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India Infrastructure

Abhinav Bhandari Ashish Kumar

[email protected] [email protected]

+91 22 3032 8507 +91 22 3032 8536

Pietro Perugino (1446-1523), The Delivery of the Keys to St. Peter, Fresco, 318 x 198 in, The Sistine Chapel, Vatican City.


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Contents

India Infrastructure: The Renaissance

India Infrastructure: Vision 2025

The Gujarat Model for Developing Infrastructure

Political Consensus on Infrastructure Reforms

USD 1.25 Trillion Opportunity

Financing USD 1.25 Trillion

Company Evaluation Matrix – Biggest Beneficiaries

Annexure

India’s infrastructure story is

entering a phase of

‘renaissance’, post the collapse

of Nehruvian order of economic

thinking. The Renaissance of

the fifteenth century was, on

many counts, great by what it

designed rather than what it

achieved. India’s infrastructure

vision is well designed (and

conceived) by the current policy

makers and now is the time to

achieve these aspirations. The

designers in this space will be

engraved as architects of India’s

resurgence in the global

economic order

2


Elara Capital |

India Infrastructure: The Renaissance

New Vision and a New India

Riding on a thumping mandate for growth and governance, the new government

has rolled out an ambitious vision for

Urban areas – 100 smart cities, 50 tourist circuits, “Housing for All” by 2022

Next generation infrastructure – Gas grids and National optical-fibre network

National highway construction – 16,000 km by 2020

Railway – Agri rail network, tourist rail, high speed train network

Water – Inter-linking of rivers, drinking water supply grid, piped water

Port development – Sagar Mala project, modernization of existing ports

(Refer Annexure I for details)

Foundations of optimism

Priority – Move up India’s ranking in the Global Competitive Index (GCI) from 85 out

of 148 in infrastructure

Proof of concept – A successful Gujarat model to act as a blueprint for investment

and a simplified recourse for getting approvals

Regulatory framework ready – India’s legal architecture has matured to

handle issues pertaining to land acquisition, forest clearance and natural resource

allocation effectively

Consensus in a new Federal order – Devolve power to the states for

commensurate regional growth

Bridging funding barriers

Within weeks of its formation, the Modi government announced its keenness to

embrace several innovative infrastructure funding models to push India’s

development pace

Dilution of up to 49% equity stake in listed PSUs

Public offering of profit-making, unlisted, rail infrastructure companies

“Pooled Municipal Debt Obligation” facility to improve city infrastructure

Introduction of tax-efficient REIT structure for infrastructure projects

Flexible structuring to absorb contingencies for domestic lending institutions

Exemption to banks from min. regulatory pre-emption on long-term infra bonds

Biggest beneficiaries

Roads & Highways – IRB Infra, Ashoka Buildcon, J Kumar Infra, MBL Infra

Railways – L&T, IL&FS Transportation, IL&FS Engineering, ITD Cementation

Water Supply & Irrigation – HCC, Dredging Corp, Pratibha Ind, SPML Infra

Enviroment – Va Tech Wabag, Praj Industries, Supreme Infra, Unity Infra

Affordable housing – NBCC, Simplex Infrastructures

Power T&D – Techno Electric, Jyoti Structures

Industrial corridors – Container Corp, Gateway Distriparks

Ports – Adani Ports & SEZ, Gujarat Pipavav

3


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The Incredible Infrastructure Opportunity

Source: Elara India Urbanization Model, Elara Securities Estimate

349

261

235

148

116 63

54 23 1,248

Roads Railways Water supply Environment Affordable housing

Power Industrial corridors

Ports Total

(USD bn)

Bottom-up methodology indicates an investment need of USD 1.25 trillion in India’s “Core Infrastructure” until 2025

4


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India Infrastructure: Vision 2025 Core infrastructure investment beyond XII Plan

5

Sector (USD bn)

2002-2007A 2007-2012A 2012-2017E 2015-2025E

(X Plan) (XI Plan) (XII Plan) (XII Plan

& beyond)

Roads & highways 21 76 180 349

Railways (incl. MRTS) 17 40 127 261

Water supply & sanitation 10 20 67 283

Irrigation 20 41 99 100

Affordable housing - - - 116

Electricity 57 121 295 63

Ports (incl. inland waterways) 4 7 39 23

Industrial corridors - - - 54

Grand total 129 306 807 1,248

1.9x

2.1x

4.2x

1.5x

Roads will continue to be a key focus area,

spend on urban roads to gain traction

Expenditure in Railways expected to be

driven by the entry of private sector,

especially in MRTS

Swelling urban development budget across

States to facilitate a multi-fold jump in

investment

Expect a major push for affordable housing

Source: Planning Commission, Elara India Urbanization Model, Elara Securities Estimate


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Viable to Fund USD 1.25 Trillion in 10 Years

6

Bottom-up funding methodology

An aggregate investment buildup points to the private sector spending

bottoming out in FY15

Over FY15-17 while estimates point to an acceleration in private sector spend

(led by a stable government and repairing balance sheets), it is not

expected to surpass 3% of GDP

Consequently, the onus of reviving India’s truncated capex cycle lies with the

central government – 60% overall in the XII plan. Over the course of

XIII plan, it is poised to decline by ~500bp

Assumptions on funding channelization (FY16-25E)

Public sector – 56%

Internal generation – Growth in line with economic revival

Borrowings – Emphasis on borrowing cost reduction

Divestment of PSUs – Up to 49% in listed and potential listings

Private sector – 44%

Commercial banks – Build in average loan book growth of 15.5%

Equity/FDI – Resurrection of balance sheets, broad-basing of FDI

Insurance – Led by the FDI hike, build in an average AUM growth of 18%

ECBs – In line with GDP growth assumption (14% CAGR)

NBFCs - Build in average loan book growth of 22%

Source: Planning Commission, Elara Securities Estimate

Contrary to planned private spending at 4.1-5.3% of GDP

Source: CMIE, RBI, Elara Securities Research

Sources of funds for envisaged infra spend (FY16-25E)

Elara Securities estimates Envisaged infra spend (USD bn)

Public Private Total Public Private Total

FY10 4.9 2.6 7.5 44 23 67

FY11 5.0 2.9 7.9 48 28 77

FY12 5.1 3.3 8.4 53 35 88

FY13 4.7 3.2 7.9 79 55 133

FY14 4.8 3.6 8.4 90 68 158

FY15E 3.7 2.3 6.0 78 47 126

FY16E 4.0 2.5 6.5 94 59 153

FY17E 4.3 2.8 7.1 115 73 188

Budgetary support

56%

Equity/FDI 5%

ECBs 4%

Insurance 5%

NBFCs 2%

Commercial banks 28%


Elara Capital |

The Gujarat Model for Developing Infrastructure

Gujarat Infrastructure Development Board (GIDB)

GIDB is a statutory organization headed by the Chief Minister, assisted by

senior ministers & secretaries. The Board has a CEO along with a number of

in-house experts

GIDB was created via the Gujarat Infrastructure Development Act, 1999

(GID). The Act provides a legal and regulatory framework for risk-free private

sector participation, offering a level-playing field for domestic & international

investors and government agencies

GIDB looks into overall planning, implements framework studies for projects

and facilitates effective coordination between sectoral departments

Role of GIDB

Techno-commercial and financial feasibility studies

Conceiving infrastructure projects, project development and preparation

Drafting of model concession agreements

Framing and approving concession agreements

Selection of developers through transparent processes

Monitoring the progress of projects

Capacity building among government agencies and their staff

Advising government on policies on infrastructure

Administering the viability gap funding on behalf of the government

Progressive law for private sector participation (PSP)

Gujarat Infrastructure Development Law – prepared in consultation with

industry, investors and developers; lays a systematic procedure for PSP

Project identification – in sync with the planning framework (Vision 2020)

Project preparation – pre-feasibility studies before doling out projects to the

private sector; state supports expenditure through budgetary grants

Risk allocation – separate concession agreements ready for sectors; aims at

upfront allocation of risk to enable investors in judging the project better

Selection of developer – provides a level-playing field and transparent bidding

mechanisms (international competitive bidding and challenge route)

7

Source: GIDB

Process framework – Project life cycle

Identification & conceptualization of projects

To be implemented by the respective govt. agency

Whether to be implemented by private sector

Risk allocation framework

Financing framework

Bidding procedure

Contract supervision

Through GIDB


Elara Capital |

Political Consensus on Infrastructure Reforms

Evolution of a New Federal Order

Potential outcomes out of reworking Centre-State relations:

Phase I: States currently ruled by the NDA alliance and possible lateral

partners would be natural partners to the Union government’s maneuvers.

