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Enhancing investment decisions
SupremeInfrastructure India
Ltd
Detailed Report
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Explanation of CRISIL Fundamental and Valuation (CFV) matrix
The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis
of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a
five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-
point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).
CRISILFundamental Grade Assessment
CRISILValuation Grade Assessment
5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)
4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)
3/5 Good fundamentals 3/5 Align (+-10% from CMP)
2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)
1/5 Poor fundamentals 1/5 Strong downside (
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Supreme Infrastructure India LtdStrong order book; gearing is a key monitorable
Fundamental Grade 3/5 (Good fundamentals)
Valuation Grade 5/5 (CMP has strong upside)
Industry Construction & Engineering
1
December 12, 2013
Fair Value 300
CMP 207
For detailed initiating coverage report please visit: www.ier.co.in
CRISIL Independent Equity Research reports are also available on Bloomberg (CRI ) and Thomson Reuters.
With a strong order book of ~53 bn (provides revenue visibility for the next two-three years),
focus on regional and segmental (increasing share of water and power) diversification, andlow execution risk in the EPC of in-house BOT projects, Supreme Infrastructure India Ltd
(Supreme Infra) is well poised for healthy growth in the next two-three years. The company
also has a good portfolio of BOT assets which, once operational, are expected to generate
steady cash flows and post average equity IRR of ~15%. We retain our fundamental grade of
3/5. However, the stretched working capital, high gearing and the pending equity of 1.6 bn in
BOT projects are monitorables any deterioration could have an impact on our fundamental
grade. Further, high dependence on the road and building segments is a risk as slowdown in
investments in these segments could hamper growth.
Current order book of 53 bn provides revenue visibility for the next 2.7 years
The current order book provides revenue visibility for the next 30 months. The execution risk
of the order book is low as orders are progressing well and orders from in-house BOT
projects (~23% of the order book) have secured the necessary funding, clearances and land.
Supreme Infra is also taking steps to move into newer segments such as water and power;we expect these segments to contribute more to the order book.
Attractive portfolio of BOT assets; pending equity of 1.6 bn is a monitorable
Supreme Infra has a good portfolio of BOT assets - we expect these projects to generate
strong steady cash flows once operational and post average equity returns of 15%; moreover
there is low risk in timely completion of under-construction BOT projects as land acquisition is
nearly complete, financial closure (except for one) has been achieved and all approvals have
been attained. However, pending equity of 1.6 bn is a key monitorable.
Total funding gap of 2.3bn is manageable; gearing expected to remain high
There is a total funding gap of 2.3bn over the next two years (including pending equity of
1.6 bn in the BOT projects, 2.0 bn for working capital, 1.3 bn for capex, supported by
internal accruals of 2.7 bn). We see debt on the parent companys balance sheet,
securitisation of operational BOT projects and promoter equity as the likely routes for funding.
We expect the gearing to remain high but under 2x; it remains a key monitorable.Estimate two-year revenue CAGR of 8%; margin to decline by 50 bps in FY15
We estimate revenues to increase at a two-year CAGR of 8% to 23 bn in FY15, primarily
driven by execution of the current order book. EBITDA margin is expected to decline from
15.5% in FY13 to 14.9% in FY15 due to increasing presence in East India with lesser
backward infrastructure support. PAT is expected to decline to 1.0 bn in FY15 from 1.1 bn
in FY13.
Valuations: Current market price has strong upside
CRISIL Research has used the sum-of-the-parts (SoTP) method to value Supreme Infra and
arrived at a fair value of 300 per share. The contracting business has been valued by the
P/E ratio, while BOT projects have been valued by the P/B value method. At the current
market price, our valuation grade is 5/5.
