Concurrent (India) Infrastructure Limited

DARK HORSE & MULTI BAGGER

BUY
CMP: Rs.8.90 Date: January 19th, 2010. Key Ratios: Particulars OPM (%) NPM (%) ROE (%) ROCE (%) P/BV(x) P/E(x) EV/EBDITA(x) FY09 (12 m) 1 0 0 2 0.82 917.38 10.13 FY10E (12 m) 3 2 3 4 0.80 29.16 23.30 FY11E (12 m) 3 2 3 4 0.77 25.62 23.15

Target price: Rs.40.00 Market Cap. : Rs.119.26mn.

SYNOPSIS
We initiated the coverage of concurrent India Infrastructure Ltd and set a target price of Rs.40.00. Concurrent (India) Infrastructure Ltd operations cater around two businesses Viz Power and Construction. It also has a significant presence in construction of Hospitals, Roadways, commercial complexes, Erection, Material handling, Engineering and power generation projects viz. Thermal power, Hydro power and windmills. The company has launched its official website www.concurrentindia.com in an effort to bring important news and details of the projects for providing the user with better information about overall activities of the company. The company has bagged EPC contract from Pennant Penguin Holdings in Kandy, Srilanka. The company has signed agreement with Ellis Richardson Inc (ERI) on an exclusive basis for Indian markets and on a non-exclusive basis for the overseas markets. The companys Operating profit and Net profit is expected to grow at a CAGR of 11% and 200% over FY08 to FY11E.

Key Data: Sector Face Value 52 wk. High/Low Volume (2 wk. Avg.) BSE Code

Infrastructure Rs.10.00 Rs.11.91/2.10

99000 531261

V.S.R. Sastry Vice President Equity Research Desk 91-22-25276077 vsrsastry@firstcallindiaequity.com Dr. V.V.L.N. Sastry Ph.D. Chief Research Officer drsastry@firstcallindia.com

Share Holding Pattern:

Table of Content Content 1. Investment Highlights 2. Company Profile 3. Company products 4. Peer Group Comparison 5. Key Concerns 6. Financials 7. Charts & Graph 8. Outlook and Conclusion 9. Industry Overview Page No. 03 07 07 09 09 10 12 14 15

Investment Highlights
Result Updates (Q2FY10) (standalone): For the second quarter, the top line of the company increased 28%QoQ and stood at Rs.45.26mn against Rs.35.26mn of the Previous Quarter. The bottom line of the company for the quarter stood at Rs.0.35mn from Rs.0.21mn of the previous quarter i.e., an increase of 67%QoQ.

EPS of the company for the quarter stood at Rs.0.03 for equity share of Rs.10.00 each.

Expenditure for the quarter stood at Rs.45.09mn, which is around 28% higher than the previous quarter. Raw material cost of the company for the quarter accounts for 90% of the sales of the company and stood at Rs.40.51mn. Employee cost stood at Rs.1.64mn. and accounts for 4% of the revenue of the company for the quarter.

OPM and NPM for the quarter stood at 1% and 1% respectively from 1% and 1% respectively of the June quarter.

Concurrent India launches its official website The company has launched its official website www.concurrentindia.com in an effort to bring important news and details of the projects for providing the user with better information about overall activities of the company. With the help of this website, the company is planning to widen its reach to its shareholders and create awareness among them.

Concurrent India receives EPC contract from Pennant Penguin Holding The company has bagged EPC contract from Pennant Penguin Holdings in Kandy, Srilanka. The contract involves setting up of 30 MW power project which is expected to be executed in over a span of 24 months.

Concurrent India plans to float a preferential issue The company is looking to float a preferential issue at Rs 15 per share for the purpose of acquisition of land for logistics business. The company has identified land of 25 acres near Hyderabad City for the purpose of setting up logistics supply chain.

Concurrent India Constructions

bags

Rs.

