C O M P A N Y

U P D A T E

India 18 June 2012

Atlanta Limited
NSE Code 52W H/L Sensex Face Value Free Float Avg Vol (weekly) ATLANTA Rs 91/47 16,706 Rs 2 26.35% 265,401

CMP Rs 58.2

Sector: Infrastructure
BSE Code CMP (Jun 18) Nifty Equity Cap (m) Shares (m) Market Cap (m)

New Roads to Success

Atlanta ended FY12 with order book in excess of Rs 24bn which is over 4x FY13e revenues, set to put the company on a new growth trajectory. Though the company reported 31% decline in revenues in FY12 and lower EBITDA margin at 22.3%, with 3 new project wins in FY12, and commencement of second BOT project, Atlanta is set to achieve scale in its roads business from FY13 onwards.
3 new road BOTs worth Rs 27bn won in F12 are key growth drivers

...

ALTA.IN Rs 58.2 5,064 Rs 188 81.5 Rs 4,739

Shareholding Pattern (March 31, 2012)

Public 10.58% Bodies Corporat 12.79% Domestic Institutions 2.98%

Promoter 73.65%

Price Performance (Last 6 months)

Atlanta 75 70 65 60 55 50 45 40 19-Dec-11 19-Jan-12 19-Feb-12 19-Mar-12 19-Apr-12 19-May-12 Nifty

Company won 3 BOTs in FY12 1) Rs 12bn project in Bihar; 2) Rs 2bn project in Punjab and 3) Rs 13.2bn NHAI project in UP (49% stake, 51% with JV partner Essar Projects). These 3 projects collectively contribute over 70% to the EPC order book, giving strong visibility to the EPC business also. The infra EPC order book is executable by FY15. Two operational BOTs, road business set for further growth with improved cash flows During FY12 Altanta has started collecting toll on its second BOT project: the Nagpur-Kondhali BOT for NHAI. This adds to the Mumbra bypass BOT where it has been collecting toll since FY08. The projected cash flows from these 2 projects in FY13 and FY14 is Rs 783mn and Rs 941mn, respectively. With more bids likely with Essar, and ability to bid for Rs 10bn projects on its own, road portfolio could grow further in the coming years. Real estate would continue to be value accretive Atlanta has prudently invested in land parcels near the BOT projects sites, with plans to develop and monetise it post development of infrastructure. A large residential project, Atlanta Enclave, near its Mumbra project, has the potential to generate Rs 2.2-2.25bn in revenues. Since the cost of land has been very nominal, the project is expected to contribute significantly to the profitability of the company.

Valuation

Rs

Base Case

113.2

Bull Case

142.3

Details We value all 5 BOT projects on projected traffic growth rates. EPC is valued at historical average of 5x EV/EBITDA. Real estate project at realization of Rs 4,670 per sq ft. Revenue growth 10% more than the base assumption. Construction valued at 20% premium to average (6x). Revenue growth 10% less than the base assumption. Construction valued at 20% discount to average (4x). FY'11 FY'12 1,942.2 433.8 (75.9) 22.3% -3.9% -2.4% 3.5% -66.2 1.6 4.6 20.5 2.2 FY'13E 5,575.8 1,671.1 351.0 30.0% 6.3% 10.9% 11.1% 14.3 1.5 1.6 5.3 2.9 FY'14E 7,791.0 2,460.8 980.3 31.6% 12.6% 25.2% 13.2% 5.1 1.1 1.1 3.6 3.0

Bear Case

86.1

Revenue (Rs mn) EBITDA (Rs mn) PAT (Rs mn) EBITDA Margin PAT Margin ROAE ROACE P/E Price/Book EV/Net Sales EV/EBITDA D/E

2,841.5 905.2 439.9 31.9% 15.5% 14.9% 11.0% 11.4 1.6 3.1 9.8 1.4

We have revised our fair value target from Rs 134 to Rs 113 per share, due to slower growth expected in the EPC business during FY13 and FY14. Despite challenges in FY12, Atlanta stock has remains attractive. The company is set to tie-up financing for its 3 new BOT projects over the next 2 months. With portfolio of 5 BOT projects, supporting EPC business, and low risk real estate projects, there is considerable value in the Atlanta stock. Even a bear case valuation (considering lower traffic growth) gives a target price of Rs 86.1, suggesting over 48% upside from the current market price.