KEY FORECAST (STANDALONE)(mn) FY11 FY12 FY13 FY14E FY15E
Operating income 9,185 15,059 19,870 20,371 23,057
EBITDA 1,565 2,435 3,085 3,059 3,440
Adj net income 776 918 1,121 861 986
Adj EPS- 46.4 54.8 66.9 51.4 58.9
EPS growth (%) 61.6 18.2 22.1 (23.2) 14.5
Dividend yield (%) 0.6 0.6 1.0 1.0 1.0
RoCE (%) 22.1 22.9 21.0 17.1 17.0
RoE (%) 35.5 29.2 28.1 17.5 17.0
PE (x) 4.5 3.8 3.1 4.0 3.5
P/BV (x) 1.2 1.0 0.8 0.7 0.6
EV/EBITDA (x) 4.9 4.5 4.3 4.7 4.5
NM: Not meaningful; CMP: Current market price
Source: Company, CRISIL Research estimates
CFV MATRIX
KEY STOCK STATISTICSNIFTY/SENSEX 6237/20926
NSE/BSE ticker SUPREMEINF
Face value (per share) 10
Shares outstanding (mn) 16.7
Market cap (mn)/(US$ mn) 3,472/56
Enterprise value (mn) /(US$ mn) 13,259/215
52-week range ()/(H/L) 265/146
Beta 1.5
Free float (%) 42.2%
Avg daily volumes (30-days) 22,065Avg daily value (30-days) (mn) 4.4
SHAREHOLDING PATTERN
PERFORMANCE VIS--VIS MARKET
Returns
1-m 3-m 6-m 12-m
Supreme Infra -3% 28% 0% -16%
CNX 500 4% 8% 7% 2%
ANALYTICAL CONTACTMohit Modi (Director) [email protected]
Ravi Dodhia [email protected]
Bhaskar Bukrediwala [email protected]
Client servicing desk
+91 22 3342 3561 [email protected]
1 2 3 4 5
1
2
3
4
5
Valuation Grade
FundamentalGrade
PoorFundamentals
ExcellentFundamentals
Strong
Dow
nside
Str
ong
Upside
56.6% 57.4% 57.8% 57.9%
12.3% 12.8% 12.8% 12.9%6.8% 6.5% 6.5% 6.4%
24.3% 23.4% 23.0% 22.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec- 12 Mar- 13 J un -13 Sep-13
Promoter FII DII Others
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2
Table 1: Supreme Infra - Business environment
Product / Segment Engineering, procurement and construction (EPC) Build, operate and transfer(BOT)
Revenue contribution (FY13) 98% 2%Revenue contribution (FY15E) ~87% ~13%
Product / service offering The company started as a construction material supplier,
ventured into road EPC and then gradually diversified
into other segments such as building, water, power,
bridges among others. Currently Buildings and roads
comprise ~85% of the order book
Order book break-up (as of FY13): roads (42%),
buildings (46%), water (4%), power (1%) and others (7%)
Develop and manage road projects
Current portfolio: Nine BOT road projects and
one bridge project. The bridge project and three
road projects are operational while the remaining
six road projects are under development. Of the
projects under development, four are expected
to be operational by the first half of FY15
Geographic presence The company has projects in 13 states (primary being Maharashtra, Rajasthan, Haryana and Punjab). States
from North India (including Haryana, NCR, Punjab, UP) comprise 47% of the order book, West India (primarily
Maharashtra) 35% and East India (West Bengal, Assam, Bihar, Jharkhand) comprise the rest
The company has gradually reduced its dependence on Maharashtra. The share of order book fromMaharashtra now comprises
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Grading Rationale
EPC order book on strong footing; focusing on diversification
Strong order book provides revenue visibility for 2.7 years
Supreme Infras confirmed order book of 52.6 bn (2.7x revenues) provides good revenue
visibility for the next 30 months. Besides, the company is also L1 in orders worth 12.5 bn.
The order book was backed by strong order inflows of 41 bn in FY13, highest in the past
three years.
Figure 1: Healthy order book at 2.7x revenues Figure 2: Strong order inflow in FY13
Source: Company, CRISIL Research Source: Company, CRISIL Research
Roads and buildings dominate the order book
Roads and buildings continue to dominate the order book. Roads and building orders
comprised ~50% and ~30% of the new orders of 41bn, respectively, in FY13.
Figure 3: Order book concentrated in roads and buildings Figure 4: Order inflow driven by roads and building orders
Source: Company, CRISIL Research Source: Company, CRISIL Research
26.2 33.0 49.2 52.6
2.8
2.2
2.52.7
-
0.5
1.0
1.5
2.0
2.5
3.0
-
10.0
20.0
30.0
40.0
50.0
60.0
FY11 FY12 FY13 H1FY14
(x)(bn)
Order book OB/Sales (RHS)
21.4 22.9 40.7 14.0
15%7%
77%
-8%
-40%
-20%
0%
20%
40%
60%
80%
100%
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
FY11 FY12 FY13 H1FY14
(bn)
Order Inf low y-o-y growth (RHS)
Buildings46%
Bridges5%
Roads42%
Water4%
Railway2%
Power1%
Buildings29%
Bridges6%
Roads50%
Water8%
Railway4%
Power3%
Healthy order book at 2.7x
revenues was driven by strong
order inflows
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Low execution risk
The execution risk is low as we understand that most of the projects are progressing well. All
the in-house BOT projects, which form a significant ~23% of the order book, have received
environmental and forest clearances and land acquisition is nearly complete.
