Asia India

Company

Transportation Infrastructure

11 June 2009
Forecast Change
IVRCL Infra
Reuters: IVRC.BO Bloomberg: IVRC IN Exchange: BSE Ticker: IVRC Sell
Price at 10 Jun 2009 (INR) 368.85

How much can Promoter

Global Markets Research

Price target - 12mth (INR) 260.00

52-week range (INR) 383.10 - 63.85
BSE 30 15,127

dilute? Downgrade to Sell Key changes

Rating
Price target
Hold to Sell
90.00 to 260.00
È
Ç 188.9%
Deepak Agrawala Manish Saxena Sandeep Palgota
Sales (FYE) 49,720 to 48,819 È -1.8%
Research Analyst Research Analyst Research Associate
Op prof margin (FYE) 8.7 to 7.7 È -12.2%
(+91) 22 66584214 (+91) 22 6658 4034 (+91) 22 6658 4056
deepak-m.agrawala@db.com manish.saxena@db.com sandeep.palgota@db.com
Price/price relative

Dilution concerns eased, operating FCF remains negative; Sell 600

IVRCL's stock has seen a run-up by 95% over the last month in line with the BSE 450
Realty Index and stocks with comparatively weaker balance sheets. This appears 300
to be on an easing of investor worries about the liquidity environment. While near-
150
term worries on equity requirement for growth can be met, our worries stem from
0
1) the business’ ability to generate and sustain positive FCF, and 2) the extent of
further dilution in Promoter’s holding, currently at 9.7% at our revised target price

07

07

08

08

08

09
7

8
/0

/0
6/

9/

3/

6/

9/

3/
of INR260/sh. We downgrade to Sell.

12

12
IVRCL Infra
Management seems confident of demand revival BSE 30 (Rebased)
With new government in place, management appears decisively confident in their
Performance (%) 1m 3m 12m
guidance for FY10e, suggesting 20-40% yoy growth in order inflows primarily Absolute 115.4 235.6 6.1
driven by a pick-up in irrigation capex, especially in the states of Andhra Pradesh BSE 30 27.4 85.4 1.6
and Madhya Pradesh, cash contracts/annuity from roads, and power T&D. We
expect negative FCF in FY10e despite assuming a constant operating margin and Stock data
~33% revenue booking growth in FY10e. Market cap (INRm) 49,238
Market cap (USDm) 1,042
Would Promoter’s stake fall below 5%? Shares outstanding (m) 133.5
Over the past five years, Promoter’s equity stake has fallen from 30% to 9.7%, Major shareholders Promoter (9.6%)
Free float (%) 90
and this has contributed to 70% accretion in net worth. We are worried that a Avg daily value traded (USDm) 18.0
continuation of a similar strategy could lead to Promoter’s stake falling below 5%
over the next 2-3 years. Despite our revised EPS at INR18.2 for FY10e and Key indicators (FY1)
INR22.4 for FY11e, they are largely in line with consensus. ROE (%) 13.2
Net debt/equity (%) 71.7
Downgrade to Sell with revised target price of INR260/sh (-21% downside) Book value/share (INR) 137.02
We value the core business at PE of 12x FY10e (earlier 4x) on an improved Price/book (x) 2.7
demand outlook and easing of equity raising scenario. We value BOOT projects at Net interest cover (x) 2.9
Operating profit margin (%) 7.7
NPV at CoE of 14% (earlier 16%) and listed subsidiaries at market price. Key
upside risk: if management brings in any strategic/financial partner at significant Related recent research Date
premium valuations, there could be a sharp uptick in the stock price, and Indian Infrastructure: A pick-up in infrastructure
management’s increased focus on generating positive FCF from operations could investments by private sector? 24 Mar 2009
lower the equity requirement in the medium term. See pages 7-8. Indian Infrastructure: Fiscal package - The start of fresh
set of investments 05 Jan 2009
Forecasts and ratios Sharp price correction;
Year End Mar 31 2007A 2008A 2009E 2010E 2011E upgrade to Hold 01 Nov 2008
Sales (INRm) 23,058.9 36,606.0 48,818.9 58,393.3 71,208.6
EBITDA (INRm) 2,301.0 3,614.4 4,217.8 5,006.7 6,120.4
Reported NPAT (INRm) 1,414.1 2,104.8 2,259.7 2,436.2 2,990.2
DB EPS FD(INR) 11.91 16.00 16.93 18.25 22.40
OLD DB EPS FD(INR) 11.91 16.00 15.01 12.79 17.77
% Change 0.0% 0.0% 12.7% 42.6% 26.0%
PER (x) 24.8 25.8 21.8 20.2 16.5
EV/EBITDA (x) 15.5 16.6 13.8 12.3 10.5
Source: Deutsche Bank estimates, company data
1
DB EPS is fully diluted and excludes non-recurring items
2
Multiples and yields calculations use average historical prices for past years and spot prices for current and future years, except P/B which uses the
year end close

