Reliance Infra's order book may cross $7 bn-mark: Goldman

The order book of Anil Ambani-led Reliance Infrastructure is likely to cross $7 billion-mark over the medium term, as investment in the infrastructure sector emerges key to the sustenance of GDP growth in the country.     

According to a report by leading investment bank Goldman Sachs, Reliance Infrastructure currently has about $3 billion of projects under construction or implementation and has high visibility for winning about $4.2 billion worth projects over the medium term.     

The bullish trend in the order book position of Reliance Infrastructure is largely in line with the 11th Five Year Plan of the country, which highlights that an investment of $500 billion is needed in the infrastructure sector, primarily in power, roads, railways, water, ports and airports.     

The report further said going forward, Reliance Infra is likely to benefit from the opportunities that may arise for the private sector in the infrastructure space, on account of its strong cash position and low gross debt to equity ratio.     

Though the company's order book is dominated by the power segment, it is building expertise to undertake projects in sectors like urban infrastructure, cement, steel and airports.     

The Ministry of roads and highways is likely to award projects worth $20 billion every year for next few years and targets to build up to 7,000 km of roads annually through public-private partnerships.

Reliance Power has completed financial closure for Rosa, Sasan and Butibori in the last three months and availability of funds may not be a constraint for execution of these projects in our view, Goldman Sachs said in its report.     

Goldman Sachs further said that significant progress has been made towards achieving financial closure for the Krishnapatnam power project and expects the EPC contract will likely be awarded shortly to the firm. 

Regarding the court case the report said, "We believe that Reliance Infrastructure has an asymmetric risk to the upside on the resolution of the court dispute."     

ADAG group firm Reliance Natural Resources is currently engaged in a legal battle with Reliance Industries (RIL) over supply of gas.     

However, the company faces risks like deployment of cash in unprofitable infra projects; delays in commissioning of projects under construction; lower-than-expected EPC margins; and court case outcome in favour of RIL.     

In a separate report Goldman Sachs said India may need $1.7 trillion for the ten years beginning 2010 to meet infrastructure demand and keep pace with economic growth.     

The figure is higher than Goldman's previous estimate of $620-billion and the government's estimate of $500- billion for the Eleventh Five Year Plan (2007-12).     

India's infrastructure needs will benefit not only local but also global contractors of capital goods, steel, cement and allied sectors. Risks like land acquisition and regulatory issues, however, may hamper the growth, it said.