Figure 5: In-house BOT projects = one-fourth of total order book
Source: Company, CRISIL Research
Diversifying to water and power segments
In a bid to reduce the high dependence on roads and buildings (~47% and ~39% of the order
book respectively), Supreme Infra aims to increase its presence in the power and water
segments. Since FY09, the company has gradually increased its focus on these segments.
For example, the ticket size of the orders in the water projects has gradually increased from
~50mn to 1,600mn (the Bhayander water project). Similarly, in the power segment, the
company has improved its ticket size and is handling projects valued at 1.1bn (turnkey
contract for MSEDCL). As a result, the combined share of power and water segments has
improved from 0% in FY09 to ~5% in FY13 and 7% in Q2FY14. Though the managements
efforts towards diversification to the water and power segments are steps in the right direction,
we opine that it would be challenging to get large orders in these segments given the
competition in each of these segments. In both these segments there are established players
such as BHEL, Thermax, L&T, Tata Projects, KEC International, Kalpatru, Lanco Infratech,
BGR Energy HCC, IVRCL, Gammon, NCC, Soma, Patel Engg and Sadbhav. In the water
segment, the company carries out capital works such as construction of reservoirs, drainage
systems, etc. In the power segment, the company has primarily worked with MSEDCL, taking
turnkey contracts for transmission power lines.
In-house BOT23%
Total77%
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Figure 6: East India lacks enough backward infra support Figure 7: EBITDA margin expected to decline
Source: Company, CRISIL Research Source: Company, CRISIL Research
Expect steady growth in order book
We expect the order book to grow at a steady 20% CAGR over the next two years, lower than
37% CAGR growth in the past two years. The slow growth in order book is expected to be
driven by a decline in order inflows in the roads segment and slower growth in the building
segment.
Roads: Expect a decline in order inflow
Going forward, we expect a decline in the order inflow in roads. Until now, the order inflow in
roads was largely supported by EPC orders from Supreme Infras own road BOTs (with 61%
of new orders in roads from in-house BOTs). However, going forward the company does not
want to take BOT projects as they are capital intensive; instead it plans to focus on cash
contracts. In cash contracting orders, all orders, except one currently being executed by the
company, are of state highways. The company is primarily active in Maharashtra (~40% of the
roads orders) which has greater private sector participation and higher budget expenditure for
roads. CRISIL Research expects the investments in state highways to post an average CAGR
of 11% over FY13-15 based on the ongoing thrust on state road development by state
governments. Supreme Infra with its presence in state highways particularly Maharashtra, is
well poised to take orders for state highways.
1,565 2,435 3,085 3,059 3,440
17.0%
16.2%
15.5%
15.0% 14.9%
14%
14%
15%
15%
16%
16%
17%
17%
18%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY11 FY12 FY13 FY14E FY15E
(mn)
EBITDA EBITDA margin (RHS)
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Buildings: Growth expected to be subdued over the next two years
We expect growth in building orders to be subdued at ~2-3% CAGR over the next two years
because of the weak real estate demand in NCR and MMR (the key markets for Supreme
Infra comprising 80% of the building order book). Based on our discussion with market
participants, residential demand has been weak impacted by high interest rates, rising capital
values and weak economic growth. In the commercial segment, the demand has been hit by
low economic activity (slow growth across sectors in the past and weak global cues). Based
on CRISIL Researchs discussion with leading developers, we believe the pace of new
launches has slowed down and developers have pushed back their construction schedules.
This push-back is going to result in a slower order intake for construction players such as
Supreme Infra. CRISIL Research expects 50-60% of the planned supply in the NCR and MMR
markets to be delayed.
Figure 8: Steady growth in order book Figure 9: Order inflow to be muted
Source: Company, CRISIL Research Source: Company, CRISIL Research
Attractive BOT portfolio; equity funding of1.6 bn a challenge
Expect strong cash flows and equity returns from operational projects
Supreme Infra has four operational BOT projects; Manor-Wada-Bhiwandi is the latest to
commence operations in March 2013 and Q1FY14 was the first full quarter of its operations.
Based on the daily cash collection data from the three projects, we have analysed the equity
IRRs expected out of these projects. We believe that Nagar Kopargaon and Manor-Wada-
Bhiwandi could generate equity IRR of 15-17%.
