Review By Dilip Davda on April 14, 2015
MEP Infrastructure Developers Ltd. (MEP) has claimed as an established and leading player in tolling operations in the road infrastructure sector, with a pan-India presence. MEP focuses on pure toll collection projects as well as OMT projects, which involve maintenance obligations in addition to toll collection on operational roads (including highways) constructed by third parties. According to the report on “Assessment of Operate-Maintain-Transfer (OMT) and Toll Collection market for Road Projects in India” dated June 2014 by CRISIL Research (the “CRISIL Report”), the company is the leading player in OMT as well as toll collection in India based on the number of projects operated and quality of project stretches.
MEP commenced business with collection of toll at the five Mumbai Entry Points in December 2002, which it undertook for a period of eight years, from December 2002 till November 2008 pursuant to a contract with MSRDC and subsequent extensions thereof, until November 2010. As on March 19, 2015, it has completed 75 projects, with an aggregate of 133 toll plazas and 841 lanes, and have an overall experience of over 12 years in this business across 12 states in India.
Company wins projects through competitive bidding process (electronic bidding in some cases) and after satisfaction of various prescribed pre-qualification criteria. Company generates revenue from toll collection and OMT projects through collection of toll from commuters. Its toll collection and OMT projects have been awarded to us by statutory corporations or government companies primarily being NHAI, MSRDC, RSRDC, RIDCOR, MJPRCL and HRBC. As on March 19, 2015, the company operates 18 toll collection projects with an aggregate of 33 toll plazas, five OMT projects covering 2,530.04 lane kilometres with an aggregate of 15 toll plazas and one BOT project covering 42.02 lane kilometres with five toll plazas. These ongoing projects are located across 10 states in India.
Its ongoing OMT projects include the Mumbai Entry Points Project, which is our largest OMT project on the basis of revenue, under which we undertake the operation and maintenance of, and toll collection at, the five Mumbai Entry Points and the maintenance of 27 flyovers and certain allied structures in Mumbai for a period of 16 years until 2026. It also operates the RGSL Project with the right to collect toll for and maintain, the RGSL in Mumbai for a period of 156 weeks until 2017. It had issued a termination notice dated May 27, 2014 to MSRDC for terminating the Baramati Project and subsequently a letter dated July 28, 2014 seeking termination payments under the concession agreement for the Baramati Project. However, the termination has not taken effect and it continues to operate the Baramati Project as on date.
To repay in part or full, loans availed by its subsidiary (MIPL), and to generate corpus fund, the company is coming out with a maiden IPO for approx 50625000 equity share of Rs. 10 each in a price band of Rs. 63-65 to mobilize around Rs. 324 crore. Issue opens for subscription on 21.04.15 and will close on 23.04.15. Minimum application is to be made for 225 shares and in multiples thereon, thereafter. Post issue its equity capital will rise to around Rs. 162 crore from Rs. 111.49 crore. In May 2014 the company issued 11494250 equity shares at a price of Rs. 21.75 per share to promoters. Shares will be listed on BSE and NSE. Issue is lead managed by IDFC Securities Ltd, Inga Capital Pvt Ltd and IDBI Capital Market Services Ltd. Link Intime India Pvt Ltd is the registrar to the issue.
On standalone basis the company has posted an average EPS of Rs. 1.48 with a diminishing trend for last three fiscal. For the same periods, on consolidated basis it has negative EPS of (–Rs. 11.06). On consolidated basis the company has posted turnover/(Loss) of Rs. 1136.60 crore/(-Rs.47.72 crore) (2012), Rs. 1302.07 crore/(-Rs.92.93 crore) (2013), Rs. 1240.13 crore/ (-Rs.121.41 crore). For first seven months of the current fiscal the company has posted turnover of Rs. 1141.52 crore with a loss of (-Rs.97.30 crore). If we annualized and attribute this earnings on post IPO equity then the EPS comes to (-Rs.10.30). Thus the asking price for the issue is exorbitant considering negative earnings as well as the last issue at a price below Rs. 22. As the new Government is slowly doing away with toll collections, ongoing is likely to be worsen and hence future earnings will have great impacts of abolition of toll tax. Thus this issue appears to be a risky bet.
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Author has no plans to invest in this offer.
Review By Dilip Davda on April 14, 2015
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst ā Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of MEP Infrastructure Developers Ltd. offers an early investment opportunity in MEP Infrastructure Developers Ltd.. A stock market investor can buy MEP Infrastructure IPO shares by applying in IPO before MEP Infrastructure Developers Ltd. shares get listed at the stock exchanges. An investor could invest in MEP Infrastructure IPO for short term listing gain or a long term.
Read the MEP Infrastructure IPO recommendations by the leading analyst and leading stock brokers.
MEP Infrastructure IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the MEP Infrastructure IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is MEP Infrastructure IPO?"
Our recommendation for MEP Infrastructure IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the MEP Infrastructure IPO.
The MEP Infrastructure IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit MEP Infrastructure IPO allotment status to check.
