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IL&FS Transportation Networks Ltd.

BSE: 533177 Sector: Engineering
NSE: IL&FSTRANS ISIN Code: INE975G01012
BSE LIVE 15:40 | 11 Dec 77.80 0.30
(0.39%)
OPEN

78.50

HIGH

79.00

LOW

77.50

NSE 15:31 | 11 Dec 77.70 0.40
(0.52%)
OPEN

78.25

HIGH

78.85

LOW

77.40

OPEN 78.50
PREVIOUS CLOSE 77.50
VOLUME 52279
52-Week high 124.80
52-Week low 70.00
P/E 10.39
Mkt Cap.(Rs cr) 2,559
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 78.50
CLOSE 77.50
VOLUME 52279
52-Week high 124.80
52-Week low 70.00
P/E 10.39
Mkt Cap.(Rs cr) 2,559
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

IL&FS Transportation Networks Ltd. (IL&FSTRANS) - Chairman Speech

Company chairman speech

Dear Shareholders

After a long period of economic uncertainty 2016-17 spelled hope and positivity forthe world economy as it witnessed a slowly reviving demand scenario. Of course politicaland economic events continued to display volatility but there are strong prospects ofnear-term growth

In India the situation remained supportive of growth and despite the demonetizationexercise in the third quarter the Central Statistics Office estimate is a 7.1% growthrate for 2016-17. The passing of the Goods and Services Tax Bill is expected to overhaulthe scenario by increasing tax compliance and transparency giving the nation thepropensity to function as a single market. In addition a large budgetary allocation forinfrastructure is expected to further boost the economy and its growth

For ITNL we are looking positively at the evolving landscape both here in India andaround the world. We have come a long way since inception and currently own and operate alarge number of assets in some of the core sectors of infrastructure. This growing andrapidly expanding footprint across sectors and geographies coupled with a build-up inconcomitant capacity and ability should ensure our further progress along this path quitenaturally. We firmly believe we will continue on our course with greater vigour in theyears to come

The Indian Infrastructure Stage

With India still being one of the fastest growing large nations the country outshinesthe rest of the world with its resilience. As in the case of every developing nationinfrastructure remains a key driver of India's growth. A sector that spurs several othereconomic activities such as job creation physical infrastructure is booming in India andis strongly supported by the government. In fact there is an expected total investment of`25 trillion in the space in the coming three years

The Ministry of Road Transport & Highways invested nearly Rs 3.17 trillion in thelast couple of years to build highways of global standards in India. However as opposedto the forecasts less than 50% of the targeted distance has been covered by 2016-17. TheHybrid Annuity Model (HAM) was rolled out last year building more momentum towards roadconstruction in the nation. The Built-Operate-Transfer (BOT) model projects remainedsubdued in number as opposed to the Engineering Procurement Construction (EPC) Modelwhich garnered significant focus. In case of Railways too the Government is seekinginvestments from the private sector and there is an increasing push to bring ForeignDirect Investment (FDI) in the Indian Railways. Hence the push by the Government todevelop India's transportation space is very strong

From Landmarks to milestones

2016-17 was a year of immense pride for us as we executed and delivered landmarkprojects in the road sector as well as a key non-road project The Honourable PrimeMinister of India Shri Narendra Modi inaugurated and dedicated to the nation the‘Chenani-Nashri Tunnel'. The 9 km-long tunnel is a landmark project for the state ofJammu & Kashmir opening up new vistas of connectivity and convergence and for India'scapabilities it is an "intelligent" construction with state-of-the-arttechnology and safety features embedded. The longest road tunnel in the Southeast Asianregion it reduces the travel time between Jammu and Srinagar by 2 hours and is a muchsafer route than the existing one. Despite multiple challenges such as a tough geographyand complex engineering we were able to execute the project on schedule

Apart from this many other projects also got commissioned during the year in the roadssegment. We have also made rapid strides in the non-road segment. The Rapid Metro Projectin Gurgaon began operations and development work commenced on the underground portion ofthe Chennai metro in addition to an automated car park for the Dubai Supreme Court

Which brings me to another point – our growing international footprint. We areactively pursuing business opportunities in Asia Pacific Middle East and Africa EuropeanUnion South America and North America expanding our global footprint and making ourexpertise count across the world