Deutsche Bank AG/Hong Kong

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at
http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1. MICA(P) 106/05/2009
11 June 2009 Infrastructure IVRCL Infra

Model updated:08 June 2009 Fiscal year end 31-Mar 2006 2007 2008 2009E 2010E 2011E
Running the numbers Financial Summary
Asia DB EPS (INR) 9.65 11.91 16.00 16.93 18.25 22.40
Reported EPS (INR) 9.65 11.91 16.00 16.93 18.25 22.40
India DPS (INR) 0.00 1.00 1.40 1.40 1.40 1.40
Infrastructure BVPS (INR) 44.3 101.9 120.3 137.0 153.6 174.4
Weighted average shares (m) 96 119 132 133 134 134
Average market cap (INRm) 14,173 35,087 54,266 49,238 49,238 49,238
IVRCL Infra Enterprise value (INRm) 15,791 35,637 59,910 58,372 61,543 64,514
Valuation Metrics
Reuters: IVRC.BO Bloomberg: IVRC IN
P/E (DB) (x) 15.2 24.8 25.8 21.8 20.2 16.5
P/E (Reported) (x) 15.2 24.8 25.8 21.8 20.2 16.5
Sell P/BV (x) 6.27 2.87 3.33 2.69 2.40 2.12
Price (10 Jun 09) INR 368.85 FCF Yield (%) nm nm nm nm nm nm
Target price INR 260.00 Dividend Yield (%) 0.0 0.3 0.3 0.4 0.4 0.4

52-week Range INR 63.85 - 383.10 EV/Sales (x) 1.1 1.5 1.6 1.2 1.1 0.9
EV/EBITDA (x) 11.8 15.5 16.6 13.8 12.3 10.5
Market Cap (m) INRm 49,238
EV/EBIT (x) 12.8 17.1 18.2 15.6 13.8 11.7
USDm 1,042

Company Profile Income Statement (INRm)

IVRCL Infrastructures & Projects Ltd is a construction Sales revenue 14,957 23,059 36,606 48,819 58,393 71,209
company engaged in building buildings, bridges, pipelines, Gross profit 1,800 3,220 5,261 5,094 6,075 7,456
marine construction, canal modernization and road works. EBITDA 1,343 2,301 3,614 4,218 5,007 6,120
IVRCL group is also involved in various real estate projects Depreciation 110 216 328 473 533 612
and also has ownership of many BOOT projects.
Amortisation 0 0 0 0 0 0
EBIT 1,233 2,085 3,286 3,745 4,474 5,508
Net interest income(expense) -253 -308 -478 -1,306 -1,376 -1,722
Associates/affiliates 0 0 0 0 0 0
Exceptionals/extraordinaries 0 0 0 0 0 0
Other pre-tax income/(expense) 57 74 45 299 150 200
Profit before tax 1,037 1,850 2,853 2,738 3,248 3,986
Price Performance Income tax expense 108 436 749 478 812 996
Minorities 0 0 0 0 0 0
600 Other post-tax income/(expense) 0 0 0 0 0 0
450 Net profit 930 1,414 2,105 2,260 2,436 2,990
300 DB adjustments (including dilution) 0 0 0 0 0 0
150 DB Net profit 930 1,414 2,105 2,260 2,436 2,990