Transformation of fence-sitters, in key states that are not a part of the

government in New Delhi but may not be averse to responding to the

overtures of the government. Once these states are on board, a large part of

India would be covered.

Phase II: Transformation of detractors is the critical second phase. Their

return to mainstream discourse, irrespective of political affiliations, for want

of being part of the growth story, is the vital second-tier, and this is what will

redefine the way federal consensus evolves in India.

The new modus operandi

In the framework of Constitution’s concurrent list, the more progressive states

could be allowed to move ahead on reforms process under Article 254 (2).

The Constitution of India provides for exceptions under Article 254 (2) that allow

the state legislation to prevail on an item in the concurrent list provided the

President of India gives his accent.

8

India’s federal structure given present Center-State relations

The new regime at Center stands to devolve power to the States for commensurate regional growth

Tamil Nadu

May 2016

Karnataka

May 2018

Andhra Pradesh

May 2016

Maharashtra

Dec 2014

Madhya Pradesh

Jan 2019

Rajasthan

Jan 2019

Gujarat

Jan 2018

Uttar Pradesh

May 2017

Punjab

Mar 2017

Bihar

Nov 2015

Orissa

May 2016

Jharkhand

Jan 2015

West

BengalMay 2016

SikkimArunachalPradesh

Assam

Apr 2016

Tripura

Meghalaya

Mizoram

Manipur

Nagaland

Goa

Pondicherry

Uttaranchal

Mar 2017

Jammu

&Kashmir

Jan 2015

Haryana

Oct 2014

HimachalPradesh

Dec 2017

Delhi

Chhattisgarh

Jan 2019

Friendly

Favorable

Hostile

Telangana

May 2016

Source: Election Commission, Elara Securities Estimate

Illustration of Center-State relations with the new NDA government and the next State elections


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Political cycles and the New Growth Mandate

Source: Elara Securities Research

Tamil Nadu

May 2016

Karnataka

May 2018

Andhra Pradesh

May 2016

Maharashtra

Dec 2014

Madhya Pradesh

Jan 2019

Rajasthan

Jan 2019

Gujarat

Jan 2018

Uttar Pradesh

May 2017

Punjab

Mar 2017

Bihar

Nov 2015

Orissa

May 2016

Jharkhand

Jan 2015

West

BengalMay 2016


Assam

Apr 2016

Tripura

Meghalaya

Mizoram

Manipur

Nagaland

Goa

Pondicherry

Uttaranchal

Mar 2017

Jammu

&Kashmir

Jan 2015

Haryana

Oct 2014

Himachal

PradeshDec 2017

Delhi

Chhattisgarh

Jan 2019

Friendly

Favorable

Hostile

Telangana

May 2016

Tamil Nadu

May 2016

Karnataka

May 2018

Andhra Pradesh

May 2016

Maharashtra

Dec 2014

Madhya Pradesh

Jan 2019

Rajasthan

Jan 2019

Gujarat

Jan 2018

Uttar Pradesh

May 2017

Punjab

Mar 2017

Bihar

Nov 2015

Orissa

May 2016

Jharkhand

Jan 2015

West

BengalMay 2016


Assam

Apr 2016

Tripura

Meghalaya

Mizoram

Manipur

Nagaland

Goa

Pondicherry

Uttaranchal

Mar 2017

Jammu

&Kashmir

Jan 2015

Haryana

Oct 2014

HimachalPradesh

Dec 2017

Delhi

Chhattisgarh

Jan 2019

Friendly

Favorable

Hostile

Telangana

May 2016

Going by LS trends, political cycles signal a massive churning to consolidate 78% of landscape in favor of growth by 2017

Natural allies in quest of growth: • Primary: Gujarat, Madhya Pradesh,

Rajasthan, Chhattisgarh, Punjab, Andhra Pradesh and Goa

• Lateral entries: Odisha, Tamil Nadu, Telangana and Kerala

States where assembly elections holds trigger: Maharashtra, Uttar Pradesh, Bihar, Jharkhand, Karnataka, Assam, Haryana and J&K Detractors: West Bengal

9


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USD 1.25 Trillion Opportunity

10


Elara Capital |

Roads and Highways: Getting the Right Push

Setting up of ‘3P India’ for

faster dispute resolution

Setting up of a Road Finance

Corporation (INR 1trn) to fund

EPC projects

An ARC for stressed assets

where NHAI will subscribe to

seed money & push execution

Proposal to empower the

Ministry to award projects up

to INR 10bn on its own

Formation of a USD 100bn

New Development Bank (NDB)

to fund infrastructure projects

Initiation of 1,000 km

expressway development

Source: NHAI

11


Elara Capital |

National Highways: Award Pipeline for the Next Four Years

Opportunity

NHAI’s cost estimate: USD 21bn for laying and widening the remaining

~16,200 km of highways yet to be awarded

(refer to Annexure II for details)

Triggers

Clearance to INR 1.8 trillion stalled road construction projects

Cleared INR 400bn highway projects in J&K, North East, Uttarakhand and

Himachal Pradesh

Allocation of a higher budgetary support worth INR 378bn for FY15 (Vs

actual grant of INR 305bn in FY14, an increase of ~24%)

Execution

Award target for FY15: 5,500 km (2,300 km for EPC-based cash contracts

and 3,278 km via the BOT mode)

Execution to witness a marked leap from 5.5 km/day in FY14 to 8 km/day

by March 2015

Distribution between BOT toll and cash & annuity models

Source: CRISIL

0

2,000

4,000

6,000

8,000

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E

(km)

Completed Awarded

NHAI’s scorecard – Year-wise awards vs construction

Source: NHAI, Elara Securities Estimate

8,420 9,626 3,921

13,352

2,406 12,000

0

5,000

10,000

15,000

20,000

25,000

Completed projects Under implementation projects

To be awarded projects

(km)

BOT Toll Cash and Annuity

12


Elara Capital |

Urban Roads: Key Beneficiary of State Spending

Opportunity

USD 288bn in capex besides USD 40bn in operations & maintenance

expected across India’s cities leading to 2025

Triggers

Motor vehicles in India increased ~200x between 1951 and 2011 while the

road network expanded only 12x

Cities are facing twin challenges of providing adequate roads for future use

and improving poor condition of existing roads due to neglect over the years

Expected rise in motor vehicles

Source: Elara India Urbanization Model

Registered motor vehicles - India

Source: Offices of State Transport Commissioners/UT Administrations

Road length required until 2025


0.3

0.7

1.9

5.4

21.4

55.0

58.9

67.0

72.7

81.5

89.6

96.7

105.4

115.0

127.7

141.9

159.5

0

50

100

150

200

1951 1971 1991 2002 2004 2006 2008 2010 2012

(in mn)

160

315

2012 2025E

(mn)

106,598

450,148

Existing shortage Future needs

(km)

