Thursday, September 10, 2009

Brahmaputra Infraproject Ltd – Road Runner

By appointing Mr. Kamal Nath as the Minister of Roads & Highways (MoRH) in the new UPA government, Dr Manmohan Singh may well have pulled off a master stroke.

The country’s crying need for infrastructure is well documented. The hopes & aspirations of the current & future generations cannot come to fruition without a huge & concerted effort to speed up the pace of infrastructure development, of which Roads & Highways are an integral & critical part. Frankly, no pace would be fast enough.

And selecting an aggressive & ambitious MoRH was just the right move, to give the Roads & Highways sector the push & impetus it badly needed. The MoRH has got cracking by announcing a stiff target of building 7,000 km of roads in a year.

While everyone knows the huge execution risks - land acquisition, plus multiplicity of agencies involved, leading to time/cost slippages, and higher working capital needs, this author believes that the new MoRH will be a game changer for the sector.

With most Infrastructure & Roads players already well researched, the author felt it was time to profile one rather unknown company in the listed space which could well be a big beneficiary of the likely improved prospects for the sector. This company is Brahmaputra Infraproject Ltd (BSE Code : 531194). This company was until recently known as Mewar Industries, before being taken over by the Mr. S. K. Prithani led Brahmaputra Group (Website : ) to be their listed entity. The new promoters are a fast growing group in infrastructure development with significant presence in sectors like Mining, Building Construction, Bridges & Flyovers, Airports, Tunnels, Expressways & Highways, Other Civil Construction. The group appears to have already started routing new business through the listed entity.

For FY09 the company had a Net Profit of Rs 2.07 Cr on a turnover of 30.62 Cr resulting in an EPS of RS 2.96 on an equity of 7 Cr. Most of the revenues accrued in the 4th & final quarter, when the company has started executing it’s new projects. The company declared a dividend of 5% as a shareholder friendly measure.

In 1st Quarter of FY10, the company further improved it’s performance, clocking a net profit of 2.94 Cr for the quarter, on a turnover of 42.55 Cr, resulting in a quarterly EPS of Rs 4.20 .

Given the visibility of revenue following the announcement of it’s bagging orders worth 433 Cr in July 2009 from Jaiprakash Associates for construction of part of the Yamuna Expressway from Greater Noida to Agra, it is probable that the current year EPS would be in double digits. There is a good possibility that further orders of the group could be bid & executed through Brahmaputra Infraproject Ltd.

Equity : 7 Cr
Latest EPS : 2.96 Rs (FY09). EPS for Q1 of FY10 is Rs 4.20.
Promoter Holding : 72%
CMP : 70.10 (Closing on BSE, 9th Sept , 2009)

Recommendation : Given the above background, at Rs 70/- the company does not look expensive to this author, and the author recommends investors to research & analyse this company in greater detail. On corrections, the stock could prove to be an astute investment.

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at .