KNR Constructions

Submitted By:
Jodha Amarsingh

TEAM ACE Kshitij Joshi

Makarand Badgujar
 Financial Highlights &
Company Overview Industry Overview Business Description DCF Valuation
Peer Comp.

Multidomain infrastructure project development

company providing (EPC) engineering,
-In the year 2008 KNRCL had opened
procurement and construction services across
for Initial Public Issue and raised Vision
various fast-growing sectors
Rs.1338.67 millions
-Got itself listed on BSE and NSE. To develop KNRCL as a Centre
The company has in the past executed of excellence in the field of
infrastructure projects independently as Infrastructure services by
well as through joint ventures striving continuously to
provide eco-friendly solution
adopting state-of-the-art
practices and commitment to
quality through motivated
KNRCL incorporated in 1995 by human resource
professionals having experience in the
field of infrastructure development

Key Highlights of the company

• Two irrigation projects were awarded in Q1FY21 and will start operations in Q1FY22
• INR345cr of equity has been invested in all HAM projects till 9MFY21 and incremental equity of INR90cr will be Mission
invested in Q4FY21 Aim to add more business
• The company has a bid pipeline of INR20,000cr - 15 HAM projects and 1 EPC project verticals to the organization in
• The company has collected receivables of INR540cr from Telangana. New receivables of INR333cr from HAM projects the fields of construction of
has increased working capital (WC) days to 55 days in Q3FY21 Elevated Metro Rail and
• INR60cr has been spent on capex till 9MFY21 and another INR40cr will be spent in Q4FY21 Railway Projects.
 Financial Highlights &
Company Overview Industry Overview Business Description DCF Valuation
Peer Comp.

KNR Constructions Ltd.

Business Overview Presence Across India Business Overview

The Company is a multi-domain infrastructure project
development company. The Company undertakes engineering, Its urban water infrastructure management project is Challaghatta
procurement and construction (EPC) contracts, as well as build- Main Valley Project, which involves the remodeling of primary and
operate-transfer (BOT) projects across various sectors, such as secondary storm drains, bridges/culverts and related works in
construction and maintenance of roads, highways, flyovers and Challaghatta Main Valley in Bangalore City.
bridges.

Its range of verticals also include irrigation projects, water The Company's irrigation and water management projects include
management, agriculture and trading business. It has completed Shankara Samudram Balancing Reservoir, Eastern Kosi Canal
approximately 5,890 kilometers of projects across over 10 states in system, Reservoir across Mathadivagu and Budpur Balancing
India. Reservoir.

Road & Highways

Growth Drivers Highway Construction Trends Trends

The Government aims to construct 65,000 Kms of national Policy Support Schemes
highways at a cost of Rs 5.35 lakh crore ($ 741.51 billion) by 2022. Robust Demand
According to the Govt. launched the
Production of
data released by Bharatmala Project,
commercial
vehicles increased DPIIT, construction which aims to build
Government of India allocated Rs. 111 lakh crore ($ 1.4 trillion)
under National Infrastructure pipeline for FY 19-25. Road sector to to 752,022 in develop. sector 66,100 km of
account for 18% of capital expenditure over FT 19-25. FY20, attracted FDI inflow economic corridors,
commanding a worth US$ 25.78 border and coastal
need for stronger billion in the roads, and
In April 2020, the Government set a target of constructing roads road network in expressways to
between April 2000
worth Rs. 15 lakh crore ($ 212.80 billion) over the next two years. India. boost the highway
and Sept. 2020.
network.
 Financial Highlights &
Company Overview Industry Overview Business Description DCF Valuation
Technical Analysis

Financial Highlights Order Book Breakup

Order book (OB) stood strong at INR76.7b, implying an OB-to-revenue ratio at 3.1x and providing healthy
revenue visibility.

The Balance Sheet has strengthened further with the receipt of INR5.4b in receivables from the
Telangana government, out of the pending INR6.8b. The management expects to receive INR1.4b by
FY21-end.

Gross debt declined to INR160m at the end of 3QFY21 (v/s INR644m/INR2.5b in 2QFY21/FY20). The
company became debt free with INR270m net cash at the end of 3QFY21.

Though the management has remained conservative on its EBITDA margin guidance of 17-18%, a higher
proportion of Irrigation projects (45% of the total order book) could lead to 19-20% margin in the near
future.

Technical Analysis

- Formation of symmetrical pattern, hence

possibility of breakout on both the sides
- RSI trading in a narrow range of around 40-50.
- No clear indication from MACD indicator.
 Financial Highlights &
Company Overview Industry Overview Business Description DCF Valuation
Peer Comp.