13


Elara Capital |

Indian Railways: The Long Awaited Facelift Begins

Focus on doubling and tripling

to decongest the over-utilized

existing network

Enhancing domestic

investment and FDI in rail

infrastructure

Setting up of Diamond

Quadrilateral network of high

speed rail on 9 sectors

Bullet train proposed on

identified Mumbai –

Ahmedabad sector

Substantial increase of 40% in

FY15 budget allocation for

cleanliness

Recent fare and tariff hike to

add revenue worth INR 80bn

to the kitty

Source: www.mapsofindia.com

14


Elara Capital |

Indian Railways: Framework Ready for the PPP Drive

Opportunity

Pending projects backlog of Indian Railways stands at USD 32.2bn,

comprising 10,000 km new line construction, safety & security projects

and doubling, gauge conversion & electrification jobs

USD 125.5bn cumulative investment estimate (includes modernization

capex) (refer to Annexure III for details)

Triggers

Speeding up of private participation in projects like high speed rail, DFC,

modernization of stations, rolling stock manufacturing

Implementation of projects on a 50:50 cost-sharing pattern with states

(Jharkhand and Karnataka executing projects of INR 38bn & INR 50bn)

Sources of funds for railways (actual vs. recommended)

Source: Indian Railways, Elara Securities Estimate

INR bn 2012-13 2013-14RE 2014-15BE Elara est. % deviation

Gross Budgetary Support 241 270 301 250 17

Internal Generation 95 94 154 202 (31)

Leasing/Borrowings 151 149 118 50 58

PPPs 0 60 60 229 (281)

Others 17 21 22 22 -

Total 504 594 654 753 (15)

Investments & resource mobilization (for the next 10 years)

Investment through PPPs (INR bn)

1 High speed corridor (Mumbai-Ahmedabad) 600

2 Elevated Rail corridor in Mumbai suburbs 200

3 Redevelopment of stations 1,100

4 Dedicated freight corridors 1,340

5 Logistics parks 170

6 Wagon leasing and other freight schemes 50

7 Loco and coach manufacturing units 60

8 Captive power, renewable energy & other projects 60

9 Port connectivity projects 50

Resource mobilization through PPPs

10 Land and airspace 500

Total 4,130

Source: Indian Railways, Elara Securities Estimate

15


Elara Capital |

Mass Rapid Transit: Ideal Considering Radial Expansion of Cities

Opportunity

Public transport accounts for only 22% of urban transit in India (vs 40-

49% globally)

USD 98bn in capital expenditure and USD 37.5bn in O&M

Triggers

Currently, rapid transit systems operate in five Indian cities and are under

construction or in planning in several other cities.

In the next 10 years, MoUD aims to set up a metro rail in all cities having a

population of 2mn (refer to Annexure IV for details)

City public transportation mix


28 cities to have > 2 mn people by 2025

Source: UNWUP 2013, Elara India Urbanization Model

India public transportation needs


51.9 48.4

15.5 43.1

95.6 149.3

2010 2025E

>4 mn

2-4 mn

<2 mn 43 31

6 16

9 11

2

12

163 241

Cities

45

55

MRT BRT

(%)

3,428

4,584

MRT BRT

(km)

16


Elara Capital |

Water Supply and Irrigation

The national river-linking

project was conceptualized in

1980 as the National

Perspective Plan (NPP)

NPP aims at linking different

rivers across India to divert

excess water from surplus to

deficient regions

Poised to create additional

30mn hectares of irrigation

potential & power generation

capacity of 20-25 GW

Inter-state water disputes and

uncongenial terms with China

and Pakistan are

implementation challenges

Source: Ministry of Water Resources

17


Elara Capital |

NPP: Likely to Swell Backlogs, Brighten Prospects for EPC Firms

Opportunity

The National Perspective Plan (NPP) is estimated to cost ~USD 100bn

Himalayan rivers development (USD 77bn) – construction of storage

reservoirs on principal tributaries of Ganges and Brahmaputra rivers in India,

Nepal and Bhutan along with interlinking of river systems to transfer surplus

flows to the river mahanadi

Peninsular rivers development (USD 23bn) – divided into 1) interlinking

of Mahanadi-Godavari-Krishna-Pennar-Cauvery, 2) interlinking of West-

flowing rivers, north of Mumbai and South of Tapi, 3) interlinking of Ken with

Chambal, and 4) diversion of west-flowing rivers

Triggers

For feeding its population by 2050 (1.6-1.7bn), India will require an

irrigation potential of 160mn hectares

Economic damage owing to recurring floods and droughts (UN estimates

~USD 22bn since 1992)

INR 100bn investment in the construction sector under NPP can generate an

incremental value of INR 174bn in the economy and facilitate 4% rise

in total employment (Source: NCAER)

State-wise benefits from NPP

Multi-fold push to the economy

Sectors Value

Added Multiplier

Labor Income

Multiplier

Capital Income

Multiplier

Food grain 2.2 1.5 0.7

Non-food grain & other crops 2.2 1.6 0.7

Cement 1.2 0.6 0.7

Construction 1.6 0.9 0.7

Electricity, gas and water supply 1.0 0.5 0.4

Transport 1.5 0.8 0.8

Trade 2.0 0.8 1.2

Banking 1.5 0.7 0.8

Source: National Water Development Agency

Source: Task Force on Interlinking of Rivers Programme

State Additional quantum of water

which can be utilized (mn acre feet)

Additional area which can be irrigated

(‘000 hectare)

Orissa 6.0 1,171

Andhra Pradesh 24.0 4,685

Maharashtra 6.5 1,269

Karnataka 6.5 1,269

Tamil Nadu 12.0 2,342

Kerala 5.0 976

Madhya Pradesh 2.5 488

Uttar Pradesh 2.5 488

Gujarat 3.5 683

Total 68.5 13,371 (refer to Annexure V for details)

18


Elara Capital |

Water Supply: Entering an Era of Organized & Integrated Utilities

Opportunity

Only 64% of India’s urban population is covered by individual water connections

and stand-posts, compared with 91% in China, 86% in South Africa and 80% in Brazil

USD 84bn in capex and USD 50.6bn in O&M estimated for continuous and efficient

water supply

Triggers

Rising urban population and a below par water supply situation in cities with

intermittent supplies, inadequate coverage & low pressure

Sectoral water demand situation and key drivers

Source: 'India’s Water Future to 2025 –2050: Business as Usual Scenario and Deviations', Ernst & Young Analysis

Domestic

Industry

Agriculture

Population growth

Increased per capita water consumption

Expansion of the water intensive industries

like power, iron & steel, chemical is leading

to increase in water demand

Domestic food grain demand increasing

with increase in population

Demand for water intensive crops like

wheat, rice are increasing substantially

Poor water management

34 66

41 92

606 674

2010 2030E

Depending on the specific situations, various combinations of private sector

participation in building, operating, leasing and transferring water resources

facilities may be considered.

National Water Policy

Private sector participation will be encouraged in various aspects of planning,

investigation, design, construction, development and management of water

resources projects for diverse uses, wherever feasible. Private sector participation

will help introduce corporate management in improving service efficiency and

accountability to users. Depending upon specific situation, various combinations of

private sector participation in building, owning, operation, leasing and transferring

of water resources facilities will be considered.

Karnataka State Water Policy

Risk analysis of various business models

Considering the current

situation O&M model seems

to be most effective

Service Contracts

Incr

easi

ng level of

dele

gation,

risk

,

irre

vers

ibili

ty

Leases

BOT Approach

Concessions

Built operate own approach

O&M Contracts

Source: “Consulting Series for the Development of a Long-Term Water and Sewer Investment and Financing Strategy”

(bn cubic mtr.)

