Noida Toll Bridge - What an Investment !!!

Introduction :

The Noida Toll Bridge Company Ltd. (NTBCL) has been promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to develop construct, operate and maintain the DND Flyway on a Build Own Operate Transfer (BOOT) basis. NTBCL is a public listed company, incorporated in Uttar Pradesh, India, in 1996 and operates only in India. DND Flyway grew out of a need to bridge the growing population of Delhi with its neighbours across the Yamuna. Today, a major portion of Delhi's population lives in the Trans-Yamuna area and there was a need to build a major connecting facility between the areas growing on both sides of the Yamuna.  In January, 2008 Mayur Vihar Link (MVL) Toll Plaza with 11 lanes was commissioned. The Mayur Vihar Link Road was developed by NTBCL to shorten the travel distance for people living in Mayur Vihar and others accessing areas in its vicinity. Salient features of DND Flyway 8 Lane Dual Carriage ways Connecting Noida Sector 15a With Ring Road Near Maharani Bagh. 6 Km Link With 552 Meter Long Main Bridge Across River Yamuna And 3 Minor Bridges. 8 Lane Approach Road On Embankment. 31 Lane 200m Wide Fully Computerised Toll Plaza. Concession Agreement

A Concession Agreement confers the right to Noida Toll Bridge Co. Ltd (NTBCL) for recovering the project costs with a designated rate of return (20%) over the 30 years concession period or till such time the designated return is recovered whichever is earlier; and if not recovered the right is extendable by 2 years at a time till the project cost and the designated return thereon is recovered. The Concession Agreement provides for granting Land Development Rights to NTBCL for supporting any shortfall in earnings. The Company has 100 acres of land and has been seeking development rights. Upon approvals and the commencement of land development, it will get revenues and profit contribution from land development also.

Recent Toll Hikes & Traffic Growth Rate

In Feb 2011 proposed toll hike was rolled back due to protests. As required for maintenance, NTBCL has taken up issue for increase in toll rates with authorities. Except in year 2008, Co has not been able to hike toll rates and have met with stiff resistance whenever it has tried to hike it. It is expecting a hike in the range of 10-22% (at least 10%) in the toll rates by May - June 2011 which I do not think they will be able to implement particularly in view of UP elections. From 2000-01 to 2009 -10 there has been good growth in the average daily traffic. For FY 2012, NTBCL is expecting at least 5% further traffic growth. The planned implementation of Noida and development of Yamuna Expressway will also lead to further increase in traffic. Present composition of Traffic is 74 % for four wheelers and 24 % two wheelers and rest around 2 % is commercial vehicles. For last few years, rise in traffic in four wheelers and Commercial vehicles is more which has resulted in increase in average toll rate per vehicle. It is expected that this trend will continue in future also.

Financials:

Co sales have increased from 47.11 Cr to 84.31 Cr in last five years. Co sales are stagnant for last three years as it is not able to increase toll rates in this period and the growth have been sluggish in traffic including negative growth last fiscal. However, profit in this period increased from 11.06 Cr to 37.49 Cr in same period resulting in an EPS of 2.01 Rs/share this fiscal. Co declared a dividend of 0.5 Rs/share this fiscal first time. For current fiscal, total Debt for the Co stands at a level of 138.66 Cr as compared to over 180 Cr three years back while investment has increased to 23.76 Cr this fiscal. It is expected that co will become debt free in next three years and interest cost of 17 Cr p.a. will be saved totally. It can be expected that EPS will increase 40 % just on account of interest saving in next three years and traffic growth of 4-5 % will result in an increase in EPS of 15-20 %. It can be safely assumed that EPS of co will be 3.5 Rs / share three years onwards without considering any increase in tool rate hike. It can be expected that Co will start increasing dividend in next one or two year onwards.

Technical Analysis:

After hitting its all time high of 85.05 in Jan’2008, share price collapsed to a panic low of 16.05 Rs/share in Nov’2008 which was incidentally low since Jan’2005. After hitting a low of 16.05, share price was in corrective rally phase to a high of 48.4 Rs/share in Sep 2009. Since Sep 2009, share price is in bearish trend and has almost lost 50 % from its recent high. Technically 76.4 % & 85 % Retracement level supports are at 24.2 & 21.5 Rs/share. 200 DMA is placed at a price of 28.6 Rs/share which offers good resistance.

MACD on weekly charts is showing positive divergence and is showing a very good sign of turning around.

Similarly RSI on weekly charts is showing positive divergence and is showing a very good sign of turning around. The shares of the Co can be accumulated on every decline and it looks like all sell offs from here on will be temporary in the share price. 

Investment Theme:

There are two scenarios for investment in this Co: ---

1.    Granting Development Land Rights:  There is a possibility of granting development land rights to the Co for shortfalls of revenues. It is estimated that these development rights is equal to Rs 30 per share of the Co. Whenever this will happen then share price will immediately shoot up to almost double from present level in short run.

2.    Extension of Lease Period: In case Land rights are not granted then there is no other possibility except to increase the lease period for the Co. It is likely to be the most likely scenario in present circumstances. In this scenario, there may not be immediate run up in short run but it will be a long term story and 20 % p.a. (including dividend payout) easily can be realized in this co. Besides, till the time there is clarity on this aspect, speculative jacking up time to time cannot be ruled out and can be a good opportunity to book profits.

I have invested 2000 shares in this Co at a price of 25.35 Rs/share with an option of investing 25,000 more in case of a further decline in the share price.