22crore

worth

order

from

Sreenidhi

The company has bagged a sub-contract worth Rs 22crore from Sreenidhi Constructions, Belgaum, Karnataka. The contract involves execution of modernization of distributaries and lateral lining and rehabilitation of structures coming under Davangere branch canal (30 kilometer). The project is expected to be completed in 12 months. Concurrent India ties up with ERI The company has signed agreement with Ellis Richardson Inc (ERI) on an exclusive basis for Indian markets and on a non-exclusive basis for the overseas markets. Under this collaboration ERI will transfer and impart technical know-how for turnkey implementation of power plant to Concurrent. ERI will also offer

technical and commercial assistance in initial phase of this collaboration. The agreement is for the duration of three years and also has scope to be extended for further period. Concurrent India plans to acquire 4.15 MW power project The company has submitted its bid for acquisition of 4.15 MW power project in the state of Andhra Pradesh. The project is a Mini Hydro Electric Power Plant. The cost of the project is Rs. 23crore. Concurrent India looking to acquire 320 perches land in Sri Lanka Concurrent (India) Infrastructure (earlier Kushagra Software) is looking to acquire 320 perches land in Sri Jayewardenepura Kotte, Colombo, Sri Lanka. The company has entered into a transaction with Sino-Lanka, a local entity, for the said acquisition. Further, Sino-Lanka has agreed to transfer the rights of the land to the company and has also agreed to co-operate in the necessary documentation and expressed its willingness to assist with the government authorities namely UDA and BOI. Concurrent India receives project from Sreenidhi Constructions Concurrent (India) Infrastructure (earlier Kushagra Software) has bagged a deal worth Rs 20crore for waterways works from Sreenidhi Constructions. The contract involves designing, supply, erection, testing, commissioning and construction of canal works of Gddada Mallapur UN-Irrigation scheme in Bydagi Taluq in Haven district of Karnataka. The contract is expected to be completed within 12 months. Concurrent India bags work order worth $3.5 million Concurrent (India) Infrastructure (earlier Kushagra Software) has bagged a power project works order worth $3.5 million. The order is scheduled for completion over a period of next 12 months. Kushagra Software pilot power project in Sri Lanka meets with success

Concurrent (India) Infrastructure (formerly known as Kushagra Software), which launched a pilot project for power generation in the Negombo beach region of Sri Lanka, has announced that the pilot was successful. As per the technology used, one wind wheel is capable of illuminating fifty/sixty watt bulbs. In the case of domestic needs, one wind wheel is capable of supplying electricity needs of two bedroom rural houses. The technology used by Concurrent is environmental friendly as there is no pollution involved in it. Also, a distinct feature of this technology used by Concurrent is that power could be generated with low speed winds unlike in the usual wind power generation technology where high speed winds are needed to generate power. Kushagra Softwar receives courts nod for merger Kushagra Software has received the Bombay High Courts approval for merger of Concurrent Infrastructure -- a private limited company -- with Concurrent (India) Infrastructure. Concurrent (India) Infrastructure was formerly known as Kushagra Software. This merger will bring into the fold of the company, the order book pipeline for infrastructure projects and developmental rights. The company received a letter of intent for doing a pilot project for area Negombo Beach Project from the Ministry of Road Development, Housing & Construction of Western Provincial Council, Sri Lanka

Company profile
Concurrent (India) Infrastructure Ltd operations cater around two businesses Viz Power and Construction. Concurrent is a diversified business entity with a predominant focus on urban infrastructure projects. It also has a significant presence in construction of Hospitals, Roadways, commercial complexes, Erection, Material handling, Engineering and power generation projects viz. Thermal power, Hydro power and windmills. Concurrent was incorporated in the year 1994, it started as a real estate developer and majority diversified into infrastructure in the year 2007. The company, formerly known as Kushagra Software Limited, is based in Navi Mumbai, India.

