IRB Infra shifts to top gear, toll fees provide the momentum

IRB Infra is on a long drive. At the Citi India Investor Conference, the sheer speed made many sit up and take notice.

[caption id=“attachment_23710” align=“alignleft” width=“380” caption=“IRB Infra, according to the management, is in a position to handle projects to the tune of Rs 4,000-5,000 crore every year without any additional equity infusion. B Mathur/Reuters “]  [/caption]

Collections are keeping IRB Infra in a fine shape. The toll collection and construction on the Tumkur-Chitradurg project are up and running from 4 June. The initial amount is in line with the company’s expectations.

There is good news on the traffic flow, too, which on the Suart-Dahisar stretch has grown 6-7%. The same growth is getting carried forward to Bharuch-Surat road. Daily toll collections on the Bharuch Surat road have crept up to Rs 40 lakh. For the Surat Dahisar project, daily toll collections are floating in the range of Rs 105-110 lakh. IRB Infra is expecting equity internal rate of return (IRR) of around 16% on this project.

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The company expects the 5-6% traffic growth for the Mumbai-Pune Expressway to continue. It’s pinning its hopes on the National Highway Authority of India (NHAI) to announce 4-5 projects – including four in MP – in the second half of June, with an average project size pegged at Rs 1,000 crore each.

According to the management, IRB Infra can handle projects to the tune of Rs 4,000-5,000 crore every year without any additional equity infusion. The company targets equity IRRs of around 18% while bidding for projects, except in cases of large ones like the Ahmedabad-Vadodara project, where higher revenue visibility allows for a lower IRR.

IRB Infra has also executed the project development agreement and completed the land acquisition (670 acres) for a greenfield airport project in Sindhudurg district, around 80 km north of the existing Goa airport. The company plans to apply for environmental clearances after June, when a ban on construction projects in the Konkan region is expected to expire. The project is to be constructed in 18 months as the total cost may run into Rs 175-200 crore. The company expects an equity IRR of 20%, assuming a 20% shift in traffic from the Goa airport.