KNR Constructions Ltd. CAPEX Schedule

Particulars/Year 2019 2020 2021(E) 2022(E) 2023(E) 2024(E) 2025(E)
(All figures in ₹Crore) PROFIT & LOSS STATEMENT Gross PP&E
Opening 820.43 1016.80 1205.48 1424.07 1685.15 1996.78 2362.24
Additions 212.75 199.83 223.59 266.08 316.63 370.46 426.03
Other changes -16.38 -11.15 -5.00 -5.00 -5.00 -5.00 -5.00
Year 2019A 2020A 2021E 2022E 2023E 2024E 2025E Closing 1016.80 1205.48 1424.07 1685.15 1996.78 2362.24 2783.26

Particulars Accumulated Depriciation

Revenue from operations 2291.5 2451.7 2794.9 3325.9 3957.9 4630.7 5325.3 Opening accumulated depriciation 486.74 642.20 824.50 1035.43 1283.52 1576.00 1921.45
Depriciation for the year 168.17 191.42 204.93 242.09 286.48 339.45 401.58
Rev. growth % 11% 7% 14% 19% 19% 17% 15% other changes -12.71 -9.12 6.00 6.00 6.00 6.00 6.00
other income 74.34 65.68 74.9 89.1 106.0 124.1 142.7 Closing depriciation 642.20 824.50 1035.43 1283.52 1576.00 1921.45 2329.03
Net value 374.60 380.98 388.64 401.63 420.78 440.79 454.23
Total Revenue 2366 2517 2870 3415 4064 4755 5468
Expenses Capex(additions as a % of sales) 9.28% 8.15% 8.00% 8.00% 8.00% 8.00% 8.00%
Depriciation as a % of average of
Cost of materials consumed 643.8 753.3 838.5 997.8 1187.4 1389.2 1597.6 opening & closing PPE 18.31% 17.23% 17.00% 17.00% 17.00% 17.00% 17.00%
Construction expenses 967.83 844.52 1117.966 1330.38 1583.152 1852.288 2130.131
WACC Calculations
change in work in progress -1.3 0.0 0.0 0.0 0.0 0.0 0.0
Rf (Risk free premium) 6.18%
Construction cost under service concession agrrements 4.5 44.6 50.8 60.5 71.9 84.2 96.8
Beta (Refer Beta sheet) 0.53
Employee benefits expense 94.8 126.9 144.7 172.2 204.9 239.7 275.7
Market Return for Last 5 Years 15.63%
Other expenses 45.3 59.9 68.3 81.3 96.8 113.2 130.2
KNR Share Price 211.80
EBITDA 611.0 688.1 649.5 772.9 919.8 1076.2 1237.6 Market Risk Premium 9.45%
Depreciation and Amortization 230.1 254.1 204.9 242.1 286.5 339.5 401.6 Market value of equity (Cr) 5957.93
EBIT 380.9 434.0 444.6 530.8 633.3 736.7 836.0
Market value of debt (Cr) 577.88
Interest Expense 89.1 110.2 117.3 139.6 166.2 194.4 223.6
Proportion of equity 0.912
EBT 291.8 323.8 327.3 391.2 467.2 542.3 612.5
Proportion of debt 0.088
Exceptional items 2.5 10.7 10.7 10.7 10.7 10.7 10.7
Cost of Equity (Rf+
PBT 289.3 313.1 316.6 380.5 456.5 531.6 601.8
Beta*Market Risk Premium) 11.19%
Current tax 60.7 97.7 79.1 95.1 114.1 132.9 150.4
Cost of Debt 13%
Defeered tax -33.7 -29.2 -29.2 -29.2 -29.2 -29.2 -29.2
Tax Rate 25%
PAT 262.4 244.6 266.7 314.6 371.6 428.0 480.6
No of shares (Crores) 28.13
Dividend per share 0.2 0.5 0.7 0.9 1.1 1.3 1.5
Dividend and Dividend Tax 6.8 15.3 19.7 25.3 30.9 36.6 42.2 Weighted Average Cost of
Retained Earnings 255.6 229.3 296.9 355.2 340.7 495.0 559.6 Capital (WACC) 11.06%
 Financial Highlights &
Company Overview Industry Overview Business Description DCF Valuation
Peer Comp.