0
Jun 07 Nov 07 M ay 08 Nov 08 Apr 09 Cash Flow (INRm)
Cash flow from operations -3,420 -694 -4,336 -2,824 -1,702 -1,251
IVRCL Inf ra BSE 30 (Rebased)
Net Capex -527 -1,253 -1,618 -800 -750 -1,000
Free cash flow -3,946 -1,947 -5,954 -3,624 -2,452 -2,251
Margin Trends
Equity raised/(bought back) -1,432 85 -28 0 0 0
Dividends paid 0 0 0 0 0 0
10.4
10.0 Net inc/(dec) in borrowings 4,315 -1,225 5,117 3,322 3,725 21,786
9.6 Other investing/financing cash flows 0 0 0 0 0 0
9.2 Net cash flow 0 -3,088 -865 -302 1,273 19,535
8.8
8.4 Change in working capital -4,470 -2,339 -6,820 -5,571 -4,671 -4,853
8.0
7.6
06 07 08 09E 10E 11E Balance Sheet (INRm)
Cash and other liquid assets 2,443 2,238 1,729 1,004 1,559 2,648
EBITDA Margin EBIT Margin
Tangible fixed assets 1,373 2,435 3,733 4,060 4,277 4,665
Goodwill/intangible assets 0 0 0 0 0 0
Growth & Profitability Associates/investments 2,765 2,829 3,409 3,979 3,979 3,980
Other assets 11,099 20,596 27,102 38,387 44,419 51,586
80 25
Total assets 17,680 28,098 35,973 47,429 54,233 62,879
60 20
Interest bearing debt 6,827 5,617 10,782 14,117 17,843 21,904
15
40 Other liabilities 6,084 9,264 9,132 15,020 15,880 17,695
10 Total liabilities 12,910 14,881 19,913 29,137 33,723 39,598
20 5 Shareholders' equity 4,770 13,217 16,060 18,292 20,510 23,280
0 0 Minorities 0 0 0 0 0 0
06 07 08 09E 10E 11E Total shareholders' equity 4,770 13,217 16,060 18,292 20,510 23,280
Sales growt h (LHS) ROE (RHS) Net debt 4,383 3,379 9,053 13,113 16,284 19,255

Solvency Key Company Metrics

Sales growth (%) 43.3 54.2 58.8 33.4 19.6 21.9
100 8
DB EPS growth (%) 487.2 23.5 34.3 5.8 7.8 22.7
80 6 EBITDA Margin (%) 9.0 10.0 9.9 8.6 8.6 8.6
60
4 EBIT Margin (%) 8.2 9.0 9.0 7.7 7.7 7.7
40 Payout ratio (%) 0.0 8.4 8.8 8.3 7.7 6.3
20 2
ROE (%) 21.1 15.7 14.4 13.2 12.6 13.7
0 0 Capex/sales (%) 3.5 5.4 4.4 1.6 1.3 1.4
06 07 08 09E 10E 11E Capex/depreciation (x) 4.8 5.8 4.9 1.7 1.4 1.6
Net debt / equit y (LHS) Net int erest cover (RHS) Net debt/equity (%) 91.9 25.6 56.4 71.7 79.4 82.7
Net interest cover (x) 4.9 6.8 6.9 2.9 3.3 3.2

Deepak Agrawala Source: Company data, Deutsche Bank estimates

+91 22 66584214 deepak-m.agrawala@db.com

Page 2 Deutsche Bank AG/Hong Kong

11 June 2009 Infrastructure IVRCL Infra

Investment thesis
Outlook
We downgrade IVRCL to Sell with a revised target price of INR260/sh. The macro demand
environment appears to be positive, and we believe that guidance for order inflow growth of
+20% in FY10e looks achievable. We have raised earning estimates by 43% in FY10e and
26% in FY11e. However, with absolute performance of 95% in the past month, most of the
earnings upside from a demand revival seems to be in the price. With the easing liquidity
scenario, the near-term worries on management’s ability to raise equity appear to have
reduced. However, we remain concerned about:
„ Continual negative free cash flow from operations. Our cash flow analysis suggests that
management needs to raise debt to about INR3.7bn in FY10e to attain our estimates.
This assumes net working capital at about 49% of sales – among the highest in the
Indian construction industry.
„ Our simple scenario analysis shows that if management were to meet its guidance of
35% yoy revenue growth and if WC/sales increases by 5-10% (base case = 49%), then
dilution of ~2-5% at the current price of INR330/sh could be required to maintain a
debt:equity of 1:1.
„ In the last month, IVRCL’s stock has outperformed the broader BSE Sensex by 68%,
implying that the positives from the demand increase are largely priced in.