19


Elara Capital |

Environment Affordable Housing

Power T&D Ports

20


Elara Capital |

Environment: End of the “Cost vs Benefit Debate”

Opportunity

Sewage & Solid Waste: USD 73bn in capital expenditure and USD

44.6bn in operations & maintenance

Storm Water Drains: USD 25bn in capex and USD 5bn in O&M across

India’s cities up to 2025

Triggers

Acute sanitation challenge in India with 18% of urban households defecating

in the open and 94% of cities having an inadequate sewerage network

Less than 50% waste collection coverage in smaller cities (70-90% in

major metros) with a mere 30% solid waste segregation

Less than 20% of the road network in India covered by storm water drains Water drains expenditure


Expected daily generation

124,148

99,318

Water Supply Sewage water

(mn liters)

4.4

20.5

Existing shortage Future needs

(USD bn) MoUD formulated benchmarks for SWM

Proposed indicator Benchmark

Household level coverage of Solid Waste Management services 100%

Efficiency of collection of municipal solid waste 100%

Extent of segregation of municipal solid waste 100%

Extent of municipal solid waste recovered/recycled 80%

Extent of scientific disposal of municipal solid waste 100%

Extent of cost recovery in solid waste management services 100%

Efficiency in redressal of customer complaints 80%

Efficiency in collection of user charges 90%

Extent of processing and treatment of MSW 100%

21


Elara Capital |

Affordable Housing: Sheltering the Bottom of the Pyramid Opportunity

Capital expenditure of USD 115.5bn required towards providing affordable

housing across India’s cities up to 2025

Triggers

About 25mn households in India (35% of overall stock, 2011 census) cannot

afford housing at market prices and ~17% of these households live in slums

An additional 130mn people expected to join the ranks of India’s urbanites

over the next 12 years, raising this number to 33mn households

Monthly per capita expenditure

Est. no of households

in mn

Housing shortage

in mn % shortage

EWS 0 - 3,300 21.8 21.8 99.9

LIG 3,301 - 7,300 27.6 2.9 10.5

MIG 7,301 - 14,500 16.9 0.0 0.2

HIG 14,501 and above

Total shortage 66.3 24.7 37.3

Note: EWS - Economically Weaker Sections, LIG - Lower Income Group, MIG - Medium Income Group, HIG - Higher Income Group Source: Report of the Technical Group on estimation of Urban housing shortage

Housing shortage scenario in Urban India

Source: Guidelines for Affordable housing in partnership (Amended), MHUPA, 2011

Definition of affordable housing – MHUPA (2011)

Size EMI or Rent

EWS minimum of 300 sq ft super built-up area minimum of 269 sq ft (25 sq m) carpet area

not exceeding 30–40% of gross monthly income

of buyer LIG

minimum of 500 sq ft super built-up area maximum of 517 sq ft (48 sq m) carpet area

MIG 600–1,200 sq ft super built-up area maximum of 861 sq ft (80 sq m) carpet area

Financing of projects under JNNURM

Note: The percentage figure is on total project cost. *Including Beneficiary Contribution Source: Modified Guidelines for Submission on BSUP, Feb 2009, MHUPA

Category of Cities Grant Central

Share State / ULB /

Parastatal Share*

Cities with > 4mn population 50% 50%

Cities with 1-4mn population 50% 50%

Cities/Towns in NE states and J&K 90% 10%

Other Cities 80% 20%

22


Elara Capital |

Power Transmission: An Era of High Density Transmission Corridor

23

Changing asset profile of India’s transmission sector

Source: Power Grid Corporation of India

Deregulation and globalization across sectors in India

Source: FICCI, Booz&Co

Level of

Globalization

High

Low

Regulated Market Open / Free Market Time from De-regulation

Power

Transmission

Power

Generation

Infrastructure

(Road/Highways) Airports

Manufacturing Airlines

Auto ITES

Telecom

Continued support is needed after deregulation to setup a level playing field (land approvals, infrastructure

discounts, tax holidays)

Number of years of government support /

reforms are needed to drive maturity / stability

Mar-14

(Mar-11)

Tr. Lines Sub-stations

765kV 8%

400kV & HVDC 82%

<400kV 10%

ckm: 106,804 (82,355)

(13%)

(1%)

(86%)

765kV 15% 400kV &

HVDC 74%

<400kV 11%

Substations: 184 (135) incl. GIS: 10 (Nil)

(15%)

(1%)

(84%)

Opportunity

Development of an integrated National Grid, including strengthening of five

regional grids; envisaged capital expenditure of USD 63bn up to 2025

Triggers

Planned generation capacity additions of 88GW and 79GW in XII and XIII

five-year plan, respectively

Expansion in industrial activity, growing population, rising penetration and per

capita usage


Elara Capital |

DMIC: Links Six States to Build Mega Industrial Hub

Opportunity

The Delhi-Mumbai Industrial Corridor (DMIC) aims at building 24 cities (11

investment regions and 13 industrial areas) along a 1,483-km railway line

with investment aggregating USD 90bn

The corridor eyes linking business and capitals of India, passing through six

provincial states

Project funding is envisaged to be sourced from several state & central

government agencies, multilateral organizations like World Bank & ADB and

private investors in domestic & foreign capital markets

Triggers

The vision for DMIC is to build state-of-the-art industrial hubs to support

manufacturing & services and provide base for sustainable development while

creating opportunities for inflow of long-term foreign investment

Five-year goals for DMIC: double employment potential (14.9% CAGR),

triple industrial output (24.6% CAGR) and quadruple exports from the

region (31.9% CAGR)

(Refer to annexures VI & VII for details)

DMIC project snapshot

Source: DMIC Concept Paper 2007

24


Elara Capital |

Ports: Focus Back on the National Maritime Agenda Opportunity

Investment worth ~USD 28bn planned under the National Maritime Agenda

(2010-20) for development of new ports, augmentation & mechanization of

existing facilities, purchase of modern cargo-handling equipments and

logistics improvement

Triggers

Severe fuel shortages on the domestic front faced by India’s power sector

An ever-rising need to upgrade port infrastructure and related facilities to

handle increased quantities of imports

Source: Maritime Agenda 2010-20

Continuing Private Equity interest in India’s port story

Phase 1 (2010-12)

23%

Phase 2 (2012-17)

56%

Phase 3 (2017-20)

21%

Major Ports 39%

Non-Major Ports 61%

Channel deepening

7%

Berth construction

65%

Equipment 5%

Connectivity 5%

Other works 17%

Details of proposed investment outlay (2010-20)

Phase-wise outlay Outlay by port category Nature of outlay

Source: E&Y, Grant Thornton

Target Acquirer Value (USD mn)

Krishnapatnam Port (2008) 3I Group 161.0

JSW Infrastructure (2010) Eton Park Capital 125.0

Fourcee Infrastructure (2012) General Atlantic LLC 104.0

Mundra Port 3I Group, GIC Real Estate 100.0

Karaikal Port (Second round) Ascent Capital 41.7

Ocean Sparkle (2012) Standard Chartered PE 41.6

Gangavaram Port (2008) Warburg Pincus 34.0

Karaikal Port (First Round) IDFC Project Equity 32.6

Gujarat Pipavav Port IDFC 28.5

Karaikal Port (2012) Standard Chartered PE (Mauritius) II 27.1

20Cube Logistics (2013) Zephyr Peacock India 17.0

Continental Warehousing Nhava Sheva Aureos India Fund, Eplanet Venture 16.4

25


Elara Capital |

Financing USD 1.25 Trillion

26


Elara Capital |

USD 4.1 Trillion Infra Spend Up to 2025, 31% in “Core” Sectors

India’s Infrastructure pie (top-down methodology)

Nominal GDP forecast - Assumptions on India’s growth built on a base

case outlook of 14.2% CAGR (13.2% and 15.2% in the first and second

part, respectively) for a 10-year period (starting FY16E)

Investment forecast - In consensus with Planning Commission, India’s

gross infrastructure spend is modeled to touch 10% of GDP in the long run

from 6% currently

Defining “Core” Infra - Four sectors namely power (T&D), transportation,

social services (partially) and irrigation & flood control, constituting 35% of

gross Central outlay for infrastructure

Source: Ministry of Finance, Elara Securities Estimate

India’s GDP – base case growth outlook of 14.2% CAGR

Source: CMIE, Elara Securities Research

Envisaged infra investment mix (FY16-25)

