Buy IRB Infra; target of Rs 230: Emkay

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26 Aug, 2025 12:21

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Emkay Global Financial Services is bullish on  IRB Infrastructure Developers and has recommended buy rating on the stock with a target price of Rs 230 in its September 3, 2012 research report.

“IRB has received an order from Service Tax Authorities, raising a demand of Rs 604.6mn on 3 of its Road SPV’s. In addition, penalty and interest at appropriate rate as per provisions of Service Tax Act could also be leviable. Penalty ranges from 0%-100% of the tax demand. 3 SPVs to whom the order has been issued are IDAA (Bharuch Surat project-operational), ATR Infra (Pune-Nashik-operational) & IRBPL (Thane-Bhiwandi (operational), Kaman-Payegon, Bhiwandi-Wada, Khambatki Ghat).”

“IRB has assessed the potential liability of ~Rs 2.3bn (excluding the interest & penalty which can again be of similar quantum) if the provisions of above order are replicated on other SPV’s. Hence the total demand of service tax liability could be to the tune of Rs2.9 bn and similar could be the quantum of penalty leading to total liability of ~Rs5.8bn which works out ~Rs17/share. IRB will launch an appeal against the order within 90days. Although the decision might take its own time, we believe the management has a strong case in their favour owing to historical case laws and CBDT circular issued earlier.” 

“As per the recent notification issued by CBDT, ‘Toll collection service by way of access to a road or a bridge on payment of toll charges are exempt under Sec 66D (h)’ safeguarding developers from any future demands by service tax authorities. Based on our assessment of section 66D and our discussion with other developers and tax expert, we believe that toll road companies collecting toll under a specific concession agreement are not liable to pay service tax, hence the order does not impact our valuation of IRB’s BoT portfolio. We believe that management has a strong case considering the erroneous evaluations made by the tax department in the show cause notice and the interpretation from the earlier circulars & case laws. We continue to like IRB’s robust portfolio of cash flow generating assets and strong balance sheet position which will drive the company’s accelerated asset accretion. Maintain buy-TP Rs230,” says Emkay Global Financial Services research report.

Public holding more than 90% in Indian cos

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