Valuation
We value IVRCL on an SOTP basis. IVRCL has two businesses – a contracting business and a
developer business. We value the core contracting business at 12x FY10e (earlier 4x), as the
equity funding requirement for the company has considerably eased and the demand
scenario has improved significantly. Furthermore, this multiple is in line with other mid-cap
construction companies. The developer business can broadly be divided into two listed
subsidiaries and four unlisted subsidiaries. We value the unlisted subsidiaries (i.e. the BOOT
road project and the desalination project) at NPV of the project’s cash flows at a CoE of 14%
(reduced from 16% due to a reduction in equity risk premiums), based on our forecast of a
risk-free rate of 8.1%, our forecast for a risk premium of 5.4% and a beta of 1.1. We estimate
this value to be INR29/sh. The listed subsidiaries (i.e. IVR Prime and Hindustan Dorr Oliver)
have been valued at current market value, which gives a value of INR45/sh. Overall we use a
conglomerate discount of 10% to reach our 12-month target price of INR260/sh.

Risks
Key upside risks include management’s ability to bring in any strategic/financial partner at
significant premium valuations from which there could be a sharp increase in the stock price.
Furthermore, if management increases its focus on generating positive free cash flow from
operations, the equity requirement in the medium term could drop. A further upside risk is an
improvement in cash collection lowering working capital intensity.

As per our sensitivity analysis, if order inflows are 10% higher than our estimates, then EPS
would increase by 5% in FY10e. If the order execution cycle improves leading to revenue
realization 10% higher than our estimates, then EPS would increase by 24% in FY10e and
17% in FY11e. A 100bps fall in EBITDA margins could lead to a 16% drop in EPS in FY10e.

Deutsche Bank AG/Hong Kong Page 3

11 June 2009 Infrastructure IVRCL Infra

Consistent equity placement

led to growth in net worth
Promoter shareholding has gradually reduced
Historically, Promoter has gradually reduced its shareholding in IVRCL and placed equity to
various investors. As a result, Promoter’s shareholding has fallen sharply from ~50% in FY00
to 9.7% in FY09.

Figure 1: Promoter shareholding has gradually dropped

% Shareholding Promoter holding (%) Non-promoter holding (%)

100%

90%

80%

70%

60%
Preferential
50% allotment
Private
40% Placement
Preferential
30%
allotment
20% QIB / FCCB

10%

0%
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Source: Company data, Bombay Stock Exchange

Net worth accretion primarily due to equity issuances

During FY04-08, the accretion to net worth was up by INR14bn – 74% of this accretion was
contributed by equity placement (including securities premium).

Figure 2: Net worth built up over the years Figure 3: Equity and premium formed a substantial
chunk of net worth in recent years
INR mn Equity + Securities premium Reserves and Surplus (excl Securities premium)
As Proportion of Networth Equity + Securities premium Reserves and Surplus (excl Securities premium)
12,000
100%

90%
10,000

80%

8,000 70%

60%

6,000
50%

40%
4,000
30%

20%
2,000

10%

- 0%
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

Source: Annual Reports of the company Source: Annual Reports of the company

Page 4 Deutsche Bank AG/Hong Kong

11 June 2009 Infrastructure IVRCL Infra

As a result, debt:equity has fallen recently

Owing to equity placement, the company managed to reduce debt:equity to its lowest level
of 0.4x in FY07. However, in FY09, the debt:equity ratio started rising and is currently at 0.8x,
primarily due to an increase in the working capital requirement.