26.2 33.0 49.2 61.8 75.1
26%
49%
26%22%
0%
10%
20%
30%
40%
50%
60%
0
10
20
30
40
50
60
70
80
FY11 FY12 FY13 FY14E FY15E
(bn)
Order book y-o-y growth (RHS)
21.4 22.9 40.7 33.0 36.4
15% 7%
77%
-19%
10%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0
5
10
15
20
25
30
35
40
45
FY11 FY12 FY13 FY14E FY15E
(bn)
Order Inf low y-o-y growth (RHS)
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Pending equity funding of 1.6 bn is a monitorable
The six under-construction BOT projects require equity funding of 1.6 bn in the next two
years. Out of this, ~1 bn was earlier expected to come from leading international investor 3i
(to be infused in the Panvel-Indapur project). However, 3i may not invest the balance owing to
change in its views on the prospects of the infrastructure segment in India. This has increased
the equity investment burden on Supreme Infra to 1.6 bn. The funding of the BOT projects is
a monitorable.
Table 5: Pending equity investment of 1.6bn
bn Project cost Debt Equity
Supreme
Infra's share
(including 3i)
Equity infused
(as of Q1FY14) Pending
Operational
Manor-Wada-Bhiwandi 4.3 3.2 1.1 1.1 1.1 -
Ahmednagar-Kopargaon 2.3 1.8 0.6 0.6 0.6 -
Patiala,Nabha,Malerkotla 0.9 0.7 0.3 0.3 0.3 -
Kasheli Bridge 3.0 2.0 1.0 0.1 0.1 -
Total operational 10.6 7.6 2.9 2.0 2.0 -
Under construction
Panvel-Indapur 12.1 9.0 3.1 2.3 1.3 1.0
Jaipur Ring Road 10.5 7.9 2.6 1.0 0.8 0.3
Ahmednagar-Karnala-
Tembhurni
5.4 4.1 1.4 1.4 1.4 -
Sangli-Shiroli 3.3 2.5 0.8 0.8 0.8 -
Haji-Malang 0.8 0.5 0.3 0.3 0.2 0.1
Kotkapura-Muktsar 1.1 0.8 0.3 0.3 - 0.3
Total (for under-construction) 33.1 24.7 8.4 6.1 4.5 1.6
Total 43.7 32.4 11.3 8.1 6.5 1.6
Source: Company, CRISIL Research
Total funding gap of ~2.3 bn incremental debt is the mostlikely option; gearing expected to remain high
Supreme Infra faces a funding gap of ~2.3 bn over the next two years. Total ~4.9 bn
funding is required in the next two years. Out of this, ~2.0 bn is for working capital, ~1.3 bn
for capex and ~1.6 bn for the remaining equity investment in BOT projects. We have also
assumed a dividend payout of
0.1bn (similar to what it paid in FY13). While ~
2.7 bn isexpected to be generated out of internal accruals and negligible contribution of ~ 0.1 bn as
free cash flow to equity from operational BOTs, the remaining ~2.3 bn needs to be funded by
either debt or equity. We believe debt on the parent companys balance sheet, securitisation
of certain operational BOTs and promoters equity are likely routes to manage the funding
gap. In our estimates, we have taken debt as the possible source of funding. The current
gearing of the company is high at 2.3x (as of FY13-end). However, with support from internal
accruals, we expect Supreme Infra to manage the gearing at ~2.0x. Gearing is a key
monitorable for our fundamental grade.
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Table 6: Total funding gap of 2.3bn Figure 10: Gearing to remain high
bn FY14E FY15EUses of funds
Working capital requirement (A) (0.8) (1.2)
Capex (B) (0.6) (0.6)
Equity investments in BOTs (C) (0.8) (0.8)
Dividends (D) (0.0) (0.0)
Sources of funds
Internal accruals standalone (E) 1.2 1.4
Funding gap (A+B+C+D-E) (1.0) (1.3)
Source: Company, CRISIL Research Source: Company, CRISIL Research
Securitisation and promoter equity are other likely funding options
Though we have not assumed any equity infusion in our estimates, we feel that the company
has certain operational projects which if securitised would help it to manage the funding gap.
As per our analysis, Manor-Wada-Bhiwandi and Patiala-Malerkotla projects are expected to
generate strong equity cash flows with IRRs of 17% and 15%, respectively. These projects are
present in key commercial corridors and have recorded strong cash collection.
