Tan­tia Con­struc­tions Ltd: An in­fra­struc­ture play

(BSE Code: 532738) (CMP: Rs.18.50) (FV: Rs.10)

Money Times - - Stock Analysis Stock Scan - By Ar­chana Jain

For decades, eastern In­dia was dis­missed as a re­mote and un­der-in­vested re­gion. How­ever, this pic­ture is fast chang­ing with new in­vest­ments be­ing made in roads, rail­way and air­port devel­op­ment. Tan­tia Con­struc­tions Ltd (TCL) is a core

in­fra­struc­ture com­pany help­ing make this a vi­brant re­al­ity. Be­ing a pi­o­neer in cre­at­ing in­fra­struc­ture in Eastern In­dia with an ex­pe­ri­ence of over five decades, the Com­pany has a wide foot­print across the re­gion to­day. TCL was estab­lished in 1964 by Late Shri G.P. Tan­tia to strengthen In­dia’s rail­way in­fra­struc­ture. In 2001, it was ac­cred­ited with ISO 9001:2000 cer­ti­fi­ca­tion by DNV of the Nether­land. It has a ro­bust or­der book of Rs.2500 crore. Prod­uct/ Busi­ness line: TCL has grad­u­ally evolved over the years from a pure rail­way con­struc­tion com­pany to a full- fledged in­fra­struc­ture com­pany ex­e­cut­ing var­i­ous di­ver­si­fied projects. It has pres­ence in roads, rail­ways, tun­nels, bridges and fly­overs, ur­ban in­fra­struc­ture, sew­er­age and drainage, civil and hous­ing con­struc­tion. It has also ven­tured into the lu­cra­tive ma­rine in­fra­struc­ture space, power trans­mis­sion & dis­tri­bu­tion seg­ment, agro chem­i­cals and avi­a­tion in­fra­struc­ture.

Geo­graph­i­cal Pres­ence: West Ben­gal, As­sam, Mi­zo­ram, Bi­har, Jhark­hand, Orissa, UP, Delhi, Haryana, Pun­jab, Andhra Pradesh, Kar­nataka,

Ker­ala, Tamil Nadu, Bangladesh, Bhutan and

Nepal.

Projects:

 Rail­way: Eastern Rail­way, East Cen­tral Rail­way, Western Rail­way, North Eastern Rail­way, South Eastern

Rail­way, North East Fron­tier Rail­way, Kolkata Metro Rail­way, IRCON In­ter­na­tional Ltd, RITES.

 Roads and High­ways: Na­tional High­way Author­ity of In­dia (NHAI), Pun­jab, Mi­zo­ram, Kar­nataka, West Ben­gal, State

PWDs (Pub­lic Works Depart­ments).

 Ur­ban Devel­op­ment: Hoo­gly River Bridge Com­mis­sion­ers (HRBC), Hous­ing In­fra­struc­ture Devel­op­ment Cor­po­ra­tion (HIDCO), Kolkata Mu­nic­i­pal Cor­po­ra­tion (KMC), Kolkata Mu­nic­i­pal Devel­op­ment As­so­ci­a­tion (KMDA), Kolkata En­vi­ron­men­tal Im­prove­ment Project, Delhi State In­dus­trial Devel­op­ment Cor­po­ra­tion (DSIDC), Delhi Devel­op­ment Author­ity (DDA).

 Oth­ers: North Eastern Elec­tric Power Cor­po­ra­tion (NEEPCO), Na­tional Ther­mal Power Cor­po­ra­tion (NTPC), As­sam State Elec­tric­ity Board (ASEB), Cen­tral Pub­lic Works Depart­ment, In­dian Oil Cor­po­ra­tion (IOC), Air­port Author­ity of In­dia (AAI), SAIL etc.

Al­liance part­ners: TSO (France), Road Builder

SDN Ber­had Malaysia, IVRCL In­fra­struc­ture and Projects Ltd, Ramky In­fras­truc­tures Ltd, BSBK

Ltd, Soma En­ter­prise Ltd.

Sub­sidiaries: Tan­tia In­fra­struc­ture Pvt Ltd; Tan­ti­aBatala-Beas Toll­wayPvt Ltd; Tan­ti­aSan­jauliPark­ingsPvt Ltd; and Tan­ti­aRax­aultoll­wayPvt Ltd, of which, the first three are wholly-owned sub­sidiaries.

