Reliance Infrastructure

Reliance Infrastructure was recently awarded two road projects worth Rs 4,000 crore, making it one of the largest players in the promising road segment. In addition, the company has also emerged as a leading player in the infrastructure space, and is developing 23 large projects worth Rs 36,200 crore across other segments like airports, bridges & sea-links, metro rail and so on. It also has a significant presence in the power generation and transmission & distribution businesses, wherein the resolution over gas supply between Reliance Industries and RNRL could pave the way for Reliance Power's mega power project in Dadri.

Boost from infra

Of the ongoing projects, almost 13 projects worth Rs 21,000 crore will be operational in the current year – which is significantly higher compared to just two projects commissioned in 2009-10 – boosting the company's revenues and profitability. In the road segment, the company has 11 BOT (build-operate-transfer) road projects of 970 km worth Rs 12,000 crore. Out of this, two road projects of 97 km are already operational since September 2009 quarter. But, the biggest boost will come in the current and next years as five new road projects (about 800 km) will become operational by the end of this year.

In addition, the company is also developing three metro rail projects. In 2009-10, projects worth Rs 4,950 crore, or 35 km, will be operational, which includes the Mumbai Metro Line One and the Delhi Airport Metro Express Line.

The company has also emerged as a large player in the power transmission space, and is developing five transmission projects worth Rs 6,640 crore. This includes two ultra mega transmission projects worth Rs 2,370 crore. One of these projects, of Rs 1,380 crore, will become operational in the current quarter. Over the next twothree years, the company foresees an opportunity of Rs 55,600 crore in this segment.

Stable business

Most of these projects will contribute partially to revenue in the current year and fully in 201112. Meanwhile, power generation and distribution, which forms almost 78 per cent of total revenues, is expected to grow by five-six per cent in 2010-11.

The growth will be higher at about 30-35 per cent in the case of the engineering-procurementconstruction (EPC) business, which contributes about 22 per cent of revenues. This is primarily on account of the strong order book of Rs 19,250 crore, which is almost 5.6 times its 2009-10 revenues, and provides good visibility.

Investment rationale

With most of its projects slated for commissioning in the current year, expect the company's revenues and profits to rise by 30 per cent each in 2010-11. In the long run, considering the company's capabilities, strong balance sheet and large size of projects as well as presence across the infra space, it is well positioned to harness the opportunities in the infrastructure segment.

Considering its different businesses, including the 44.9 per cent stake in Reliance Power and huge cash and cash equivalent in the books, analysts value the stock at Rs 1,300-1,400 per share, which indicates good potential for an upside from the current price of Rs 1,029.35.

This, along with its future plans in the power business, should reward investors in the long run.