Business Areas

WindMill Hydeo Power Engineering Real Estate

Power Hydropower Concurrent has established a leadership position in the Hydro Power sector. Concurrent diversified its construction capabilities to build and serve the entire segment viz. Dams, Barrages, Tunnels, Underground Power Stations, Surface Power Stations along with Water conductor Systems like Surge Shafts, Pressure Shafts and Penstocks are all now part of the Concurrent repertoire. Concurrent has unrivalled expertise in large power production, where precision of the work is a vital factor along with the quality of concrete used. With its thorough knowledge and commitment to quality Concurrent undertakes such projects on Engineering Procurement and Construction (EPC) basis as well. Windmill The Wind energy industry is currently characterized by growing demand, limited by a restricted supply. With the windmills steadily increasing their stake in the energy sector, coupled with hike in electricity tariffs and escalating energy consumption, the market of customized small-windmill makers for households

has approximate 30 per cent annual growth, and is likely to throw a huge market across the country. Concurrent explores new grounds and taps into this developing segment. Concurrents turnkey services range from complex front-end engineering design, construction, installation and commissioning to long-term operations and maintenance as well as the length breadth and depth of customer requirements across the wind energy value chain. Prior to chat Concurrent performs Viability Study on location, geographical condition and feasibility of the project. The key difference lies in having both strong front-end engineering and the benefit of local experience, interface management and construction know how. Construction Concurrent undertakes turnkey projects of Design and Construction of commercial complexes, Centres like Shopping Malls and Retail outlets and large residential & commercial complexes. Its capability encompasses design and construction. Concurrent takes pride in its structural framework including finishing and interior works and electro-mechanical services. Concurrent offers Engineering, Procurement and Construction (EPC) Services include terminal buildings, visitors lounges, etc. Concurrent specializes in building all types of bridges in various span ranges, using innovative and sophisticated construction techniques. Which include: Incremental Launching Segment construction Cables stayed Pre-cast, pre-stressed Steel, concrete composite construction Engineering: The Engineering Procuring and Construction market in India has undergone significant changes and it has affected both government agencies and private investment projects. Concurrent will continue to grow its successful construction operations profitably whilst expanding its EPC capabilities and acquitting/ executing in an increasing number. These projects will come from the key sectors currently addressed by Concurrent including Hydro, Water, Nuclear and Thermal as well as Transport and Integrated Infrastructure projects. These EPC

skills and capabilities will also be utilized to support Concurrents own investment projects on Build, Operate & Transfer (BOT) basis. A Key feature of large and complex EPC projects is the requirement to integrate the right partners to tackle the engineering, equipment and material supply and specialized construction subcontractors to meet the project objective. Commercially this may feature joint ventures or consortia but the key is for the Concurrent project management team to integrate with the partners to tackle the challenges of shorter schedules and tighter budgets along with the key requisites of safety, quality and sound environmental practice as well as increased interface management.

Peer Group Comparison

Name of the company CMP(Rs.) (As on January 19th,2010) 8.90 67.65 87.30 210.70 Market Cap. (Rs. Mn.) EPS (Rs.) P/E (x) P/BV (x) Dividend (%)

Concurrent infrastructure Ltd GMR Infrastructures Ltd Unitech Ltd Era Infra Engineering Ltd

119.26 247913.2 208900.7 37655.9

0.01 0.13 1.22 16.70

520.00 71.88 12.62

0.86 4.34 6.93 4.30

0.00 0.00 5.00 20.00

Key Concerns
Heightened competition Increasing cost of the product

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Financials
Results Update 12 months ended Profit and Loss A/C (Standalone): Value(Rs. in million) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Net Profit Equity Capital Reserves Face Value (Rs) Total No. of Shares EPS (Rs) FY08 12m 518.03 8.00 526.03 -521.19 4.84 -4.63 0.21 -0.05 0.17 0.00 0.17 134.00 11.80 10.00 13.40 0.01 FY09 12m 460.75 7.35 468.10 -464.62 3.48 -3.31 0.17 -0.04 0.13 0.00 0.13 134.00 11.80 10.00 13.40 0.01 FY10E 12m 221.16 3.68 224.84 -218.95 5.89 0.00 5.89 -0.04 5.84 -1.75 4.09 134.00 15.89 10.00 13.40 0.31 FY11E 12m 265.39 4.04 269.43 -262.74 6.70 0.00 6.70 -0.05 6.65 -1.99 4.65 134.00 20.54 10.00 13.40 0.35

