Multi Baggers

Gayatri Projects Ltd.

CMP – Rs. 82.85          BSE Code – 532767

Gayatri Projects Limited (GPL), is a Hyderabad based EPC company executing various projects including construction of Dams, Roads & Highways, Bridges, Canals, Airports, Ports etc.. The company has completed several projects like National Thermal Power Corporation, National Aluminium Company, South Eastern Railways, etc. Today, it is associated with clients such as Jindal Vijaynagar Steel, International Airports Authority (Calicut Airport), Kakinada Port Project, Upper Krishna Project in Karnataka, Sardar Sarovar Project in Gujarat and various irrigation projects in Maharashtra Govt. and Orissa Irrigation Department.

The company has a current unexecuted order book of over Rs.3120 crores with a healthy mix of orders from various sectors – Roads and Irrigation sectors account for roughly 30-35% each, Orders from BOT Projects is around 22-23% and the Building and Industrial Projects division having the balance.

Major Concerns & Conclusion

Most companies are facing difficulties in raising Funds owing to liquidity pressures being faced currently. The slowdown in the economy may lead to a slowdown in the incremental order flow and also in the execution in ongoing projects. Moreover, the coming elections may lead to increased uncertainty atleast for the short term. The company has some BOT projects with Maytas Infrastructure as a Consortium/ Joint Venture partner and the uncertainty surrounding Maytas in view of the Satyam fiasco is taking its toll on the stock of Gayatri Projects. The High debt in the balance sheet is also a cause for concern- the company however has a healthy Interest Cover Ratio of around 3.

The company has raised Rs.100 crores from AMP Capital Finance Mauritius Ltd. by diluting 30% equity in Gayatri Infra Ventures Ltd. (GIVL), a 100% subsidiary of Gayatri Projects created for execution of BOT Projects. AMP Capital has committed to bring in additional Rs.100 crores to GIVL.
The company has tied up with DLF Ltd. for exploring opportunities in the Roads space and with Jaiprakash Associates for Irrigation Projects. In the water business, the company has tied up with Ion Exchange. They will jointly bid for contracts for water and sewerage treatment plants and desalination plants. The tie-ups provide strong pre-qualification for future projects in various sectors.

Opportunities for the company exist in Roads & Highway projects. The pace of execution for various Highway projects handled by NHAI has been slow over the past few years. The executions may gather speed after the general elections scheduled in April/ May 2009. NHAI may also come out with fresh tenders for new Roads & Highways. Moreover, the company will be a beneficiary in the fixed price contracts that it had signed in view of a steep decline in the cost of Steel, Cement and other inputs.

The company’s revenues and profits have grown in the first 9 months of FY 09 – revenues have grown by 39% and PAT by 14%. The provision for tax for 9 months has been higher by 18%. Inspite of improved financial performance, the market cap of the company has seen a sharp correction on account of the concerns and the challenging scenario which the sector and the company is witnessing currently. With expected Sales Turnover of Rs.950-1000 crores for FY 09; expected PAT of around Rs. 42 crores; Book Value of Rs.177; and an order book of over Rs.3100 crores, and trading at a PE of 2, we believe Gayatri Projects looks cheap at a market cap of less than Rs.85 crores. Moreover, the stock price having declined from a high of around Rs.700 to the current levels looks attractive for investment. The promoters have been increasing their stake in the company through creeping acquisition and have increased their stake by 1.51% in the Oct-Dec 08 quarter. The promoters have been buying the stock from the market in Jan & Feb 09 as is evident from various disclosures made to the Stock Exchange.

In view of the concerns, the stock is recommended for investors with an appetite for High Risk. Investors can choose to accumulate the stock at the current levels and on declines.

Disclaimer: Ashish Chugh is an equity analyst and investment consultant based at New Delhi, INDIA. At the time of writing this article, he, his firm and dependent family members donot have a position in the stocks mentioned above. The author, his firm or any of his dependent family members may make purchases or sale of the securities mentioned in the report while the report is in circulation. The author invites readers to send him email and welcomes comments, feedback & queries at nexgenfin@yahoo.com.
This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.