11.7 12.0

13.0 13.0 14.0 14.0 14.0

15.0 15.0

16.0

16.0

10

12

14

16

18

0

200

400

600

FY15E FY17E FY19E FY21E FY23E FY25E

(%) (INR tn)

India GDP (LHS) Implied gr (RHS)

Sectors Core Infra (USD 1,250bn)

Non Core Infra (USD 2,803bn)

Agriculture & allied activities - Agriculture & allied activities

Communication - Communication

Economic services - Economic services

Energy Power T&D Power Generation

Petroleum

Coal & lignite

Non-conventional energy

General services - General services

Industry & minerals - Industry & minerals

Irrigation and flood control Major & medium irrigation -

Minor irrigation

Flood control & drainage

Rural development - Rural development

Science & technology - Science & technology

Social Services Water supply & sanitation General & technical education

Housing Sports & youth services

Urban development Art & culture

Medical & public health, family welfare

Information, broadcasting & publicity

Welfare of SC, ST & OBC

Lab our & employment

Social security & welfare

North-eastern areas

Transportation Roads & bridges Shipping

Railways Civil aviation

Ports & lighthouses Other transport services

Inland water transport

27


Elara Capital |

Private Sector Unlikely to Make a Big Comeback in XII Plan


Contrary to planned private spending at 4.1-5.3% of GDP

Source: CMIE, RBI, Elara Securities Research

Sources of funds for envisaged infra spend (FY16-25E)

Elara Securities estimates Envisaged infra spend (USD bn)

Public Private Total Public Private Total

FY10 4.9 2.6 7.5 44 23 67

FY11 5.0 2.9 7.9 48 28 77

FY12 5.1 3.3 8.4 53 35 88

FY13 4.7 3.2 7.9 79 55 133

FY14 4.8 3.6 8.4 90 68 158

FY15E 3.7 2.3 6.0 78 47 126

FY16E 4.0 2.5 6.5 94 59 153

FY17E 4.3 2.8 7.1 115 73 188

Budgetary support

56%

Equity/FDI 5%

ECBs 4%

Insurance 5%

NBFCs 2%


Bottom-up funding methodology

An aggregate investment buildup points to the private sector spending

bottoming out in FY15

Over FY15-17 while estimates point to an acceleration in private sector spend

(led by a stable government and repairing balance sheets), it is not

expected to surpass 3% of GDP

Consequently, the onus of reviving India’s truncated capex cycle lies with the

central government – 60% overall in the XII plan. Over the course of

XIII plan, it is poised to decline by ~500bp

Assumptions on funding channelization (FY16-25E)

Public sector – 56%

Internal generation – Growth in line with economic revival

Borrowings – Emphasis on borrowing cost reduction

Divestment of PSUs – Up to 49% in listed and potential listings

Private sector – 44%

Commercial banks – Build in average loan book growth of 15.5%

Equity/FDI – Resurrection of balance sheets, broad-basing of FDI

Insurance – Led by the FDI hike, build in an average AUM growth of 18%

ECBs – In line with GDP growth assumption (14% CAGR)

NBFCs - Build in average loan book growth of 22%

28


Elara Capital |

Raising Public Finance: Asset Sales the Only Mantra An incremental public sector funding need of USD 110bn until FY20E for

the infrastructure sector; as the state support is expected to be just USD

6bn, Government of India will have to shoulder the entire responsibility

Divestment of stake to 51% in case of listed entities and a public offering

of at least 20 unlisted, profit making entities over the next five years can

comfortably enable the Centre to bridge this financing gap

Fund raising prospects from listed public entities

Source: Capitaline, Elara Securities Estimate

Details of top 20 unlisted, profit making public entities

(USD bn)

No. of listed companies (nos.) 102

Current market cap (as on 05 August 2014) 295

Average stake (%) 70

Room for further divestment (%) 19

Additional room to raise 56

Fund raising prospects from unlisted public entities

(USD bn)

No. of unlisted companies (nos.) 20

Total profitability (FY13) 6

Average multiple (x) 15

Room to divest (%) 49

Additional room to raise 45

Company Name Sector Profit (USD mn)

South East. Coal Mining & Mineral products 717

Mahanadi Coalfield Mining & Mineral products 702

ONGC Videsh Crude Oil & Natural Gas 653

Hind. Aeronautics Capital Goods-Non Electrical Equipment 499

Northern Coalfield Mining & Mineral products 447

General Insurance Insurance 391

Nuclear Power Corp Power Generation & Distribution 350

Central Coalfield Mining & Mineral products 314

N A B A R D Banks 304

Eastern Coalfield Mining & Mineral products 276

Bharat Coking Mining & Mineral products 250

St. Bank of Hyderabad Banks 208

Guj. State Petro. Crude Oil & Natural Gas 141

New India Assurance Insurance 141

E X I M Bank Banks 124

Airport Authority Miscellaneous 123

IFFCO Fertilizers 121

Natl. Insurance Insurance 116

Oriental Insurance Insurance 89

THDC India Power Generation & Distribution 89

29


Elara Capital |

Private Finance: Banks Dominance to Continue

Commercial banks

Recently announced measures in the Union Budget (flexible structuring to

absorb adverse contingencies and minimum regulatory pre-emption while

raising long-term funds) to further accelerate infrastructure lending by

domestic banks

Equity/FDI

A large part of equity infusion relies on inflow of foreign money into domestic

investment institutions, which have not shown significant interest of late

in taking equity in infra projects

Insurance

Life insurance companies are required to invest at least 15% of their fund

in infrastructure and housing

With the hike in FDI to 49% in the insurance sector, AUM of life insurers

(five-year CAGR of 16.3%) and the potential for infrastructure lending

should get a boost

NBFCs

Historically, NBFC lending has primarily catered to demand from power,

telecom and road sectors. The major IFCs which contribute ~90% lending

are PFC, REC, IDFC, IIFCL, L&T Infrastructure Finance and IFCI Source: CMIE, CEIC, RBI, Elara Securities Research

Envisaged private sector funding mix (FY16-25E)

Equity/FDI 11%


NBFCs 5%

Insurance 12%

ECBs 8%

Private funding avenue (USD bn)

Equity/FDI Banks NBFCs Insurance ECBs Total

FY15E 5 20 3 6 9 43

FY16E 7 39 3 8 9 66

FY17E 8 48 4 9 10 80

FY18E 11 61 5 11 11 98

FY19E 13 73 6 13 12 117

FY20E 17 88 7 15 13 139

FY21E 20 113 9 23 14 179

FY22E 24 135 11 24 16 210

30


Elara Capital |

Company Evaluation Matrix

31


Elara Capital |

The Biggest Beneficiaries

32

Segment Sub-segment Capex (USD bn) Key beneficiaries

Roads National highways 21 IRB Infra Developers, Ashoka Buildcon

Urban roads 328 J Kumar Infra, MBL Infra

Total 349

Railways Indian railways 126 IL&FS Engineering, ITD Cementation

Mass rapid transit 135 L&T, IL&FS Transportation

Total 261

Water supply Urban water supply 135 Pratibha Industries, SPML Infra

National river linking 100 HCC, Dredging Corp

Total 235

Environment Sewage & Solid waste 118 Va Tech Wabag, Praj Industries

Storm water drains 30 Supreme Infra, Unity Infra

Total 148

Housing Affordable housing 116 NBCC, Simplex Infrastructures

Power T&D 63 Techno Electric, Jyoti Structures

Industrial corridors DMIC 54 Container Corp, Gateway Distriparks

Ports Maritime Agenda 2010-20 23 Adani Ports & SEZ, Gujarat Pipavav

Grand total 1,248

An investment need of USD 1.25 trillion in India’s “Core Infrastructure” until 2025

Source: Elara Securities Estimate


Elara Capital |

Construction & Infrastructure – Large and Mid Caps Company Market cap (INR bn) Key parameters Consensus estimates (Consol FY16E)

Name Bloomberg Code

Current M. cap*

Peak M. cap

Diff (%)

Segmental entrenchment

Consol PAT CAGR (%)

Revenue (INR mn)

PAT (INR mn)

FY16E P/E (x)

Larsen & Toubro LT IN 1,380.5 1,625.0 (17.7) 8 22.6 1,139,696 64,852 21.3

JP Associates JPA IN 152.2 562.1 (269.3) 3 10.0 255,818 9,219 16.5

GMR Infra GMRI IN 124.9 459.9 (268.2) 4 3.1 131,535 (2,731) n. a.

