Saturday, April 26, 2014

Infrastructure: Many roads to profit
April 20, 2014: More airports in smaller cities and towns, a chain of ports, and freight and industrial corridors are on the BJP’s infrastructure-building agenda. The manifesto reiterates its faith in the public-private partnership model.

The timeline envisaged to set up the promised infrastructure is reasonable at 10 years.

Some of these ideas aren’t new, though they can do with better execution. On airports, for example, the 12th Five-Year plan already envisages spends of ₹87,700 crore for their development. Finances permitting, GVK Power & Infra and GMR Infra, the two main listed players in airport development, and smaller companies such as Valecha Engineering could gain significantly from the new airport projects taking off.

Projects for all
The major ports today are constrained by slow turnaround times, high traffic, and lack of room for expansion. This creates potential for new ports to spring up. Adani Ports, with a sparkling record of ramping up volumes at Mundra port while also constructing berths at other ports, has a good shot at participating in such projects. Gujarat Pipavav, too, is well-placed with its port improving in profitability. While there are dozens of companies keen to bid for development of road connectivity, the highly leveraged ones may not be able to make the cut.

The BJP’s plans on roads and freight corridors may bolster the order books for Sadbhav Engineering, IL&FS Transportation Networks, IRB Infra and Larsen & Toubro, which today have the financial wherewithal to take on new projects. Special focus for the north-eastern region may open up opportunities for regional players such as MBL Infra and JMC Projects.

Plans to build 100 cities will require smaller projects for everything from bus shelters and car parks to sewerage and waste water management. MBL Infra, J Kumar Infra and L&T are well-placed to gain from a thrust on urban infra development.

While IVRCL, Pratibha Industries, Unity Infra, and Ramky Infra are key players, too, high leverage may stand in the way.

Water and desalination projects may mean more opportunities for players such as VA Tech Wabag.

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