands at approximately INR 3,837 crore, representing a market share of 12% in the hybrid annuity space.
- →The company has bagged six hybrid annuity projects; financial closure achieved for four projects, and documentation for the remaining two expected to be completed soon.
- →EPC work for six hybrid annuity projects amounts to INR 3,000+ crore to be booked over the next 2.5 years.
- →There are 24 HAM projects available publicly; MEP is evaluating 6-8 projects and has already bid for a few.
- →The government plans to award around 5,000-5,200 km of road projects in FY2018, up 10-15% from prior years, providing a large pipeline.
- →TOT model projects: 75 tolling projects (~4,500 km) expected to raise around INR 80,000-1,00,000 crore over next 1-2 years; first tranche bidding to start by April.
- →MEP expects consistent margin estimates while bidding for upcoming projects.
Capex plans
Yes- →MEP Infrastructure Developers Limited has infused equity of approximately INR 170-200 Crores combined with JV partners across four of six hybrid annuity projects, apportioned on a pro-rata basis (60%-74% depending on shareholding).
- →Additional equity infusion is planned over a 2.5-year period from the appointed date to COD for these projects.
- →The company's board has approved a rights/preferential issue to raise funds needed for the next 6 to 12 months equity requirements for hybrid annuity projects.
- →The company is evaluating and bidding for 24 HAM projects in the public domain, expecting to bid for at least 6-8 projects, with some bidding already done.
- →For TOT projects, equity infusion is expected post 9 to 12 months after bidding.
- →Capital requirements for TOT projects are predicted to be significantly larger than current projects.
- →Equity infusion and possible capital raising from the market will be balanced alongside monetizing receivables and promoter contributions.
- →No immediate increase in debt observed as financial closures are recent and funded via equity or other sources.
How does MEP Infrastructure Developers Ltd rank vs peers in Transport Infrastructure?
Pro feature1MEP Infrastructure Developers Ltd
Rev 2Mar 3
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