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MBL Infrastructures Ltd – AVOID

November 27, 2009

MBL Infrastructure Ltd (MBL) is engaged primarily in construction and maintenance of roads and highways.

MBL has a strong order book of Rs 815 crore (including order inflow of Rs 203 crore post June), which is at 1.6x FY09 revenues. This provides revenue visibility over the next 1.5-2 years. However, the current order book to FY09 revenues ratio is relatively lower than its peers.

MBL has successfully completed the execution of the BOT project of the 114 km Seoni-Balaghat-Rajegaon state highway under the PPP mode. According to the management, this BOT asset generates monthly toll collections of Rs 70 lakh

Financials:
MBL’s revenues grew at a CAGR of 37.7% during FY05-FY09. The revenues from the construction and project related activities grew 38.6% while waste management and trading activities revenues grew 35.7%.

MBL is available at 9.5x the upper band of its FY09 EPS. Considering the lower revenue visibility compared to its peers and MBL valuation, we believe the risk-reward ratio for MBL is unfavourable and hence AVOID the IPO.

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