Table 7: Assessment of operational BOT projects
Project
CRISILs
assessmentof success
Equity
invested(mn)
Expected
equityIRR
Basis of opinion
Manor-Wada-
Bhiwandi
(Maharashtra)
High 1,075 17%
Bhiwandi, known for its textile industry, has the largest number of power looms in the
country. Many of the pharmaceuticals, retail chains, logistics companies have taken
godowns on lease given the benefits in lease rentals. Bhiwandi is also the highest octroi
paying city in India. Given the presence of power looms and godowns and improvement in
infrastructure, traffic has been increasing
Wada has industries such as pipes, chemicals, etc. Due to availability of huge land parcels
at lower costs, many small-scale and medium-scale industries are setting up their units here
Bhiwandi to Manor via Wada provides easy access to NH-8 which connects Maharashtra
and Gujarat. Manor is a junction on NH-8, the Ahmedabad-Mumbai highway
Patiala,
Malerkotla
Road (Punjab)
Moderate 280 15%
Patiala is known as a tourist destination. It has one of the highest number of vehicles per
capita and is well connected by road through NH64 (Zirakpur-Patiala-Bhatinda) and NH1(Delhi-Patiala-Amritsar)
Malerkotla to Patiala provides access to NH 64, a 256-km long highway which connects
Chandigarh to Bhatinda
Nagar
Kopargaon
(Maharashtra)
Low 590 ~11%
Ahmednagar, the largest district of Maharashtra, is home to 19 sugar factories. It also
houses automobile, electronics, agricultural industries, etc. It has population of 0.3 mn
Kopargaon is part of the Ahmednagar district. It has three sugar factories, an industrial
estate with 52 small scale industries and a dairy. It has population of 0.25 mn
The famous Sai Baba temple in Shirdi is located between Ahmednagar and Kopargaon
Kasheli Bridge
(Maharashtra)High 100
NA
(small
project)
This bridge connects Thane to Bhiwandi-Wada Road. It is located on the Mumbai-Agra
highway (NH-3), which ensures smooth connectivity between Mumbai, Thane, Nashik and
the rest of India
Source: Company, CRISIL Research
1.5
2.2 2.2
2.01.9
3.2
2.3 2.3
1.8 1.8
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
FY11 FY12 FY13E FY14E FY15E
(x)
Net D/E Interest coverage
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Supreme Infrastructure India Ltd
11
Promoter equity likely, if required
We believe that the promoters of the company have the wherewithal to put in their own
money, if need be, to partially meet the funding gap. The promoters have a huge built-up
space of 1.2 mn sq ft, in Powai, Mumbai generating revenues of ~400 mn as lease rentals.
Based on our discussion with the promoters, we believe they are willing contribute equity to
the company, if required. Moreover, there have been instances of promoter equity infusion in
the past as well which gives us comfort.
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Financial Outlook
Revenue to grow at 2-year CAGR of 8% to 23.1 bn in FY15
We expect the companys standalone revenues to increase at a two-year CAGR of 8%, slower
than the past two years, to 23.1 bn in FY15. Execution of the current orders (77% of
revenues in FY14 and 60% in FY15) is expected to drive growth.
Figure 11: Revenue growth to decline Figure 12: Order intake and order intake growth
Source: Company, CRISIL Research Source: Company, CRISIL Research
EBITDA margin to contract by ~50 bps
In FY13, EBITDA margin declined to 15.5% due to lower margin from certain projects. Weexpect margin to decline to ~15.0% in FY15. As the company increases its share beyond
North and West India - areas that enjoy a good backward infrastructure support - we believe
resource mobilisations and overheads costs are likely to increase, leading to a contraction in
margins.
Figure 13: EBITDA margin to moderate
Source: Company, CRISIL Research
9.2 15.1 19.9
20.423.1
72%
64%
32%
3%
13%
0%
20%
40%
60%
80%
0
5
10
15
20
25
FY11 FY12 FY13 FY14E FY15E
(bn)
Revenue y-o-y growth (RHS)
21.4 22.9 40.7 33.0 36.4
15% 7%
77%
-19%
10%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0
5
10
15
20
25
30
35
40
45
FY11 FY12 FY13 FY14E FY15E
(bn)
Order Inflow y-o-y growth (RHS)
1,565 2,435 3,085 3,059 3,440
17.0%
16.2%
15.5%
15.0% 14.9%
14%
14%
15%
15%
16%
16%
17%
17%
18%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY11 FY12 FY13 FY14E FY15E
(mn)
EBITDA EBITDA margin (RHS)
EBITDA margin to contract by
50 bps to ~15% in FY15
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PAT expected to be flat
We expect PAT to decline to 1.0 bn in FY15 from 1.1 bn in FY13 due to lower revenue
growth and expected decline in margins, also depreciation and interest cost are expected to
remain high. EPS is expected to decline to 58.9 in FY15 from 66.9 in FY13.Figure 14: PAT and PAT margin Figure 15: EPS and EPS growth
Source: Company, CRISIL Research Source: Company, CRISIL Research
RoCE and RoE to decline but remain healthy
Due to the expected decline in margin and the investment in BOT projects (which will not fetch
returns in the initial years), RoCE is likely to decline from 21.0% in FY13 to 17% in FY15. RoE
is expected to decline from 28.1% in FY13 to 17% in FY15.