In the Asia Pacific region we have a significant presence in China and Vietnam whileestablishing ourselves in the adjoining nations such as Laos Thailand Myanmar etc. Ourexisting project in China had higher revenues this year. In the Middle East and NorthAfrica our joint ventures and wholly owned subsidiaries are developing projects in DubaiEthiopia and Botswana. We have established ourselves in the US too by securing operationsand maintenance contracts in Texas

Recalibrating our strategy

During the year the Company right sized its project portfolio through divestment ofinvestments in certain assets refinancing of existing debts of the project companies at alower rate of interest issue of Debentures at a lower interest rate with longer termmaturity etc to optimize the balance sheet and strengthen the cash flow. One of theissues in the Public Private Partnership (PPP) sector is the dwindling credit availabilityextended by financial institutions as they face sectorial exposure limits and regulatorydemands. Consequently the infrastructure sector has witnessed restrained funding frombanks and financial institutions. Interest rates continue to decrease though not at apace which would make a significant impact on the bottom lines of companies. Howeverexpectations are that on weak growth benign inflation and the need to recoup forexreserves by attracting FPI equity flows by supporting growth RBI may consider reducinginterest rates. The Government too has pivoted away from the PPP mode of projectdevelopment to the EPC mode. As a Company we have also aligned ourselves to garner EPCprojects that are large and complex while simultaneously developing our subsidiary as anEPC contractor for small to medium ticket projects. We continue to look for BOT projectsthat meet our internal threshold criteria and are also actively looking forward toparticipating in the proposed monetization of 75 toll highways to be bid out by NHAI underthe new toll-operate-transfer (TOT) model on PPP basis

Our Performance

At a consolidated level the year in review registered marginal growth on all majorfinancial parameters. Total revenue stood at Rs 8401.62 Crore compared to Rs 8356.37Crore in the previous year. The year's Earnings before Interest Tax and Depreciation& Amortization (EBITDA) increased from Rs 2842.67 Crore in 2015-16 to Rs 3576.94Crore in 2016-17. The increase in the operating profit is on account of higherconstruction margins. Further to this the Profit After Tax (PAT) increased by 22% to Rs149.31 Crore from Rs 121.96 Crore in the previous year

With external headwinds such as reduced capital availability from banks we aretransferring this year's profits to reserve as against a dividend payout to ensurecapital for the upcoming projects. However we have created a better wealth prospect forthe investors with our Earnings per Share (EPS) standing at Rs 7.19 compared with anegative value in the previous financial year (standalone basis)

Of our portfolio of 35 projects 30 are road projects. Of the total 27 projects arealready operational (23 road projects among them). We are focused on growing ourconstruction income as well as toll revenues while aligning ourselves with theGovernment's EPC focus with four project wins already comprising a total project outlayof Rs 920 Crore

Our Order Book proportional to our stake stands at Rs 11810 Crore for BOT Rs 541Crore for EPC and $ 257 million for international projects which gives us a healthyrevenue visibility in the near term

Going Forward

With the growing population demanding better connectivity there is a huge room for thetransportation sector to grow globally. For infrastructure at least $3.3 trillion needsto be spent in order to meet the current demand according to the McKinsey GlobalInstitute's report. The growth will not be restricted to the number of kilometers of roadsbuilt as there will be a marked change in the way roads and highways are constructed byincreasing quality technology interventions and safety standards. ITNL is employing itswide-ranging resources to capture projects worldwide in almost every continent

There are tremendous opportunities in the near and long-term for the infrastructurespace in India as well. With nearly Rs 4 trillion announced in the budget for the sectoralone in the running year the importance of the same is well recognized. Nearly half ofthe amount is dedicated to the transportation sector which is a huge opportunity for ITNLto build on

ITNL will keep deleveraging its balance sheet as has been done in the past keep awatchful eye on the BOT opportunities and will continue to focus on expanding our EPCfootprints across the Country. In 2017-18 our prime focus will rest on action plans thatcan bolster our financials and these include following up and realising due claims fromthe authorities refinancing and restructuring of debt and monetization of mature assets

We are facilitating a leaping India in its mobility and connectivity by establishinghundreds of kilometers of roadways and links. All this is done with care and concern forthe people in our area of operations and we make sure that we empower them in every waywe can. While India is our primary base our footprint in the international market is alsoproportionally growing. A corporate level-led innovative safety framework is also beingincorporated into each project that we undertake

With that note I would like to heartily thank you for the support and confidence youhave extended to the Management. To continue our growth story in moving many worlds Ihumbly request continued co-operation from your end

Best Regards

Deepak Dasgupta