Tantia Constructions Ltd: An infrastructure play
(BSE Code: 532738) (CMP: Rs.18.50) (FV: Rs.10)
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
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.