Source: Company data, Four-S Research

Four-s reports are available on BLOOMBERG, Reuters, Thomson Publishers and Market Publishers

Company Report: Atlanta Limited

June 12

Performance Update
Order books up ~3x in FY12
Ends the year with order book of Rs 24.65bn Robust order book of Rs 25bn gives earning visibility Atlanta ended the year 2011-12 with a strong increase in order book. As on 31 March 2012, its order book was Rs 24.65bn; the corresponding figure was Rs 8bn on 31 March 2011. The EPC order book stood Rs 22.41bn and real estate order book stood Rs 224mn. This is around 4.4x FY13e revenue. Driven by 3 BOT project wins during the year Strong captive order book lends visibility to the EPC business The increase in order book was driven by 3 major road BOT projects wins in FY12 - 1) Rs 12bn project in Bihar; 2) Rs 2bn project in Punjab and 3) Rs 13.2bn NHAI project in UP (49% stake, 51% with JV partner Essar Projects). The EPC for all three will be done by Atlanta. These 3 projects contribute Rs 17.5bn (71%) to the order book. In house projects not only provide visibility, but better payment flows and resource mobilisation. For the Bihar and Punjab projects, the company expects to achieve financial closure by July 15 and expected appointment date is August 01. For the UP project, financial closure is expected by June end. Commenced toll collection on second BOT project Commenced operations of second toll project During F12, the company also commissioned its second road BOT project in FY12 the Nagpur-Kondhalli project for NHAI. This project is a part of NH6 which forms major link in the road network connecting Hajira in Gujarat and Kolkata in West Bengal. A sizeable amount of inter-state and intra-state traffic passes through this route and there is no convenient alternative route to this stretch. The concession period for the project is 20 years. The toll collection commenced from September 2011 and the total toll collection for FY12 was Rs 140mn. Upside potential from ongoing Mumbra project Mumbra concession period could extend from 2024 to 2044 Atlanta has made a representation for extending the concession period for the Mumbra Bypass project from 2024 to 2044. It won an award in case of arbitration with Chief Engineer, PWD, Maharashtra due to which the concession period is expected to extend up to 2044. This is likely to provide huge upside to the company. Other projects progress on track In its real estate business, construction has started in the project Atlanta Enclave, in Sheelphata, Mumbai. In the first phase, the company is building 2 towers which is expected to be completed by December 2014. First tower has already been sold during the pre launch and the second tower is also half sold. For the entertainment city project near Surat, Atlanta has appointed

Four-S Research

Company Report: Atlanta Limited

June 12

master planning consultant and land acquisition is in progress.

FY12 performance impacted by delay in financial tieup

During the year, total revenues on a standalone basis declined 39% YoY from Rs 2,785mn to Rs 1,702mn. This was due to delay in financial tieup for the Bihar project due to which Atlanta realized EPC revenues of Rs 337mn as against the estimated Rs 1,500mn. Financial tie up for the aforementioned is now expected to be done by end June 2012, so revenue in F13 would reflect that.
P&L Operating Income Raw Material costs Employee Cost Other Expenditure EBITDA EBITDA Margin% Depreciation EBIT Other Income Interest PBT Add: Prior Period Adjustments Tax PAT from ordinary activities Extraordinary items PAT PAT Margin (%) Q4FY11 869 495 23 15 336 39% 65 271 44 104 212 78 134 (37) 171 20% Q4 FY12 335 137 21 368 (191) (15) (176) 67 127 (236) 156 (48) (32) (32) FY'11 2,785 1,591 62 120 1,012 36% 140 873 61 286 649 196 453 453 16% FY'12 1,702 795 69 499 340 20% 94 247 247 432 62 156 29 189 189 11% YoY -39% -50% 12% 317% -66% -33% -72% 302% 51% -91% -85% -58% -58%