Figure 4: Debt:equity
Debt : Equity (x)
1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

-
FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Source: Deutsche Bank, company data

Additional borrowings required to meet our estimates

Our assessment of the financials suggests that the company would need additional
borrowings of about INR3.9bn in FY10e to meet our earnings expectation. This assumes net
working capital of 49% of net sales for FY10e. Figure 5 shows key highlights of cash flow.

Figure 5: Cash flow

FY09e FY10e FY11e

Operating profit before working capital changes 3,211 4,262 5,342

Working capital changes and tax paid (5,571) (6,279) (5,492)
Tax paid (464) (947) (1,201)
Net cash generated from operations (2,824) (2,965) (1,352)

Capex (800) (750) (1,000)

Investments (570) - (1)
Loans to subsidiaries 174 (500) (500)
Other

Net cash used in investing activities (1,195) (1,250) (1,501)

Issue of share capital - - -

borrowings 3,322 3,931 4,061
others

Net cash from financing 3,322 3,931 4,061

Source: Deutsche Bank, Company

Deutsche Bank AG/Hong Kong Page 5

11 June 2009 Infrastructure IVRCL Infra

Assumptions and forecasts

Our assumptions factor in virtually all negatives
Figure 6 includes the key changes in the earnings model. As the order inflow in FY09e was
lower than our estimates, we have assumed 8% yoy growth in order inflows in FY10e and
11% yoy growth in the order backlog. With marginal improvement in the execution cycle, we
have raised our revenue estimates by 23% in FY10e, but we have maintained the EBITDA
margins at ~9% in FY10-11e.

Figure 6: Changes in key assumptions

FY10e FY11e

Old Estimates New Estimates chg (%/bps) Old Estimates New Estimates chg (%/bps)
Order Inflow 95,000 75,000 (21) 115,000 115,000 -
Order Backlog 222,749 160,647 (28) 274,112 203,283 (26)
Gross Sales 51,485 59,353 15 63,637 72,365 14
EBITDA 4,914 5,007 2 6,221 6,120 (2)
EBITDA Margins (%) # 9.6 8.6 (107) 9.9 8.6 (128)
Source: Deutsche Bank. # Change in bps

Accordingly, we have raised our EPS estimates by 43% in FY10e and 26% in FY11e. While
we estimate the earnings CAGR at 15%, RoE is estimated at 13% in FY10e.

Figure 7: Financials at a glance – standalone

FY10e FY11e

Old Estimates New Estimates chg (%/bps) Old Estimates New Estimates chg (%/bps)
Sales 50,963 58,393 15 62,991 71,209 13
EBITDA 4,914 5,007 2 6,221 6,120 (2)
EBIT 4,421 4,474 1 5,657 5,508 (3)
Interest 1,942 1,376 (29) 2,196 1,722 (22)
PAT 1,708 2,436 43 2,372 2,990 26
EPS (INR/sh) 13 18 43 18 22 26
ROE # 9 12.6 345 12 13.7 211
ROCE # 12 12.7 57 14 13.2 (39)
Source: Deutsche Bank, #Change in bps

Page 6 Deutsche Bank AG/Hong Kong

11 June 2009 Infrastructure IVRCL Infra

Valuation and risks

Stock moved in tandem with BSE Realty Index
IVRCL’s stock has moved in line with the BSE Realty Index in the past three months and has
significantly outperformed the BSE Midcap Index by 150%.

Figure 8: IVRCL has underperformed BSE Midcap Index by 30% in past month
(Index; x = IVRCL BSE Realty Index BSE Midcap Index
100)

400

350

300

250

200

150

100

50

-
3/2/2009 3/17/2009 4/1/2009 4/16/2009 5/1/2009 5/16/2009 5/31/2009

Source: Deutsche Bank, Bloomberg

We raise target price to INR260/sh using SOTP methodology

We continue to value IVRCL on a SOTP basis. The core contracting business has been valued
at 12x FY10e (earlier 4x), as the equity funding requirement for the company has considerably
eased and the demand scenario has improved significantly. Furthermore, this multiple is in
line with other mid-cap construction companies. The unlisted subsidiaries (i.e. the BOOT road
project and the desalination project) have been valued at the NPV of the projects’ cash flows.
We have assumed a CoE of 14% (reduced from 16% due to a reduction in equity risk
premiums), based on our forecasts of a risk-free rate of 8.1% and risk premium of 5.4% and
a beta of 1.1. We estimate this value to be INR29/sh. The listed subsidiaries (i.e. IVR Prime
and Hindustan Dorr Oliver) have been valued at the current market value, which yields
INR45/sh. Overall, we use a conglomerate discount of 10% to reach our 12-month target
price of INR260/sh.