Per­for­mance High­lights: For FY17, TCL achieved a turnover of Rs.298.46 crore v/s Rs.410.6 crore in FY16. It posted net loss of Rs.67.22 crore v/s net loss of Rs.30.36 crore in FY16. This was mainly as a re­sult of its fo­cus on im­ple­ment­ing a pro­gres­sive turn­around in prof­itabil­ity. De­spite a chal­leng­ing busi­ness land­scape, the Com­pany em­braced sev­eral proac­tive steps that in­cluded an ag­gres­sive fo­cus on claims re­al­i­sa­tions, cost op­ti­miza­tion, mon­e­ti­za­tion of as­sets and cau­tious and se­lec­tive bid­ding for new projects in or­der to en­hance the qual­ity of its ex­e­cu­tion pipe­line. The man­age­ment is also fo­cused on stream­lin­ing the com­pany and re­in­forc­ing sys­tems and pro­cesses with em­pha­sis on lever­ag­ing its core com­pe­ten­cies.

The Com­pany hasn’t paid any div­i­dend since 2012 since it was un­der the cor­po­rate debt re­struc­tur­ing (CDR) scheme. It has re­duced its bor­row­ings by Rs.86 crore to Rs.190.49 crore in FY17 from Rs.277.01 crore in FY16. As at 31 March 2016, its or­der book was Rs.3981.03 crore thus pro­vid­ing good rev­enue vis­i­bil­ity.

The stock’s 52-week high/low is Rs.25.05/Rs.13.50. The yearly high/low ra­tio is be­low 2x. Its share book value is Rs.66.03, which is much higher than the CMP thus mak­ing it a value buy. TCL’s eq­uity share cap­i­tal has in­creased un­der the CDR scheme. The pro­mot­ers have also in­creased their stake in the Com­pany.

In­dus­try Sce­nario: In­fra­struc­ture is a key driver of eco­nomic devel­op­ment in a de­vel­op­ing coun­try like In­dia. In­vest­ments in the sec­tor have con­sis­tently in­creased from form­ing 5% of GDP in the 10th Five Year Plan to 9% in the 11th Five Year Plan. In­dia needs Rs.31 tril­lion (~$454.83 bn) to be spent on in­fra­struc­ture devel­op­ment over the next five years, with 70% of funds needed for power, roads and ur­ban in­fra­struc­ture seg­ments. How­ever, devel­op­ment in ba­sic in­fra­struc­ture is still rel­a­tively slow com­pared to other coun­tries. The rapid growth of the In­dian econ­omy in re­cent years has placed in­creased stress on phys­i­cal in­fra­struc­ture i.e. elec­tric­ity, rail­ways, roads, ports, ir­ri­ga­tion, wa­ter sup­ply and san­i­ta­tion, all of which al­ready suf­fer from deficit in terms of ca­pac­i­ties as well as ef­fi­cien­cies. The in­fra­struc­ture sec­tor is mainly af­fected due to de­lay in award­ing projects, en­vi­ron­men­tal clear­ance hur­dles, land ac­qui­si­tion is­sues, slower ex­e­cu­tion, lack of cheaper fi­nanc­ing op­tions etc.

Share­hold­ing: The pro­mot­ers hold 72.88% stake. An in­crease in pro­moter stake sig­nals a pos­i­tive sur­prise in com­ing quar­ters.

Con­clu­sion: The Com­pany faced many chal­lenges and wit­nessed ups and downs due to de­mon­eti­sa­tion, GST im­ple­men­ta­tion and CDR. How­ever, the bright fu­ture of the in­fra­struc­ture sec­tor gives us con­fi­dence to buy an old com­pany stock like TCL. The stock is avail­able be­low its 52-week high. Ac­cord­ing to me, in­vestors can ac­cu­mu­late the stock be­tween Rs.21-17, which is a fair buy­ing range as the pro­mot­ers have in­creased their stake by buy­ing 99,19,032 shares at Rs.21.26/share thus in­vest­ing around Rs.21 crore. We have a Buy on the stock for a price tar­get of Rs.25 in the short-term, Rs.42 in the medium-term and Rs.66-80+ in the long-term.

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