Particulars/Year
Assets
2017A 2018A 2019A
BALANCE SHEET
2020 2021(E) 2022(E) 2023(E) 2024(E) 2025(E) DCF Valuation
Non current Assets
Property Plant and Equipment 263.08 333.69 374.59 380.98 397.61 420.61 450.83 482.94 509.54
Changes in WC calculation
Capital work in progress 2.66 1.15 0.00 10.15 10.15 10.15 10.15 10.15 10.15
Particulars/Years 2021E 2022E 2023E 2024E 2025E
Investment Property 64.45 65.01 65.16 72.45 82.59 98.29 116.96 136.84 157.37
Other Intagible Assets 900.90 942.64 880.75 818.78 818.78 818.78 818.78 818.78 818.78 (Increase)/decrease in Inventory -16.6 -26.6 -31.6 -33.6 -34.7
Intangible asset under development 88.59 0.00 0.00 2.60 2.60 2.60 2.60 2.60 2.60
Financial assets (increase)/decrease in trade receivables -77 -48 -57 -61 -63
Investments 28.16 35.11 32.97 38.93 38.93 38.93 38.93 38.93 38.93
Other financial assets 13.84 2.54 141.67 699.02 796.88 948.29 1128.47 1320.30 1518.35 (decrease)/increase in trade payables 37 57 68 72 75
Deferred Tax assets 82.59 140.77 174.76 160.98 160.98 160.98 160.98 160.98 160.98
Non current tax assets 47.44 12.13 19.04 43.06 43.06 43.06 43.06 43.06 43.06 Total changes in WC -57 -17 -21 -22 -23
Other non-current assets 32.0 87.7 160.2 175.94 200.6 238.7 284.0 332.3 382.2
Total Non current assets 1523.72 1620.74 1849.11 2402.9 2552.16 2780.37 3054.78 3346.90 3641.92
Current Assets
Inventories 80.53 75.04 101.18 123.16 139.75 166.30 197.89 231.54 266.27 FCFF calculation
Financial Assets
Investments 45.42 17.55 18.96 26.90 26.90 26.90 26.90 26.90 26.90 Explicit forecast period Implicit forecast period Terminal Year
Particulars/Year
Trade receivables 181.69 269.13 96.80 174.64 251.54 299.34 356.21 416.76 479.28 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Cash and Bank Balances 25.22 44.98 9.90 40.65 40.65 40.65 40.65 40.65 40.65
Bank balances other than Cash and cash equivalents 8.58 6.99 17.57 42.21 149.54 340.95 568.86 774.47 1138.18
EBIT * (1 - tax rate) 333 398 475 553 627 702 787 865 934 1000 1040
Loans and advances 31.77 26.31 3.94 2.86 2.86 2.86 2.86 2.86 2.86 Add: Depreciation 205 242 286 339 402 450 504 554 598 640 666
Other financial assets 132.50 160.64 174.20 231.18 263.55 313.62 373.21 436.65 502.15
Sub: purchases of assets -224 -266 -317 -370 -426 -443 -465 -488 -513 -539 -565
Current Tax assets 11.68 19.93 13.51 18.36 18.36 18.36 18.36 18.36 18.36
Other current assets 200.99 366.59 443.80 440.38 502.03 597.42 710.93 831.79 956.56 Add: changes in WC -57 -17 -21 -22 -23 -25 -29 -31 -34 -36 -38
Total current assets 718.38 987.16 879.86 1100.34 1395.18 1806.39 2295.87 2779.98 3431.20 FCFF 258 357 424 500 580 683 797 899 986 1065 1103
Total Assets 2242.10 2607.90 2728.97 3503.23 3947.34 4586.76 5350.65 6126.88 7073.12
Equity & Liabilities
Terminal value 16241
Share capital 28.12 28.12 28.12 28.12 28.12 28.12 28.12 28.12 28.12 Total Cash flow 258 357 424 500 580 683 797 899 986 1065 17344
Reserves and Surplus 850.39 1069.70 1325.47 1565.74 1794.41 2091.29 2447.54 2789.76 3287.94
Total Shareholders' fund 878.51 1097.82 1353.59 1593.86 1822.53 2119.41 2475.66 2817.88 3316.06
Liabilites
% growth in post tax EBIT 38.2% 18.9% 17.8% 16.1% 12.0% 12.0% 10.0% 8.0% 7.0% 4%
Non-current Liabilities
Long term borrowings 698.15 741.92 689.91 791.71 902.55 1074.03 1278.10 1495.38 1719.68
lease liability 8.27 8.27 0.00 1.07 1.07 1.07 1.07 1.07 1.07
other Financial Liabilites 0.86 0.37 1.77 1.65 1.65 1.65 1.65 1.65 1.65
Provisions 6.04 17.32 28.44 42.46 42.46 42.46 42.46 42.46 42.46 Enterprise Value (EV) ₹ 8,864.86
Other non current liabilites 18.22 13.24 13.24 10.52 10.52 10.52 10.52 10.52 10.52
Total Non current Liabilites 731.54 781.12 733.36 847.41 958.25 1129.73 1333.80 1551.08 1775.38
Less: Debt 791.71 Price Target Based on P/E Multiple & FY23E
Current liabilities
Short term borrowings 0.00 0.00 16.94 33.64 33.64 33.64 33.64 33.64 33.64 EPS (1 Year Timeframe)- ₹ 146-176
Trade payables 164.62 247.61 230.59 262.96 299.77 356.73 424.51 496.68 571.18 Add: Cash 82.86
Other Financail laibilites
provisions
203.91
12.81
159.44
21.62
200.67
19.17
200.72
31.48
200.72
31.48
200.72
31.48
200.72
31.48
200.72
31.48
200.72
31.48
Price Target Based on Intrinsic Price- ₹ 289
Other current liabilities 250.70 298.51 170.71 526.79 600.54 714.64 850.43 995.00 1144.25 Equity Value ₹ 8,156.01
current tax liabilites 0.05 1.80 3.96 0.41 0.41 0.41 0.41 0.41 0.41
Total current Liabilities
Total Liabilites
632.09
1363.63
728.98
1510.10
642.04
1375.40
1056.00
1903.41
1166.57
2124.81
1337.62
2467.36
1541.19
2874.99
1757.93
3309.00
1981.68
3757.06
Intrinsic Share Price ₹ 289.94
Total equity and liabilities 2242.14 2607.92 2728.99 3497.27 3947.34 4586.76 5350.65 6126.88 7073.12
QUESTIONS ?