Figure 9: SOTP valuation

Business Equity value Equity value/sh Comments
(INR m) (INR/sh)

Core contracting 29,234 219 Based on PE 12x FY10e - Mid-cycle multiple

BOOT Projects 3,886 29 IVRCL's share of NPV at CoE 14%
Equity stake in Hindustan Dorr Oliver 1,917 14 On market price of HDOR
Equity stake in IVR Prime 4,116 31 On market price of IVR Prime
Sub-Total 39,152 293
Less: Holding co. Discount 3,915 29 10% conglomerate discount
Total 35,237 260 Rounded off
Source: Deutsche Bank

Deutsche Bank AG/Hong Kong Page 7

11 June 2009 Infrastructure IVRCL Infra

Risks and sensitivity analysis

Key upside risks include management’s ability to bring in any strategic/financial partner at
significant premium valuations for which there could be a sharp increase in the stock price.
Furthermore, if management increases its focus on generating positive free cash flow from
operations, the equity requirement in the medium term could drop. Another upside risk is an
improvement in cash collection to lower working capital intensity.

As per our sensitivity analysis:

„ Order inflow: If order inflow is 10% higher than our estimates, then the EPS would
increase by 5% in FY10e and 13% in FY11e.
„ Order execution cycle and revenues: If the order execution cycle improves and leads to a
revenue realization of 10% higher than our estimates, then the EPS would increase by
24% in FY10e and 17% in FY11e.
„ Operating margins: If the EBITDA margin is lower than our estimates by 100bps, then
EPS could potentially drop by 16% in FY10e.

Figure 10: Sensitivity analysis

Revenues EBITDA Net Income Revenues EBITDA Net Income

Base Case 62,257 5,544 2,832 76,697 6,833 3,511

Order inflow higher by 10% 63,668 5,750 2,979 81,081 7,473 3,961

% Change over base case 2 4 5 6 9 13

Order inflow lower by 10% 60,846 5,338 2,686 72,314 6,194 3,062

% Change over base case (2) (4) (5) (6) (9) (13)
Revenues 10% higher 68,483 6,452 3,520 81,986 7,605 4,116
% Change over base case 10 16 24 7 11 17
Revenues 10% lower 56,031 4,636 2,144 70,976 5,999 2,859
% Change over base case (10) (16) (24) (7) (12) (19)
Margins 100 bps higher 62,257 6,167 3,299 76,697 7,600 4,087
% Change over base case - 11 16 - 11 16
Margins 100 bps lower 62,257 4,921 2,365 76,697 6,066 2,936
% Change over base case - (11) (16) - (11) (16)
Source: Deutsche Bank

Page 8 Deutsche Bank AG/Hong Kong

11 June 2009 Infrastructure IVRCL Infra

Appendix A: Q4FY09 results

Highlights of the results
Q4FY09 results were marginally better than our expectations. Net sales at INR16.3bn (23%
yoy – the second lowest growth rate after 22% yoy during Q3FY09 in the last 18 quarters)
drove EBITDA to INR1.4bn. EBITDA margins – 8.7% (-177bps yoy) – were down due to
higher construction expenses. Interest cost has spiraled up by 89% yoy due to higher
working capital loans and increasing cost of debt. Net income at INR798m (+9% yoy – one of
the lowest yoy growth rates in the past five years) was aided by dividend income from
subsidiaries but affected by higher interest costs.