*Standalone results

Rs Mn

Other expenditure increased from Rs 120mn in FY11 to Rs 499mn in FY12. This was due to provision of Rs 327mn in the fourth quarter, which resulted in a loss in Q4. The provision was as per a ruling in an arbitration process involving a NHAI project in Orissa. Thus there has been a decline in EBITDA Margin from 36% in FY11 to 20% in FY12. There has been prior period adjustment relating to amortization expense. At Mumbra Bypass, till 2011, amortization was charged on available concession period, thus every year same amount of amortization was charged. Now as per revised Schedule IV of Companies Act 1956, amortization has to be charged based on estimated revenue. Thus for FY12 differential amortization amount of Rs 156m has been added back to Profit.
P&L Operating Income Raw Material costs Employee Cost Other Expenditure EBITDA EBITDA Margin% FY'11 2,841.5 1,608.2 62.9 123.2 1,047.2 36.9% FY'12 1,942.2 908.2 74.5 525.7 433.8 22.3% YoY -31.6% -43.5% 18.5% 326.7% -58.6%

Four-S Research

Company Report: Atlanta Limited

Depreciation EBIT Interest Other Income PBT Add: Prior period adjustments Tax PAT Share of Profit/ (Loss) to Minority Interest PAT PAT Margin % 141.7 905.5 285.5 25.9 645.9 206.0 440.0 (0.0) 440.0 15.5% 131.2 302.6 539.1 36.5 (200.0) 156.4 32.5 (76.2) (0.2) (75.9) -

June 12
-7.4% -66.6% 88.8% 41.0% -131.0% -84.2% -117.3% 502.6% -117.3%

*Consolidated results

Rs Mn

Projections and Price Target

We revise the revenue and PAT for FY13 and 14
We have revised our estimates for Atlanta in FY13 and FY14 due to a likelihood that the EPC turnover buildup from the orderbook in hand could be slower than earlier expected.
FY13E Previous 6,023.2 1,998.6 687.4 33.2% 11.4% FY14E Previous 11,384.0 3,862.8 1,939.4 33.9% 17.0%

Revised Revenue (Rs Mn) EBITDA (Rs Mn) PAT (Rs Mn) EBITDA Margin (%) PAT Margin (%) 5,575.8 1,671.1 351.0 30.0% 6.3%

Var(%) -7.4% -16.4% -48.9%

Revised 7,791.0 2,460.8 980.3 31.6% 12.6%

Var(%) -31.6% -36.3% -49.5%

Strong revenue and profit growth ahead The current order book has to be executed over FY13-15, giving strong visibility to growth in the EPC business during this period. Based on this, we expect revenues from construction business to grow over ~5x in 2 years. Revenue from construction is expected to grow from around Rs 1.3bn in FY12, to over Rs 6.6bn in FY14. BOT toll income is also expected to approximately double over the same period as the company has started collecting toll from Nagpur-Kondhali project in FY12 in addition to toll from Mumbra Bypass project. Atlantas residential project on Mumbra land would also contribute to the top line in FY13 and FY14 with Rs 225mn and Rs 300mn of revenues booked, respectively. Altantas earnings are likely to show strong growth as well. Net profit of the consolidated business is likely to cross Rs 980mn level in FY14, giving PAT margin of 12.6%.

Valuation and Price Target

Fair Value of Rs 113

Four-S Research

Company Report: Atlanta Limited

June 12

We have revised the fair value at Rs 113 per share, down from our earlier estimate of Rs 134 per share, due to lower than expected growth in the EPC business in FY12. We have valued the company using the sum-of-parts method. The value can be broadly divided into three parts: Rs 106 from the BOT portfolio, Rs 3 from the construction business of the standalone company and Rs 4 from the wholly owned real estate project Atlanta Enclave. In these projections, we have not built any value for the planned mega project: the Entertainment City, near Surat, Gujarat. The project is in fairly early stages, and several details of the project are yet to emerge. Sensitivity analysis suggests low downside risk We tried various scenarios which could negatively impact the share price like lower traffic growth, higher cost of debt, etc. Among the various variables taken above, lower traffic growth has the maximum impact. With 10% less revenue growth than the base case for each of the BOT projects, though the NPV of BOT projects go down by ~17%, there is still value in the business with fair value of Rs 86.1, suggesting low downside risk. A significant long term upside potential is possible from new tourism infra project, which may start reflecting in the stock price once the company gets land from the state government and environment clearance is in place.