Figure 16: RoE and RoCE to remain healthy despite decline
Source: Company, CRISIL Research estimates
776 918 1,121 861 986
8.5%
6.1%
5.6%
4.2% 4.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0
200
400
600
800
1,000
1,200
FY11 FY12 FY13 FY14E FY15E
(mn)
PAT PAT margin (RHS)
46.4 54.8 66.9 51.4 58.9
61.6%
18.2% 22.1%
-23.2%
14.5%
-60%
-40%
-20%
0%
20%
40%
60%
80%
0
10
20
30
40
50
60
70
80
FY11 FY12 FY13 FY14E FY15E
()
EPS y-o-y growth (RHS)
22.1 22.921.0
17.1 17.0
35.5
29.228.1
17.5 17.0
0
5
10
15
20
25
30
35
40
FY11 FY12 FY13 FY14E FY15E
(%)
RoCE RoE
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Supreme Infrastructure India Ltd
15
Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of management
quality, apart from other key factors such as industry and business prospects, and financial
performance.
Capable second generation
Supreme Infra has an experienced management headed by promoter-director
Mr Bhawanishankar Sharma. Mr Sharma has an experience of more than three decades in
the construction sector. He is supported by his two sons - Mr Vikram Sharma and Mr Vikash
Sharma. Mr Vikram Sharma is the managing director of the company. He joined the company
in 1998 and has turned it around from a materials supplier to a leading EPC player in the
country. He holds a bachelors degree in civil engineering from Mumbai University and has
been on the board for the past 15 years. Mr Vikas Sharma is a whole time director with the
company. He holds a masters degree in management studies from Mumbai University. He
has been with the company for the past 15 years and heads the finance and accounts
division.
A closely-held company
Supreme Infra is a closely-held company with family members and friends of promoters
comprising the senior management. Some regional heads of Supreme Infra are college
friends of Mr Vikram Sharma. The day-to-day decision making is decentralized at the regional
level and are taken by the regional heads. However, major decisions are taken by the
promoters in co-ordination with the senior management.
Promoters are highly
experienced and have strong
domain expertise
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Supreme Infrastructure India Ltd
19
Figure 19: P/E premium / discount to CNX 500 Figure 20: P/E movement
Source: NSE, CRISIL Research Source: NSE, CRISIL Research
CRISIL IER reports released on Supreme Infrastructure India Ltd
Date Nature of report
Fundamental
grade Fair value
Valuation
grade
CMP
(on the date of report)
04-Sep-12 Initiating coverage 3/5 595 5/5 273
16-Nov-12 Q2FY13 result update 3/5 595 5/5 270
07-Mar-13 Q3FY13 result update 3/5 595 5/5 204
12-Jun-13 Q4FY13 result update 3/5 432 5/5 204
04-Sep-13 Q1FY14 result update 3/5 320 5/5 173
12-Dec-13 Detailed Report 3/5
300 5/5
207
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%-10%
0%
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Premium/Discount to CNX 500
Median premium/discount to CNX 500
0
1
2
3
4
5
6
7
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
(Times)
1yr Fwd PE (x) Median PE
+1 std dev
-1 std dev
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CRISILIERIndependentEquityResearch
20
Company Overview
Incorporated in 1983, Supreme Infra is a Mumbai-based construction company. Having
started as a materials supplier, over time the company has evolved as an EPC player focusing
on segments such as roads and buildings. It has a backward integrated model and owns four
quarrying mines, six crushing plants, and 13 RMC plants. Its clientele includes PWD
Maharashtra, NHAI, Jaipur Development Authority (JDA), Sadbhav Engineering, K Raheja,
Hiranandani Constructions and MMRDA (a state government entity).
