12 November 2013
2QFY14 Results Update | Sector:
Utilities
Reliance Infrastructure
BSE SENSEX
20,491
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
6,079
RELI IN
263.0
572/308
8/9/-16
Financials & Valuation (INR b)
Y/E MAR
Net Sales
EBITDA
Adj PAT
Adj.EPS
(INR)
Growth
(%)
BV/Share
(INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
2013E 2014E 2015E
142.7
18.6
17.2
65.2
-14.3
734
10.7
10.7
6.8
0.6
142.1
17.8
13.3
50.6
-22.3
777
6.7
8.3
8.7
0.6
149.7
18.8
14.4
54.8
8.3
823
6.9
8.6
8.0
0.5
CMP: INR441
TP: INR557
Buy
M.Cap. (INR b) / (USD b) 116.0/1.9
Higher margins, other income drive PAT:
For 2QFY14, RELI reported standalone
PAT of INR3.5b, higher than estimate of INR3.1b, led by better margins and higher
than estimated other income (INR3b v/s our estimate of INR2.5b). However, this
was largely offset by higher interest cost at INR2.3b, 10% above our estimate.
Tax/PBT ratio was also higher at 25% v/s our estimate of 18%.
Key takeaways from concall:
(1) Mumbai new Multi Year Tariff (MYT) has been
approved and cross-subsidy charge has been increased to INR8.2b v/s INR1b
previously, (2) Mumbai Metro trial run has commenced and is on track for CoD in
FY14, (3) Delhi Metro operation is handed over to DMRC with effect from July
2013; arbitration is going well and first hearing is expected in January 2014, (4)
5mtpa cement unit in MP is likely to be commissioned this month, (5) EPC order
book at INR81b.
Valuation and view:
We expect RELI to report standalone PAT of INR13.3b (down
23%) in FY14 and INR14.4b (up 8.3%) in FY15. The stock trades at 8x FY15E EPS
and 0.5x FY15E BV.
Buy.
Nalin Bhatt
(NalinBhatt@MotilalOswal.com); +91 22 3982 5429
Satyam Agarwal
(AgarwalS@MotilalOswal.com); +91 22 3982 5410
Investors are advised to refer through disclosures made at the end of the Research Report.

Reliance Infrastructure
Operating performance better than estimate; Reported PAT boosted by
other income
In 2QFY14, Reliance Infra (RELI) reported standalone revenue at INR28.3b (v/s
est INR35b), EBITDA at INR4.8b (v/s est INR4.4b) and PAT at INR3.5b, above our
estimate of INR3.1b. Revenue at INR28.3b were down by 19% YoY as electricity
revenue dipped by 1% and EPC revenue declined sharply by 35%. EBITDA stood
at INR4.8b up 5% YoY, while EBITDA margin stood at 16.8% as compared to
13.0% in 2QFY13 and 13.4% in 1QFY14.
EBITDA was 8% above our expectation despite 19% lower than estimated
revenue mainly led by better than estimated margins in Power and EPC
business.
Other Income stood at INR3b, 20% higher than our estimate of INR2.5b.
Depreciation stood at INR847m, 15% below our estimate. However, higher
interest costs by 10% offset the same upto a certain extent.
PBT thus stood at INR4.6b, 20% above our estimate. Tax/PBT ratio during the
quarter stood at 25% v/s our estimate of 18% resulting in PAT of INR3.5b, 10%
above our estimate.
Segmental performance
During 2QFY14, power business reported revenues of INR15.6b down 1% YoY,
while EBIT stood at INR2.8b up 34% YoY and 13% on QoQ basis. EPC division
reported 2QFY14 revenues of INR12.4b, down 35% YoY; while EBIT stood at
INR1.5b, down 18% YoY. EBIT margin also improved at 12.2% vs 9.6% YoY and
8.8% QoQ.
As at September 30, 2013, EPC order book stood at INR81b and management is
confident of maintaining current run rate of revenues over next 5 quarters. Also,
it expects fresh inflow of orders from R Power for its projects like Sasan
Expansion, Tilaiya and Tato hydro power projects.
EPC EBITDA flat YoY and QoQ (INR m)
EBITDA
22.6
15.0
14.1
16.2
20.3
23.0
16.8
11.4
17.1
14.8
15.8
15.3
14.0
14.4
Margin (%)
Source: MOSL, Company
Consolidated performance: EPC margins improve
Consolidated revenue stood at INR49.8b down 10% YoY, of which EPC revenue
stood at INR12.5b, down 30% YoY. Operational other income for the quarter
stood at INR503m, up 2.6x YoY. However, revenues from Infrastructure division
increased by 56% YoY to INR1.8b, led by commissioning of new projects.
12 November 2013
2

