Monday, January 15, 2018

Reliance Infrastructure Ltd: Buy
CMP: Rs.555.55
Triggers:
#Reliance Infrastructure (RInfra) is likely to win an engineering, procurement and construction (EPC)
project worth Rs5.67 bn, according to a media report. The company has emerged as the lowest bidder (L1) in a tender floated by NTPC for Flue Gas Desulphurisation (FGD) works of its 3 x 500 MW power plant in Jhajjar, Haryana, the report added.

#Reliance Infrastructure (RInfra) has applied to Maharashtra Electricity Regulatory Commission (MERC) to transfer its Mumbai power business and the attached licences to Adani Transmission Ltd. The total deal value is Rs.13,251 crore. In addition, regulatory assets under approval estimated at Rs.5,000 crore and net working capital on closing estimated at Rs.550 crore will flow directly to RInfra. Thus, the total consideration value has been estimated at Rs.18,800 crore. Post-deal, RInfra would become debt-free, with a cash surplus of up to Rs.3,000 crore.

#Global research firm JPMorgan maintained its overweight stance on the stock with a target of Rs.630. It said that the implied equity value of the deal is Rs.6,250 crore i.e. two times regulated equity base. It expects the transaction to conclude in a couple of quarters.

#In a latest development regarding the Versova-Bandra sealink, the Anil Ambani-led Reliance Infrastructure has replaced a Chinese company as its partner for the Versova-Bandra Sealink project.

#Reliance Naval and Engineering Ltd in which Reliance Infrastructure Ltd stake, has a debt of Rs.8,418.67 crore. However, this is expected to come down substantially as according to Ambani, with the acquisition of Reliance Naval and Engineering Ltd (earlier known as Reliance Defence and Engineering Ltd and Pipavav Defence & Offshore Engineering) it is now one of the only two companies in India strategically positioned to participate in the Centre’s strategic partnership programme announced earlier this year.
The company has decided to focus on defence and engineering, procurement and construction business. It plans bids for six submarines worth Rs.50,000 crore. “With regard to Reliance Naval, the mandatory requirement for change of ownership is what we’ve achieved with our 31% shareholding. We have the ability to increase our shareholding to 36%. We will be shortly announcing a rights issue and through the rights issue, we will have the ability to increase our shareholding,” Anil Ambani said in September, 2017.

#The drive to make power plants compliant with environmental norms is going to open up a Rs 1.3-lakh-crore opportunity in the next three years for emission control equipment providers. According to a latest report by research firm Motilal Oswal Securities, companies such as BHEL, L&T, GE Power and Reliance Infra should benefit from the opportunity.

#RInfra plans to participate in the controversial Rs.1-lakh crore bullet train project from Mumbai to Ahmedabad, for which it is in talks with Japanese companies, Ambani told shareholders at the 88th AGM of Reliance Infrastructure on September, '17.

#The company is eyeing large engineering, procurement and construction (EPC) order inflow from projects like the Bandra-Versova Sea Link and Coastal Road, both in Mumbai, for which it has been shortlisted. The company has qualified for the Rs.40,000-odd crore Mumbai-Nagpur Expressway project too.

#Earlier in January 2017, the Reliance Shipyard was qualified by the U.S. Navy as an approved contractor to perform complex repair and alteration services for the U.S. Navy’s Seventh Fleet vessels operating in the region. Reliance Shipyard at Pipavav, Gujarat is the first Shipyard in India to have received MSRA Certification to undertake service and repair works for the vessels of Seventh Fleet.

#The book value of the shares of the company is Rs.948.49. It is a dividend paying company -- last year it gave a dividend of 90% to the shareholders. Its market cap is only Rs.14,610.41 crore. The stock fell from a high of around Rs.1350 in 2009 to the current price of around Rs.655.55. Buy the scrip of Reliance Infrastructure Ltd for short term targets of Rs.800-877.
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