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Quarterly ended Profit and Loss A/C (Standalone):

Value(Rs. in million) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Net Profit Equity Capital Face Value (Rs) Total No. of Shares EPS (Rs)

31-Mar-09 3m 95.73 0.00 95.73 -96.85 -1.12 0.00 -1.12 -0.02 -1.14 0.00 -1.14 134.00 10.00 13.40 -0.09

30-Jun-09 3m 35.26 0.25 35.51 -35.19 0.32 0.00 0.32 -0.01 0.31 -0.10 0.21 134.00 10.00 13.40 0.02

30-Sep-09 3m 45.26 0.35 45.61 -45.09 0.52 0.00 0.52 -0.01 0.51 -0.16 0.35 134.00 10.00 13.40 0.03

31-Dec-09E 3m 49.79 0.42 50.21 -49.29 0.92 0.00 0.92 -0.01 0.91 -0.27 0.64 134.00 10.00 13.40 0.05

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Charts
Net sales & PAT

P/E Ratio (x)

13

P/BV (X)

EV/EBITDA(X)

1 Year Comparative Graph

14

Concurrent India Ltd

BSE SENSEX

Outlook and Conclusion

At the market price of Rs.8.90, the stock is trading at 29.16 x and 25.62 x for FY10E and FY11E respectively. On the basis of EV/EBDITA, the stock trades at 23.30 x for FY10E and 23.15 x for FY11E. Price to book value of the company is expected to be at 0.80 x for FY10E and 0.77 x for FY11E respectively. EPS of the company is expected to be at Rs.0.31 and Rs.0.34 for the earnings of FY10E and FY11E respectively. The companys Operating profit and Net profit is expected to grow at a CAGR of 11% and 200% over FY08 to FY11E. The company has launched its official website www.concurrentindia.com in an effort to bring important news and details of the projects

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for providing the user with better information about overall activities of the company. The company has bagged EPC contract from Pennant Penguin Holdings in Kandy, Srilanka. The contract involves setting up of 30 MW power project which is expected to be executed in over a span of 24 months. The company is looking to float a preferential issue at Rs 15 per share for the purpose of acquisition of land for logistics business. The company has identified land of 25 acres near Hyderabad City for the purpose of setting up logistics supply chain. The company has bagged a sub-contract worth Rs 22crore from Sreenidhi Constructions, Belgaum, Karnataka. The company has signed agreement with Ellis Richardson Inc (ERI) on an exclusive basis for Indian markets and on a non-exclusive basis for the overseas markets. The company has submitted its bid for acquisition of 4.15 MW power project in the state of Andhra Pradesh. The project is a Mini Hydro Electric Power Plant. The cost of the project is Rs. 23crore. The company is looking to acquire 320 Jayewardenepura Kotte, Colombo, Sri Lanka. perches land in Sri

The company launched a pilot project for power generation in the Negombo beach region of Sri Lanka, has announced that the pilot was successful. We recommend BUY with a target price of Rs.40.00 for long term.

Industry overview
The Indian real estate sector plays a significant role in the countrys economy. The real estate sector is second only to agriculture in terms of employment generation and contributes heavily towards the gross domestic product (GDP). Almost five per cent of the country's GDP is contributed to by the housing sector.