IRB Infra Developers IRB IN 88.5 102.5 (15.8) 3 71.4 53,258 6,075 14.6

IL&FS Transportation ILFT IN 56.7 70.3 (24.0) 3 47.0 80,087 5,597 10.1

NBCC NBCC IN 55.2 38.4 30.4 5 34.2 59,520 3,280 16.8

Jaypee Infratech JPIN IN 49.2 130.4 (165.2) 3 27.0 37,512 5,586 8.8

Va Tech Wabag VATW IN 39.1 36.8 5.9 3 62.0 32,378 1,790 21.8

Sadbhav Engineering SADE IN 30.6 31.6 (3.3) 5 (18.6) 43,899 1,481 20.7

Hindustan Construction HCC IN 25.7 67.9 (164.3) 6 n. a. 48,192 185 n. a.

GVK Power Infra GVKP IN 23.4 120.1 (413.7) 4 n. a. 51,102 (2,664) n. a.

Ashoka Buildcon ASBL IN 21.0 23.7 (13.0) 3 42.9 26,221 1,293 16.2

NCC NJCC IN 18.4 83.9 (356.9) 7 (9.3) 82,030 875 21.0

Simplex Infra SINF IN 14.8 34.0 (129.4) 7 (20.0) 68,908 1,063 14.0

Punj Lloyd PUNJ IN 13.6 174.4 (1,178.9) 7 (19.5) 110,018 500 27.3

J. Kumar Infra JKIL IN 10.2 8.8 13.4 5 56.8 17,370 1,248 8.2

Sector average (excl. L&T) 5 22.1 16.3

Note: Market Cap as on 5 August 2014; Source: Elara Securities Estimate

Recommend “Buy”; structurally positioned to benefit from the ensuing sectoral opportunity, attractive valuations

Recommend “Sell”; Strong sectoral positioning, current valuations though expensive

33


Elara Capital |

Construction & Infrastructure – Small & Micro Caps Company Market cap (INR bn) Key parameters Consensus estimates (Consol FY16E)

Name Bloomberg Code

Current M. cap*

Peak M. cap

Diff (%)

Segmental entrenchment

Consol PAT CAGR (%)

Revenue (INR mn)

PAT (INR mn)

FY16E P/E (x)

Gammon Infra GISP IN 9.3 24.6 (164.2) 3 (0.1) n. a. n. a. n. a.

Ahluwalia Contracts AHLU IN 9.0 22.4 (148.5) 4 n. a. 13,829 436 20.7

Patel Engineering PEC IN 8.4 60.8 (620.9) 6 9.7 31,247 408 20.7

Supreme Infra SPII IN 8.0 8.7 (8.4) 6 38.2 27,595 1,337 6.0

KNR Construction KNRC IN 6.9 6.5 5.4 4 23.9 9,170 498 13.8

IVRCL IVRC IN 6.5 75.6 (1,058.5) 7 n. a. 54,997 (2,618) n. a.

Noida Toll Bridge NTB IN 6.0 15.1 (154.6) 2 50.7 1,382 662 9.0

Pratibha Industries PRIL IN 5.3 7.6 (43.8) 5 41.4 31,541 1,094 4.8

IL&FS Engineering IECC IN 5.3 63.2 (1,091.9) 8 n. a. n. a. n. a. n. a.

MBL Infra MBL IN 5.3 5.1 4.1 4 30.9 21,940 946 5.6

Atlanta ATIF IN 5.1 10.5 (105.5) 3 n. a. n. a. n. a. n. a.

Gayatri Projects GAYP IN 4.6 6.8 (46.6) 6 (12.2) 26,592 1,157 4.0

Gammon India GMON IN 4.4 67.3 (1,429.9) 7 n. a. 50,165 (1,251) n. a.

ITD Cementation ITCE IN 4.1 8.6 (108.6) 5 2.4 16,360 310 13.3

JMC Projects JMCP IN 3.8 9.8 (156.9) 6 14.8 30,017 352 10.9

Ramky Infra RMKY IN 3.8 22.2 (489.1) 6 25.4 27,737 (521) n. a.

Era Infra Engineering ERIE IN 3.6 43.9 (1,116.1) 6 23.7 n. a. n. a. n. a.

Madhucon Projects MDHPJ IN 3.0 29.7 (880.3) 5 n. a. n. a. n. a. n. a.

SPML Infra SPML IN 2.5 17.7 (611.5) 5 29.5 n. a. n. a. n. a.

Unity Infra UIP IN 2.3 14.1 (506.4) 6 17.8 20,366 266 8.7

B L Kashyap KASH IN 2.0 45.1 (2,190.3) 2 (6.9) n. a. n. a. n. a.

Sector Average 5 19.3 10.7



Recommend “Sell”; Strong sectoral positioning, current valuations though expensive

34


Elara Capital |

Engineering Company Market cap (INR bn) Key parameters Consensus estimates (Consol FY16E)

Name Bloomberg code

Current M. cap*

Peak M. cap

Diff (%)

Consol Rev CAGR (%)

Consol PAT CAGR (%)

Revenue (INR mn)

PAT (INR mn)

FY16E P/E (x)

AIA Engineering AIAE IN 71.9 77.4 (7.7) 25.0 29.3 28,686 4,314 16.7

Engineers India ENGR IN 27.8 166.9 (499.7) 7.8 23.9 24,768 6,505 4.3

KEC International KECI IN 27.7 47.4 (71.3) 18.2 (10.6) 97,081 2,543 10.9

Kalpataru Power Transmission KPP IN 26.4 62.6 (137.2) 25.0 (3.2) 88,269 2,137 12.3

ISGEC Heavy IGSEC IN 17.4 17.8 (2.6) 18.0 24.1 n. a. n. a. n. a.

Texmaco Rail TXMRE IN 15.9 22.7 (42.6) (6.0) (13.7) 9,082 1,056 15.1

Techno Electric TEEC IN 15.8 25.4 (60.5) (0.8) (7.0) 8,831 1,487 10.6

Dredging Corp DCIL IN 12.5 37.3 (199.6) 2.2 (20.9) n. a. n. a. n. a.

Praj Industries PRJ IN 10.4 49.3 (374.3) 26.2 25.9 11,726 867 12.0

Sanghvi Movers SGM IN 7.1 12.9 (80.6) 24.9 22.1 3,213 360 19.8

Elecon Engineering ELCN IN 5.9 31.0 (422.9) 15.2 17.4 17,236 786 7.5

Titagarh Wagons TWL IN 4.5 15.6 (246.9) 7.1 (17.1) 6,700 435 10.3

Jyoti Structures JYS IN 3.8 25.1 (563.3) 28.8 26.4 36,690 849 4.5

Walchandnagar Industries WI IN 3.7 34.5 (842.8) 15.1 n. a. n. a. n. a. n. a.

Action Construction ACCE IN 2.9 11.1 (284.0) 13.5 (15.0) 9,687 266 10.9

TRF TRF IN 2.9 12.3 (331.8) 4.6 n. a. n. a. n. a. n. a.

Mcnally Bharat MCNA IN 2.9 11.8 (314.3) 33.6 n. a. n. a. n. a. n. a.