Reliance Infrastructure
Consolidated EBITDA stood at INR7.6b up 14% YoY. Interest cost and
depreciation increased by 10% YoY and 12% YoY respectively, again led by
commissioning of new infrastructure projects. Also, other income increased by
13% YoY leading to PBT of INR4.7b up 12% YoY. Reported PAT stood at INR3.4b.
PAT after Share of associates and minority interest stood at INR4.3b up 12%
YoY.
Revenues for Electricity, EPC and Infra segments were INR35.2b (down 2% YoY),
INR12.8b (down 29% YoY) and INR1.7b (up 56% YoY) respectively. EPC division
margin improved to 11.5% from 8.6% in 1QFY14 and 9.4% in 2QFY13.
EBIT of Infrastructure division witnessed QoQ decline to INR590m, vs INR769m.
Management indicated that the decline is due to one-off, and adjusted EBIT run
rate stood at INR750m.
Segmental performance (INR m)
Revenue
Electric Energy
EPC
Infra
EBIT
Electric Energy
EPC
Infra
1QFY12 2QFY12 3QFY12 4QFY12
FY12 1QFY13 2QFY13 3QFY13 4QFY13
FY13 1QFY14 2QFY14
33,558 34,393 31,051 29,020 128,581 35,184 36,018 33,016 37,284 141,502 36,031 35,252
17,541 22,123 29,406 41,408 110,478 17,662 18,026 18,410 22,965 77,064 16,697 12,790
660
772
846
925
3,660
984
1,109
1,533
1,625
5,250
1,797
1,731
5,244
1,407
-55
4,269
2,302
-75
4,472
3,149
-212
2,535
2,311
-273
16,519
9,168
-615
3,528
1,751
364
3,489
1,698
561
4,351
1,791
787
3,913
3,122
723
15,281
4,045
4,552
8,362
1,434
1,473
2,435
769
590
Source: MOSL, Company
Key takeaways from concall
Mumbai distribution area:
MLA’s new MYT was approved, in which the
Regulator corrected the cross subsidy helping RELI to be more competitive.
Cross subsidy charge has been increased to INR8.2b from INR1b. Already RELI
collected INR720m in the first month (October-13). Secondly regulatory asset
recovery of INR56.5b would be done in next 6 years. The principal amount of
~INR30b would be adjusted to write off against the regulatory asset created and
interest would be flown through P&L.
Delhi distribution business:
Delhi received marginal tariff hike of 5%. In Delhi
distribution, accrual of regulatory asset is very low.
Infrastructure portfolio: A] Roads:
Traffic growth has remain muted due to
economic slow down, lower mining activities in particular areas due to mining
ban. It is also facing problem of toll collection especially in Northern India.
B]
Metro:
Mumbai Metro’s trial run has started for entire stretch, electrical lines
charge is expected to be completed in next few months. Increase in project cost
is approved, however change in tariff would be done at the central level by ‘fair
fixation committee’ as per the Metro Act. Delhi Metro operation has been
handed to DMRC w.e.f. 1st July-13 and arbitration with DMRC is going well. First
hearing on the matter is expected in Jan-14.
C] Cement:
5m plant in MP will be
commissioned in current month. Raw material would be sourced through the
mining lease.
RELI expects capex to reduce as all the major infrastructure projects, cement
capacity, etc is expected to get commissioned by FY14E.
12 November 2013
3

Reliance Infrastructure
Valuations and view
We expect RELI to report standalone PAT of INR13.3b in FY14E (down 23% YoY)
and INR14.4b in FY15E (up 8% YoY). RELI trades at 8x FY15 EPS and 0.5x FY15E
book.
Buy.
12 November 2013
4

Reliance Infrastructure
Reliance Infrastructure: an investment profile
Company description
Key challenges
Reliance Infrastructure is an infrastructure
conglomerate with presence in Roads, Urban Infra
(MRTS), Power (entire chain including Generation,
Transmission, Distribution), Real Estate, etc. The
company has in-house EPC capabilities developed
over period of time.
Key investment positives
Internal orders represent ~80% of EPC business
order book and R-Power contributes 90%+ of
internal order book, leading to concentration.
Sectoral caps/group exposure norms have
impacted funding to various power/infrastructure
projects. Successful financial closure for major
projects under development is important for
timely implementation.
Regulatory approval 1) Renewal of Rinfra’ Mumbai
region power distribution license for 25 years 2)
Cross subsidy charge of 8.5b would help in retention
of current customers of RInfra in MLA and would
draw a level playing field.
EPC order book stands at INR81b
All the road, Metro and Cement projects to become
operational and generate revenue in FY14 itself.
Key news flows / triggers to watch
The constant protest by the public organization
could impact the tariff hike in Delhi and could
increase the regulatory assets further.
Firm gas allocation for Dadri/other gas based
projects from EGoM will provide visibility on gas
based generation projects of R-Power.
Operational performance of infra projects in FY14
Valuations and view
We expect RELI to report standalone PAT of
INR13.3b in FY14E (down 23% YoY) and INR14.4b
in FY15E (up 8.4% YoY). RELI trades at 8x FY15 EPS
and 0.5x FY15E book.
Buy.
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
50.6
54.8
Consensus
Forecast
52.9
54.4
Variation
(%)
-4.4
0.8
Target price and recommendation
Current
Price (INR)
441
Target
Price (INR)
557
Upside
(%)
26.3
Reco.
Buy
Shareholding pattern (%)
Sep-13
Promoter
Domestic Inst
Foreign
Others
48.6
19.9
18.4
13.1
Jun-13
48.6
20.1
16.5
14.9
Sep-12
48.6
21.0
16.6
13.9
Stock performance (1-year)
12 November 2013
5

Reliance Infrastructure
Financials and valuation
12 November 2013
6

Reliance Infrastructure
NOTES
12 November 2013
7

Reliance Infrastructure
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RELIANCE INFRASTRUCTURE LTD
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12 November 2013
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