Sep 11, 2012, 07.02 PM | Source: Moneycontrol.com
KRChoksey is bullish on IRB Infrastructure Developers and has recommended buy rating on the stock with a target price of Rs 171 in its September 11, 2012 research report.
, KRChoksey |
“IRB Infra received service tax notice, aggregate demand of Rs 60.46 crore, to its three SPVs i.e. Ideal Road Builders, IDAA Infrastructure and ATR Infrastructure. Management has quantified Rs 230 crore of service tax for rest of operational SPVs over the period of FY07-11. Service Tax Department has considered SPVs as “agent” of NHAI in spite of “Concessionaires.” In the circular no. 152/3/2012-ST by Ministry of Fiancé, it is clearly mentioned that “Service tax is not leviable on toll paid by the users of roads, including those roads constructed by a SPV created under an agreement between NHAI and Concessionaire (PPP Model, BOT).”
“Considering the above statement, the note from Ministry of Finance reveals that service tax can’t be leviable on SPVs as per the concession agreement with NHAI. Further, the calculation of Service Tax on the gross toll will impact the overall profitability and equity IRR fall further as the whole sector is facing problems like high interest rates, financing of projects and traffic risk. IRB will file an appeal against these orders before the competent authorities and there is high probability that case will be in favor of IRB Infra.”
In adverse conditions as per concession agreement the extra cost will be borne by NHAI either by increasing the concession period or cash component. One can buy IRB Infra with a target of Rs 171,” says KRChoksey research report.
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