Kalindee Rail KRNE IN 1.5 6.1 (321.8) 24.0 23.4 n. a. n. a. n. a.

Sector Average 15.7 7.0 11.2



35


Elara Capital |

Logistics Company Market cap (INR bn) Key parameters Consensus estimates (Consol FY16E)

Name Bloomberg code

Current M. cap*

Peak M. cap

Diff (%)

Consol Rev CAGR (%)

Consol PAT CAGR (%)

Revenue (INR mn)

PAT (INR mn)

FY16E P/E (x)

Container Corp CCRI IN 250.2 233.7 6.6 6.4 4.8 66,279 12,758 19.6

Blue Dart BDE IN 88.1 101.9 (15.8) 19.3 21.9 25,555 1,956 45.0

Allcargo Logistics AGLL IN 31.8 27.9 12.3 46.5 19.4 53,390 2,033 15.6

Gateway Distriparks GDPL IN 25.6 26.7 (4.3) 33.4 17.6 13,955 1,853 13.8

Transport Corp TRPC IN 14.9 14.6 2.1 11.4 15.7 28,377 1,121 13.3

Gati GTIC IN 11.1 14.3 (28.6) 15.7 (6.9) n. a. n. a. n. a.

Sical Logistics SICL IN 5.9 16.6 (180.8) (4.1) (2.0) n. a. n. a. n. a.

Arshiya ARSL IN 2.0 22.2 (994.2) 35.2 n. a. n. a. n. a. n. a.



36


Elara Capital |

Ports & Shipping Company Market cap (INR bn) Key parameters Consensus estimates (Consol FY16E)

Name Bloomberg code

Current M. cap*

Peak M. cap

Diff (%)

Consol Rev CAGR (%)

Consol PAT CAGR (%)

Revenue (INR mn)

PAT (INR mn)

FY16E P/E (x)

Adani Ports & SEZ ADSEZ IN 552.1 581.1 (5.2) 35.4 42.8 68,205 28,338 19.5

Gujarat Pipavav GPPV IN 70.7 61.0 13.7 29.9 83.3 7,649 3,752 18.8

GE Shipping GESCO IN 54.9 85.6 (56.0) 9.0 (0.9) 34,046 6,797 8.1

Pipavav Defence PIPV IN 38.9 77.4 (98.7) 155.0 59.8 28,570 127 n. a.

Essar Ports ESRS IN 38.5 79.9 (107.8) 7.9 9.7 22,048 4,863 7.9

BEML Ltd BEML IN 27.8 75.0 (170.2) 5.9 n. a. 38,044 1,707 16.3

SCI SCI IN 26.9 91.3 (239.0) 4.1 n. a. 51,649 369 73.1

Global Offshore GWOS IN 13.5 9.2 31.9 27.1 18.8 n. a. n. a. n. a.

ABG Shipyard ABGS IN 12.8 50.9 (297.0) 21.2 1.9 n. a. n. a. n. a.

Mercator MRLN IN 8.4 39.8 (377.2) 24.0 n. a. n. a. n. a. n. a.

GOL Offshore GOFF IN 4.4 42.0 (846.6) 14.3 n. a. n. a. n. a. n. a.

Essar Shipping ESL IN 4.3 7.1 (62.9) 56.0 3.7 n. a. n. a. n. a.




37


Elara Capital |

Annexure

38


Elara Capital |

Annexure I

Core Infrastructure

Hasten work on the DFC and other Freight corridors as well as the

concurrent industrial corridors. In parallel, intensify work again on

completing national highway projects

Creation of world class ports, well connected with roads and rail to the

hinterland. Air cargo facilities will be deepened. Focus on a National

logistics network for streamlined movement of goods

Rail networks to connect hinterland with ports to allow uninterrupted

passage of goods as well as Agri-rail networks. Diamond quadrilateral

projects of HST (High Speed Trains)

Creation of a National Gas-Grid plan to make gas available for

households and industry

Set up a National Optical-Fibre network, right up to the villages

Inter-linking of rivers on the basis of feasibility reports

Urbanization

Bring urban service delivery – roads, potable water, education,

health, supply chain, electricity, broadband – to rural India, under the

idea of “Rurban”

Major thrust on urbanization centered around Transportation &

Housing. Initiate work on 100 new specialized cities – based on

concept of new urbanism's sustainability and walk to work. Development

of existing urban clusters providing best in class infrastructure & services

A massive housing program aimed at “Housing for All” by 2022

Approach to integrated habitat development - building on concepts

like Twin cities and Satellite towns

Tourism

Creation of 50 tourist circuits on concepts of affordability and build on

themes – cultural & spiritual, desert, heritage, archaeological, Himalayan

Detailing New Government’s Infra Vision

39


Elara Capital |

Annexure II

Roads & Highways - NHDP and other NHAI projects (status: 31 March 2014)

NHAI’s project cost estimates for balance length for award – INR 1,255bn (~USD 21bn)

NS-EW – INR 16.9bn Phase III – INR 112.2bn Phase IV – INR 648.6bn

Phase V – INR 153.4bn Phase VI – INR 166.8bn Phase VII – INR 157bn

Source: NHAI, Elara Securities Research

NHDP Port

Connectivity Others

Total by

NHAI GQ NS-EW Phase

III

Phase

IV Phase V

Phase

VI

Phase

VII

NHDP

Total

Total Length (km) 5,846 7,142 12,109 14,799 6,500 1,000 700 48,096 380 2,142 50,618

Already four-laned (km) 5,846 6,282 6,098 483 1,819 - 22 20,550 377 1,438 22,365

% completed 100.0 88.0 50.4 3.3 28.0 - 3.1 42.7 99.2 67.1 44.2

Under implementation (km) - 443 4,326 4,575 2,262 - 19 11,625 3 427 12,055

Contracts under implementation (no) - 46 86 39 28 - 2 201 1 10 212

% under implementation - 6.2 35.7 30.9 34.8 - 2.7 24.2 0.8 19.9 23.8

Balance length for award (km) - 417 1,685 9,741 2,419 1,000 659 15,921 - 277 16,198

% balance for award - 5.8 13.9 65.8 37.2 100.0 94.1 33.1 - 12.9 32.0

40


Elara Capital |

Annexure III

41

Source: Indian Railways, Elara Securities Research

Indian Railways - Total investment requirement for modernization (until 2020)

330 250

725

1,100 170 13 5

2,040

970 5,600

0

1,000

2,000

3,000

4,000

5,000

6,000

Tracks & Bridges

Signaling Systems

Rolling Stock Station & Terminals

(PPP)

Logistics Parks (PPP)

ICT initiatives Indigenous Development

Dedicated Freight

Corridors (Part PPP)

Other PPP initiatives

Total for Modernization

(INR bn)


Elara Capital |

Annexure IV

Indian Railways - Metro rail projects in India

City System Start of operations

System Length (km) Notes

In operation

Planned In progress

Kolkata Kolkata Metro 24-Oct-84 28.4 90.0 First mass rapid transit system in India and the 17th Zone of Indian Railways

Chennai Chennai MRTS 1-Nov-95 19.3 It is planned for the MRTS to be taken over by the Chennai Metro Rail Limited once the Chennai Metro becomes operational

Delhi Delhi Metro 24-Dec-02 192.7 India's first modern rapid transit system

Bangalore Namma Metro 20-Oct-11 16.6 114.4 42.3 First metro in India to introduce Wi-Fi onboard trains

Gurgaon Rapid Metro Rail Gurgaon 14-Nov-13 5.1 India's first fully privately financed metro. Also the first metro system in the country to auction naming rights for its stations

Jaipur Jaipur Metro Sep-2014 32.5 Under construction

Chennai Chennai Metro Oct-2014 45.1 Under construction

Mumbai Mumbai Metro 8-Jun-14 11.4 146.5 India's first PPP metro project in which all the three phases were given to a private player