Figure 11: Q4FY09 results snapshot

INR m Q4FY09 Q4FY08 yoy (%) FY09 FY08 yoy (%)

Revenues 16,272 13,217 23 48,819 36,624 33

EBITDA 1,419 1,387 2 4,218 3,655 15
EBITDA Margin # 9 10 (177) 9 10 (134)
EBIT 1,285 1,288 (0) 3,745 3,326 13
Interest 392 208 89 1,309 518 153
Interest as % of EBIT # 31 16 1,438 35 16 1,940
Adjusted Net Income 798 733 9 2,260 2,105 7
Source: Deutsche Bank; company data

Highlights of the conference call with management

„ Order book is INR14.5bn (water segment ~70% of the order book). Management guides
for an order book of INR16-18bn in FY10e, implying growth of 10-24% yoy.
„ Water and irrigation should continue to be the main focus (primarily from the states of
Andhra Pradesh, Madhya Pradesh, West Bengal, Bihar, Karnataka), followed by power.
„ On the revenue front, management guides for revenue of INR62-65bn, implying growth
of 27-33% yoy and earnings growth of 45-55% yoy growth in FY10e.
„ As of Mar09, debt is ~INR14bn, while cash levels have dropped to INR1bn. Net working
capital remains at ~50% of sales.

Deutsche Bank AG/Hong Kong Page 9

11 June 2009 Infrastructure IVRCL Infra

Appendix 1
Important Disclosures
Additional information available upon request
Disclosure checklist
Company Ticker Recent price* Disclosure
IVRCL Infra IVRC.BO 368.85 (INR) 10 Jun 09 6,8
*Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies.

Important Disclosures Required by U.S. Regulators

Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See
“Important Disclosures Required by Non-US Regulators” and Explanatory Notes.
6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company
calculated under computational methods required by US law.

8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment banking services
from this company in the next three months.

Important Disclosures Required by Non-U.S. Regulators

Please also refer to disclosures in the “Important Disclosures Required by US Regulators” and the Explanatory Notes.
6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company
calculated under computational methods required by US law.

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this
research, please see the most recently published company report or visit our global disclosure look-up page on our
website at http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=IVRC.BO.

Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject
issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any
compensation for providing a specific recommendation or view in this report. Deepak Agrawala

Page 10 Deutsche Bank AG/Hong Kong

11 June 2009 Infrastructure IVRCL Infra

Historical recommendations and target price: IVRCL Infra (IVRC.BO)

(as of 10/06/2009)
600.00 Previous Recommendations
1 Strong Buy
500.00 Buy
Market Perform
Underperform
Not Rated
400.00
S ec ur it y P r ic e

Suspended Rating
2
Current Recommendations
300.00 Buy
Hold
3 Sell
200.00 Not Rated
Suspended Rating
4
*New Recommendation Structure
100.00
as of September 9, 2002

0.00
Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09
Da t e

1. 5/12/2007: Buy, Target Price Change INR579.00 3. 11/10/2008: Sell, Target Price Change INR120.00
2. 19/7/2008: Downgrade to Sell, Target Price Change INR225.00 4. 3/11/2008: Upgrade to Hold, Target Price Change INR90.00

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-

holder return (TSR = percentage change in share price 250
38% 37%
from current price to projected target price plus pro-
200 26%
jected dividend yield ) , we recommend that investors
buy the stock. 150
Sell: Based on a current 12-month view of total share- 100
holder return, we recommend that investors sell the 13% 15%
50 10%
stock
Hold: We take a neutral view on the stock 12-months 0
out and, based on this time horizon, do not recommend Buy Hold Sell
either a Buy or Sell.
Notes:
Companies Covered Cos. w/ Banking Relationship
1. Newly issued research recommendations and target
prices always supersede previously published research. Asia-Pacific Universe
2. Ratings definitions prior to 27 January, 2007 were:
Buy: Expected total return (including dividends) of
10% or more over a 12-month period
Hold: Expected total return (including dividends)
between -10% and 10% over a 12-month period
Sell: Expected total return (including dividends) of -
10% or worse over a 12-month period

Deutsche Bank AG/Hong Kong Page 11

11 June 2009 Infrastructure IVRCL Infra

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Deutsche Bank AG/Hong Kong

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