Buy IRB Infrastructure Developers; target of Rs 150: Sharekhan

Sharekhan's research report on IRB Infrastructure Developers

IRB signed a definitive agreement with GIC to transfer nine assets at ~1x P/B through private InvIT with IRB having 51% stake. IRB to gain in interest savings, EPC and O&M opportunities and strong partner for future bidding. The portfolio to have EV of Rs. 22,500 crore and EBITDA and FCF of Rs. 1.29 lakh crore and Rs. 88,000 crore, respectively, over its life. IRB’s Q1FY2020 net earnings were dented by higher depreciation, interest and tax outgo, while EPC and BOT verticals reported healthy revenue growth.

Outlook

We upgrade IRB Infrastructure to Buy with unchanged PT of Rs. 150 on account of easing of leverage and funding requirement of future projects with inclusion of GIC as a financial partner.

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