Navi Mumbai Navi Mumbai Metro 2016 106.4 Under construction

Kochi Kochi Metro 2016 25.6 Kochi is the first Tier-II city in India to be granted a metro under the Central Government's plan

Lucknow Lucknow Metro 2017 36.0 Under construction

Ahmedabad & Gandhinagar

Metro Link Express Gandhinagar and Ahmedabad (MEGA)

2017 83.0 In planning stage

Source: Various Publication, Elara Securities Research

42


Elara Capital |

Annexure IV (Continued…)

City System Start of operations

System Length (km) Notes

In operation

Planned In progress

Hyderabad Hyderabad Metro Mar-2015 71.6 Under construction

Bhopal Bhopal Metro In planning stage

Chandigarh Chandigarh Metro 2018 37.5 In planning stage

Indore Indore Metro 2020 30.0 In planning stage

Kanpur Kanpur Metro 2018 84.0 In planning stage

Ludhiana Ludhiana Metro 2017–18 In planning stage

Nagpur Nagpur Metro 39.8 In planning stage

Nasik Greater Nasik Metro Proposed Metro line which will connect Igatpuri, Deolali, Nasik Road, Nasik Central and Ojhar Airport

Patna Patna Metro 2016 60.0 In planning stage

Pune Pune Metro 2018 82.0 In planning stage

Surat Surat Metro 2018 In planning stage

Vizag Vizag Metro In planning stage

Mumbai Western railway elevated corridor 2020 63.3 In planning stage

Guwahati Guwahati Metro 44.2 In planning stage

National Capital Region

National Capital Region Metro 2021 381.0 The National Capital Region Transport Corporation Limited (NCRTC) is proposed as the implementing agency for taking up the RRTS project in the NCR

Source: Various Publication, Elara Securities Research

Indian Railways - Metro rail projects in India

43


Elara Capital |

Annexure V

44

Irrigation benefit

(lac hectare) Net power generation

(MW)

With

MSTG Link With

JTF Link With

MSTG Link With

JTF Link

Year 1 - - - -

Year 2 - - - -

Year 3 7.3 7.3 - -

Year 4 24.1 24.1 72 72

Year 5 36.5 36.5 72 72

Year 6 48.5 53.1 42 42

Year 7 81.7 90.9 1,944 2,000

Year 8 169.8 174.2 1,594 1,650

Year 9 266.8 266.3 20,850 15,619

Year 10 299.7 299.2 24,802 19,571

Benefit rollout plan

Note: MSTG link Manas – Sankosh – Tista - Ganga

JTF link Jogigopa-Tista-Farakka


National Perspective Plan: Huge scope demands phase-wise implementation

Investment rollout plan

Note: At 2003-04 prices


22 129

340

529

697

911 756

599

350

110

0

250

500

750

1,000

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

(INR bn)

With MSTG Link

22 119

377

566 677

892 746

542

293

110

0

250

500

750

1,000

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

(INR bn)

With JTF Link


Elara Capital |

Annexure VI

Haryana, Rajasthan & Gujarat to be meaningfully affected

DMIC states Area under

PIA (sq km) Total area of

affected state (sq km) Area of state

under PIA (%)

Delhi 1,483 1,483 100

Haryana 26,410 44,212 60

Rajasthan 198,849 342,236 58

Gujarat 120,706 196,024 62

Maharashtra 56,760 307,713 18

UT of D&N Haveli 491 491 100

UT of Diu & Daman 122 122 100

Uttar Pradesh 28,265 238,566 12

Madhya Pradesh 2,866 308,144 1

Uttaranchal 533 53,566 1

Total of states 436,486 1,492,557 29.2

Investment requirement


Sector-wise employment generation

Category Area

(hectares) USD bn

Manufacturing/ Industrial Processing Area/ SEZs 55,000 33.8

Agro/Food Processing Area 5,000 2.8

IT/ITES Hubs 2,000 8.8

Knowledge Cities 5,000 7.5

Logistics Infrastructure 8,500 3.8

Integrated Townships/ Real Estate Development 16,500 15.0

Area and other Infrastructure 8,000

Length of Feeder Roads 4000 km 2.0

Length of Feeder Rail Links 2500 km 1.9

Ports (3 Greenfield Ports & Augmentation of 2 Ports) 3.0

Airports (Augmentation of Five Airports, 2 Airstrips) 1.6

Power Plants 10,000 MW 10.0

Total 100,000 90.0

Employment

Manufacturing/ Industrial Processing Area 2,000,000

Employment in agro/food processing 200,000

IT/ITES/Biotech Hubs 600,000

Knowledge Cities 100,000

Logistics Infrastructure 100,000

Total 3,000,000

Delhi Mumbai Industrial Corridor = 2x employment + 3x industrial output + 4x exports

45


Elara Capital |

Annexure VII

State Proposed Location Category of Region

Uttar Pradesh Dadri-Noida-Ghaziabad Investment Region

Uttar Pradesh Meerut-Muzaffarnagar Industrial Area

Haryana Faridabad-Palwal Industrial Area

Haryana Rewari-Hissar Industrial Area

Haryana Kundli-Sonepat Investment Region

Haryana Manesar-Bawal Investment Region

Rajasthan Kushkhera-Bhiwadi-Neemrana Investment Region

Rajasthan Jaipur-Dausa Industrial Area

Rajasthan Ajmer-Kishangarh Industrial Area

Rajasthan Rajsamand-Bhilwara Industrial Area

Proposed 20 industrial nodes in Delhi Mumbai Industrial Corridor

State Proposed Location Category of Region

Rajasthan Pali-Marwar Industrial Area

Gujarat Palanpur-Sidhpur-Mahesana Industrial Area

Gujarat Ahmedabad-Dholera Investment Region

Gujarat Vadodara-Ankleshwar Industrial Area

Gujarat Bharuch-Dahej Investment Region

Gujarat Surat-Navsari Industrial Area

Gujarat Valsad-Umbergaon Industrial Area

Mahrashtra Nashik-Sinnar Investment Region

Mahrashtra Pune-Khed Industrial Area

Mahrashtra Alewadi/ Dighi Port Industrial Area

Nodes for Phase-1 Implementation


46


Elara Capital |

Annexure VIII

Planning Commission estimates Elara Securities estimates Envisaged infra spend (USD bn)

Public Private Total Public Private Total Public Private Total

FY10 4.9 2.6 7.5 4.9 2.6 7.5 44 23 67

FY11 5.0 2.9 7.9 5.0 2.9 7.9 48 28 77

FY12 5.1 3.3 8.4 5.1 3.3 8.4 53 35 88

FY13 4.7 3.2 7.9 4.7 3.2 7.9 79 55 133

FY14 4.8 3.6 8.4 4.8 3.6 8.4 90 68 158

FY15E 4.8 4.1 8.9 3.7 2.3 6.0 78 47 126

FY16E 5.0 4.6 9.6 4.0 2.5 6.5 94 59 153

FY17E 5.1 5.3 10.4 4.3 2.8 7.1 115 73 188

FY18E 4.5 3.0 7.5 136 90 226

FY19E 4.7 3.3 8.0 161 113 275

FY20E 4.8 3.5 8.3 188 137 325

FY21E 5.0 3.8 8.8 223 170 393

FY22E 5.2 4.0 9.2 267 205 472

FY23E 5.3 4.2 9.5 313 248 561

FY24E 5.4 4.3 9.7 370 295 664

FY25E 5.5 4.5 10.0 437 358 795


Infra spend mix as a % of GDP

USD 4.1 trillion infra spend up to 2025, 31% in “Core” sectors

Contrary to planned private spending, expect a central

government led revival of India’s truncated capex cycle

47


Elara Capital |

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Elara Capital |

India

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Tel : +91 22 3032 8500

Europe

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London NW1 5JX,

United Kingdom

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USA

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Disclaimer for U.S. Investors

49


Elara Capital |

Team Details

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