Table 10: Milestones
1983 Incorporated as Supreme Asphalts Pvt. Ltd
2002 Changed name to Supreme Infrastructure Pvt. Ltd
2002 Received first contract for roads and bridges in Amravati by MSRDC
2003 Set up first RMC plant in Powai, Mumbai
2004 Received first order for construction and widening of Western Express Highway from
MMRDA
2006 Received order from Sadbhav Engineering for four-laning of Bhiwandi-Nasik Highway
2006 Established quarrying and crushing plant, RMC plant in Padgha, Nasik (Maharashtra)
2007 Received first order from NHAI worth 1 bn for balance work at NH-4, links four major
cities of India (Mumbai, Pune, Bengaluru and Chennai)
2008 Came out with an IPO, offered ~3.5 mn shares to raise ~380 mn
2008 Forayed into railway and received orders worth 289 mn from Central Railway
2008 Forayed into housing project and received an order to construct low-cost housing inThane, Mumbai
2009 Received a 2.4 bn order to construct a multi-storied complex in Haryana
2010 Awarded first BOT project worth 12.1 bn from NHAI to construct a four-lane road in
Panvel-Indapur
2011 Received award for Fastest Growing Construction Company (small category-2nd
rank) at the 9th Construction World - Annual Awards 2011
2012 Commencement of tolling operations for Patiala Nabha Malerkotla (PNM) road project
2013 Manor-Wada-Bhiwandi toll operations commenced from March 2013
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Supreme Infrastructure India Ltd
21
Annexure: Financials (Standalone)
Source: CRISIL Research
Income statement Balance Sheet
(mn) FY11 FY12 FY13 FY14E FY15E (mn) FY11 FY12 FY13 FY14E FY15EOperating income 9,185 15,059 19,870 20,371 23,057 Liabilities
EBITDA 1,565 2,435 3,085 3,059 3,440 Equity share capital 167 167 167 167 167
EBITDA margin 17.0% 16.2% 15.5% 15.0% 14.9% Reserves 2,651 3,294 4,351 5,173 6,119
Depreciation 246 284 336 376 431 Minorities - - - - -
EBIT 1,319 2,151 2,749 2,683 3,009 Net worth 2,818 3,461 4,518 5,340 6,287
Interest 408 915 1,192 1,475 1,634 Convertible debt 250 - - - -
Operating PBT 911 1,236 1,557 1,208 1,375 Other debt 4,299 7,958 10,235 11,313 12,391
Other income 49 28 41 22 33 Total debt 4,549 7,958 10,235 11,313 12,391
Exceptional inc/(exp) (17) - (24) - - Deferred tax liability (net) 88 108 104 104 104
PBT 944 1,264 1,573 1,230 1,409 Total liabilities 7,454 11,527 14,857 16,757 18,782
Tax provision 184 346 477 369 423 Assets
Minority interest - - - - - Net fixed assets 2,578 2,815 3,021 3,383 3,592
PAT (Reported) 760 918 1,096 861 986 Capital WIP 74 107 101 0 0
Less: Exceptionals (17) - (24) - - Total fixed assets 2,652 2,923 3,123 3,384 3,593
Adjusted PAT 776 918 1,121 861 986 Investments 1,191 3,163 3,1953,992 4,790
Current a ssets
Ratios Inventory 1,170 1,414 1,707 1,953 2,211
FY11 FY12 FY13 FY14E FY15E Sundry debtors 2,886 4,963 6,790 7,255 8,528
Growth Loans and advances 1,463 4,052 5,386 5,685 6,123
Operating income (%) 72.0 64.0 31.9 2.5 13.2 Cash & bank balance 335 318 430 423 267
EBITDA (%) 63.9 55.5 26.7 (0.8) 12.5 Marketable securities 39 48 17 17 17
Adj PAT (%) 94.9 18.2 22.1 (23.2) 14.5 Total current assets 5,893 10,794 14,330 15,334 17,146
Adj EPS (%) 61.6 18.2 22.1 (23.2) 14.5 Total current liabilities 2,281 5,363 5,805 5,969 6,762
Net current assets 3,612 5,431 8,525 9,366 10,384
Profitability Intangibles/Misc. expenditure - 11 15 15 15
EBITDA margin (%) 17.0 16.2 15.5 15.0 14.9 Total assets 7,454 11,527 14,857 16,757 18,782
Adj PAT Margin (%) 8.5 6.1 5.6 4.2 4.3
RoE (%) 35.5 29.2 28.1 17.5 17.0 Cash flow
RoCE (%) 22.1 22.9 21.0 17.1 17.0 (mn) FY11 FY12 FY13 FY14E FY15E
RoIC (%) 25.4 27.0 24.7 20.2 20.5 Pre-tax profit 960 1,264 1,598 1,230 1,409
