IVRCL - Update - Angel Broking

Outlook and Valuation
The future holds great opportunities for the infrastructure players as can be concluded from the
allocations to the infrastructure sector in the Union Budget 2007-2008. Allocation for Bharat
Nirman has increased 31.6% from Rs18,696cr to Rs24,603cr, which will bring in huge orders for
the construction players across the board. Allocation for the Rajiv Gandhi Drinking Water Mission has also increased from Rs4,680cr to Rs5,850cr while total allocation for the Sanitation Campaign has increased from Rs720cr to Rs954cr. This is expected to greatly benefit leading water related players like IVRCL. Allocation for National Highways Development Program (NHDP) was enhanced in Budget 2007-2008 to US $2.8bn, up 26.5% yoy. The state highways and roads are also throwing up investment opportunities with Maharashtra and Andhra Pradesh taking the lead. Nevertheless, it may be noted current levels of investments in infrastructure is insufficient to sustain the GDP growth of 8%. Investments in infrastructure have been around 4.5% of GDP as against the estimated requirement of 7-8% as per the Approach Paper for the XIth Five Year Plan. According to government estimates, lack of adequate infrastructure has depressed the GDP growth by 1.5-2%. India requires investments of around US $475bn in Infrastructure by 2012, of which about US $125bn is expected to come from the private sector.

Our SOTP Target Price for IVRCL is Rs535. We have valued IVRCL's standalone business at
Rs382 assigning a PE of 14x FY2010E EPS of Rs27.3. IVRCL’s BOT projects, majority stake in
Hindustan Dorr Oliver (HDO) and IVR Prime Urban Development (IVR PUDL) contribute Rs28,
Rs15 and Rs110 to our Target Price, respectively. We are introducing FY2010 numbers based
on which, we upgrade the stock to a Buy from Neutral and revised Target Price of Rs535 (Rs477).