Four-S Research

Company Report: Atlanta Limited

June 12

Financial Annexure Profit & Loss Statement - Consolidated

FY'10 Contract Income Toll Income Real Estate Income Other Operating Income Total Revenue 1,648.1 373.6 2,021.7 FY'11 2,490.7 264.0 86.8 2,841.5 FY'12 1,305.9 584.9 6.0 51.5 1,948.3 FY'13E 4,567.4 783.3 225.1 5,575.8 FY'14E 6,550.1 940.7 300.2 7,791.0

Total Operating Expenditure

1,239.3

1,936.4

1,508.5

3,904.7

5,330.1

EBITDA Depreciation & Amortization EBIT Other Income Financial Expenses Profit Before Tax and Exceptional Items Exceptional Items Profit Before Tax Prior Period Expenditure Tax Expenses (including Deferred Tax) Net Profit from ordinary activities after tax Extraordinary items of expenses (net of taxes) Net Profit Before Minority Interest Share of Profit of Minority Interest Net Profit After Tax

782.4 141.3 641.1 165.9 296.6 510.4 510.4 106.4 403.9 403.9 0.0 403.9

905.2 141.7 763.5 168.0 285.5 645.9 645.9 206.0 439.9 439.9 0.0 439.9

439.8 131.2 308.6 37 539 (194.0) (194.0) 156.4 32.5 (70.1) (70.1) (0.3) (69.9)

1,671.1 392.7 1,278.4 259 923 615.2 615.2 264.3 351.0 351.0 0.0 351.0

2,460.8 408.8 2,052.0 272 835 1,489.2 1,489.2 508.9 980.3 980.3 0.0 980.3 (Rs mn)

Four-S Research

Company Report: Atlanta Limited

June 12

Balance Sheet
FY'10 Shareholder's Equity Share Capital Reserves and Surplus Total equity capital Liabilities Secured Loans Unsecured Loans Minority Interest Deferred Tax Liability Total Liabilities and Owner's Equity Assets Goodwill on consolidation Gross Block Less: Depreciation Net Fixed Assets Work-in-progress Investments 2,495.3 687.8 1,807.5 2,504.2 16.2 2,617.8 801.3 1,816.6 3,462.7 90.4 5.4 6,667.4 932.5 5,734.9 592.5 110.6 5.4 6,889.8 1,325.2 5,564.6 3,703.5 110.6 5.4 9,223.5 1,734.0 7,489.5 6,960.0 110.6 3,250.9 257.8 3.0 139.8 6,389.7 3,603.1 927.6 4.9 133.8 7,820.1 5,337.9 1,276.1 12.2 148.7 9,821.3 8,780.3 1,236.4 12.2 148.7 13,574.9 12,016.3 1,236.4 12.2 148.7 17,791.3 188.0 2,550.3 2,738.3 188.0 2,962.8 3,150.8 188 2,858.4 3,046.4 188 3,209.4 3,397.4 188 4,189.7 4,377.7 FY'11 FY'12 FY'13E FY'14E

Inventory Debtors Cash and Bank Balance Other Current Assets Loans and Advances Total Current Assets Current Liabilities Provision Total Current Liabilities Net Current Assets Miscellaneous expenditure

628.8 1,556.9 260.0 35.5 627.3 3,108.4 613.7 433.0 1,046.7 2,061.7 -

954.6 2,068.8 127.9 41.4 919.6 4,112.3 1,279.4 382.5 1,661.9 2,450.4 -

950.9 2,154.8 381.2 13.0 1,699.9 5,199.8 1,458.9 363.0 1,821.9 3,377.9 -

959.2 1,115.2 2,762.2 4.6 913.5 5,754.6 1,244.1 319.7 1,563.8 4,190.8 -

1,375.5 1,168.6 1,523.4 6.6 1,310.0 5,384.1 1,699.8 458.5 2,158.3 3,225.8 -

Total Assets

6,389.7

7,820.1

9,821.3

13,574.9

17,791.3 (Rs mn)