Total tax paid (146) (326) (480) (369) (423)
Valuations Depreciation 246 284 336 376 431
Price-earnings (x) 4.5 3.8 3.1 4.0 3.5 Working capital changes (1,782) (1,828) (3,011) (849) (1,174)
Price-book (x) 1.2 1.0 0.8 0.7 0.6 Net cash from operations (722) (606) (1,558) 388 243
EV/EBITDA (x) 4.9 4.5 4.3 4.7 4.5 Cash from investments
EV/Sales (x) 0.8 0.7 0.7 0.7 0.7 Capital expenditure (452) (565) (540) (637) (640)
Dividend payout ratio (%) 2.8 2.3 3.1 3.9 3.4 Investments and others (679) (1,981) (2) (798) (798)
Dividend yield (%) 0.6 0.6 1.0 1.0 1.0 Net cash from investments (1,132) (2,546) (542) (1,435) (1,438)
Cash from financing
B/S ratios Equity raised/(repaid) 315 - - - -
Inventory days 47 34 31 35 35 Debt raised/(repaid) 1,545 3,409 2,277 1,078 1,078
Creditors days 83 126 104 104 105 Dividend (incl. tax) (24) (25) (39) (39) (39)
Debtor days 115 120 125 130 135 Others (incl extraordinaries) 198 (250) (24) (0) -
Working capital days 129 123 148 160 160 Net cash from financing 2,033 3,135 2,213 1,039 1,039
Gross asset turnover (x) 3.2 4.3 4.9 4.3 4.3 Change in cash position 180 (17) 113 (7) (156)
Net asset turnover (x) 4.0 5.6 6.8 6.4 6.6 Closing cash 335 318 430 423 267Sales/operating assets (x) 3.6 5.4 6.6 6.3 6.6
Current ratio (x) 2.6 2.0 2.5 2.6 2.5
Debt-equity (x) 1.6 2.3 2.3 2.1 2.0 Quarterly financials
Net debt/equity (x) 1.5 2.2 2.2 2.0 1.9 ( mn) Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14
Interest coverage (EBITDA/Interest) 3.8 2.7 2.6 2.1 2.1 Net Sales 3,471 5,503 6,534 4,415 3,115
Interes t coverage (EBIT/ Interes t) 3.2 2.3 2.3 1.8 1.8 Change (q-o-q) -20% 59% 19% -32% -29%
EBITDA 607 950 827 720 491
Per share Change (q-o-q) -13% 56% -13% -13% -32%
FY11 FY12 FY13 FY14E FY15E EBITDA margin 17.5% 17.3% 12.7% 16.3% 15.8%
Adj EPS () 46.4 54.8 66.9 51.4 58.9 PAT 194 359 285 221 88
CEPS 61.1 71.8 87.0 73.9 84.6 Adj PAT 194 359 285 221 88
Book value 168.3 206.7 269.9 319.0 375.5 Change (q-o-q) -25% 85% -21% -22% -60%
Dividend () 1.3 1.3 2.0 2.0 2.0 Adj PAT margin 5.6% 6.5% 4.4% 5.0% 2.8%
Actual o/s shares (mn) 16.7 16.7 16.7 16.7 16.7 Adj EPS () 11.6 21.5 17.0 13.2 5.2
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CRISILIERIndependentEquityResearch
22
Focus Charts
Revenue and y-o-y growth Strong order intake in FY13
Source: Company, CRISIL Research Source: Company, CRISIL Research
EBITDA and EBITDA margin EPS and EPS growth
Source: Company, CRISIL Research Source: Company, CRISIL Research
RoCE and RoE Share holding pattern
Source: Company, CRISIL Research Source: Company, CRISIL Research
9.2 15.1 19.9
20.4
23.1
72%
64%
32%
3%
13%
0%
20%
40%
60%
80%
0
5
10
15
20
25
FY11 FY12 FY13 FY14E FY15E
(bn)
Revenue y-o-y growth (RHS)
21.4 22.9 40.7 33.0 36.4
15% 7%
77%
-19%
10%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0
5
10
15
20
25
30
35
40
45
FY11 FY12 FY13 FY14E FY15E
(bn)
Order Inf low y-o-y growth (RHS)
1,565 2,435 3,085 3,059 3,440
17.0%
16.2%
15.5%
15.0% 14.9%
14%
14%
15%
15%
16%
16%
17%
17%
18%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY11 FY12 FY13 FY14E FY15E
(mn)
EBITDA EBITDA margin (RHS)
46.4 54.8 66.9 51.4 58.9
61.6%
18.2% 22.1%
-23.2%
14.5%
-60%
-40%
-20%
0%
20%
40%
60%
80%
0
10
20
30
40
50
60
70
80
FY11 FY12 FY13 FY14E FY15E
()
EPS y-o-y growth (RHS)
22.1 22.921.0
17.1 17.0
35.5
29.228.1
17.5 17.0
0
5
10
15
20
25
30
35
40
FY11 FY12 FY13 FY14E FY15E
(%)
RoCE RoE
56.6% 57.4% 57.8% 57.9%
12.3% 12.8% 12.8% 12.9%6.8% 6.5% 6.5% 6.4%
24.3% 23.4% 23.0% 22.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec-12 Mar-13 Jun-13 Sep-13
Promoter FII DII Others
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