Four-S Research

Company Report: Atlanta Limited

June 12

Cash Flow Statement

FY'10 Net Profit/(Loss) before Tax Depreciation & Amortization Interest Expense Interest income Other Adjustments Operating Cashflow before Wcap (Increase)/Decrease in Trade/Other Receivables (Increase)/Decrease in Inventories Increase(Decrease) in Trade/Other Payables Other Current Assets 510.4 141.3 296.6 (6.5) (1.4) 940.4 217.7 (415.8) (305.3) 266.7 (45.0) Cash Generated from Operations Direct Taxes Paid Operating Cashflow- A Purchase/Sale of Fixed Assets (net) Purchase of Investments Sale of Asset/investment Interest Income Cash from Investing activities- B Proceeds from long term borrowings (Banks) Proceeds from long term borrowings (Contracting Authority) Proceeds from short term borrowings Grant from NHAI Dividend paid Interest Expenses Cash from Financing activities- C Change in Cash= A+B+C Opening Balance Closing Balance 658.7 (87.7) 571.0 (773.9) (0.5) 36.9 6.5 (731.0) 417.8 (54.5) 53.4 123.3 (296.6) 243.4 83.3 176.5 259.9 FY'11 645.9 141.7 285.5 (15.2) (8.2) 1,049.7 (511.9) (325.7) 652.7 (437.8) (48.5) 378.5 (123.6) 254.9 (1,118.8) (0.6) 8.2 15.2 (1,096.0) 352.2 (44.0) 713.8 (27.4) (285.5) 709.1 (132.0) 259.9 127.9 FY'12 (194.0) 131.2 539.1 156.7 633.0 (86.0) 3.6 179.5 (786.3) (2.8) (58.9) (32.5) (85.4) (1,179.3) (20.2) (1,199.5) 2,083.4 (539.1) 1,544.3 253.4 127.9 381 3,498.7 (264.3) 3,234.4 (3,333.4) (3,333.4) 3,402.6 (922.6) 2,480.0 2,381.0 381.2 2,762 2,459.4 (508.9) 1,950.5 (5,590.2) (5,590.2) 3,236.0 (835.2) 2,400.9 (1,238.9) 2,762.2 1,523 (Rs mn) FY'13E 615.2 392.7 922.6 1,930.5 1,039.6 (8.2) (214.8) 751.6 FY'14E 1,489.2 408.8 835.2 2,733.2 (53.5) (416.4) 455.7 (259.7)

Four-S Research

Company Report: Atlanta Limited

June 12

Ratios
FY'10 Per share ratios EPS (Rs) Book Value/Share CEPS 5.0 33.6 6.7 5.4 38.7 7.1 NM 37.4 0.8 4.3 41.7 9.1 12.0 53.7 17.0 FY'11 FY'12 FY'13E FY'14E

Profitability Ratios EBITDA Margin PAT Margin ROAE ROACE 38.7% 20.0% 18.1% 11.3% 31.9% 15.5% 14.9% 10.7% 22.6% -3.6% -2.3% 3.6% 30.0% 6.3% 10.9% 11.1% 31.6% 12.6% 25.2% 13.2%

Growth rates Sales Growth EBITDA Growth PAT Growth EPS Growth 4.0% 36.3% 108.6% 108.6% 40.6% 15.7% 8.9% 8.9% -31.4% -51.4% -115.9% -115.9% 186.2% 280.0% -600.7% -602.5% 39.7% 47.3% 179.3% 179.3%

D/E Current Ratio Quick Ratio Interest Cover Cash Ratio

1.3 3.0 2.4 0.8 0.4

1.4 2.5 1.9 0.7 0.1

2.2 2.9 2.3 0.6 0.3

2.9 3.7 3.1 1.4 2.2

3.0 2.5 1.9 2.5 0.9

Valuation Ratios P/E Price/Book EV/Net Sales EV/EBITDA Mcap/Sales 11.7 1.7 4.3 11.0 2.3 10.7 1.5 3.0 9.5 1.7 NM 1.6 4.6 20.2 2.6 14.3 1.5 1.6 5.3 0.9 5.1 1.1 1.1 3.6 0.6

Activity/turnover ratios Asset Turnover Inventory Turnover Average Debtors turnover Average Payables turnover Net Working Cap turnover(excl cash) NWC Days 0.8 3.2 1.3 3.3 1.1 325 1.1 3.0 1.4 2.2 1.2 298 0.3 2.0 0.9 1.3 0.7 561 0.8 5.8 5.0 4.5 3.9 94 0.8 5.7 6.7 4.6 4.6 80

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Company Report: Atlanta Limited

June 12

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Company Report: Atlanta Limited

June 12

Notes

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