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In the next five years, this contribution to the GDP is expected to rise to 6 per cent. According to Jones Lang LaSalle, faster economic growth in Brazil, Russia, India and China (BRIC) could result in the property markets of those nations recovering at a faster rate than the UK and US real estate markets. It has also been suggested that India's property sector could begin to improve from late 2009 and may attract up to US$ 12.11 billion in real estate investment over a fiveyear period. The information technology (IT) and IT-enabled services (ITES) sector alone is estimated to require 150 million sq ft of office space across urban India by 2010. Organized retail is also responsible for the growth in commercial office space requirement. The organized retail industry is likely to require an additional 220 million sq ft by 2010. Moreover, growth is not restricted to a few towns and cities but is pan-India, covering nearly all Tier-I and Tier-II cities. Almost 80 per cent of real estate developed in India is residential space, the rest comprises of offices, shopping malls, hotels and hospitals. According to the Tenth Five Year Plan, there is a shortage of 22.4 million dwelling units. Thus, over the next 10 to 15 years, 80 to 90 million housing dwelling units will have to be constructed with a majority of them catering to middle- and lower-income groups. Moreover, India leads the pack of top real estate investment markets in Asia for 2010, according to a study by PricewaterhouseCoopers (PwC) and Urban Land Institute, a global non-profit education and research institute. The report, which provides an outlook on Asia-Pacific real estate investment and development trends, points out that India, particularly Mumbai and Delhi, are good destinations. Residential properties are viewed as more promising than other sectors and Mumbai, Delhi and Bangalore top the pack in the hotel buy' prospects as well. The study is based on the opinions of over 270 international real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants. Apart from the huge demand, India also scores on the construction front. A McKinsey report reveals that the average profit from construction in India is 18 per cent, which is double the profitability for a construction project undertaken in the US. The real estate sector is also likely to get a boost from Real Estate Mutual Funds (REMFs) and Real Estate Investment Trusts (REITs). In fact, according to a CRISIL paper, the REITs would have the potential to hold at least 5 per cent share of the total global real estate market by 2010, the size of which would reach US$ 1,400

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billion in the next three years. The paper titled, Indian REITs; Are We Prepared', says that by 2010, REITs alone would hold a market size of US$ 70 billion of the total real estate market as its concept is gaining ground in countries like India and other developing nations. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian real estate sector is likely to experience consolidation wherein bigger players may opt for outright buy of smaller firms or forge joint ventures or business alliances with them. Foreign direct investment (FDI) into India in the real estate sector for the fiscal year 2008-09 has been US$ 12.62 billion approximately, according to the latest data given by the Department of Policy and Promotion (DIPP). Moreover, buoyed by positive market sentiment and demand revival in housing, four real estate companiesEmaar MGF Land, Lodha Developers, Sahara Prime City and Ambience Ltdare looking to mop-up over US$ 2.35 billion through public offerings. New Projects

Zuri Group Global is planning to invest about US$ 247.5 million towards setting up five-star business hotels and luxury residential properties over the next three years. Accor Hospitality, the largest hotel chain in Europe, with 4,000 hotels in 90 countries will invest US$ 130 million to come up with 50 hotels in India by 2012. An investment of US$ 627.3 million will be made by industries in the Aeropsace and Precision Engineering Special Economic Zone at Adibatla, Andhra Pradesh. Shriram Properties, part of Chennai-headquartered diversified Shriram Group, is planning to invest around US$ 1.02 billion in various residential and commercial projects. Unitech will invest US$ 853.42 million in construction of up to 30 million sq ft of residential and commercial spaces to be launched by next year.

Government Initiatives

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The government has introduced many progressive reform measures to unlock the potential of the sector and also meet increasing demand levels. The stimulus package announced by the government, coupled with the Reserve Bank of India's (RBI) move allowing banks to provide special treatment to the real estate sector, is likely to impact the Indian real estate sector in a positive way. RBI has decided to extend exceptional concessional treatment to the commercial real estate exposure which are restructured, up to June 30, 2009.

100 per cent FDI allowed in realty projects through the automatic route. In case of integrated townships, the minimum area to be developed has been brought down to 25 acres from 100 acres. Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed by increasingly larger number of states. Minimum capital investment for wholly-owned subsidiaries and joint ventures stands at US$ 10 million and US$ 5 million, respectively. Full repatriation of original investment after three years. 51 per cent FDI allowed in single-brand retail outlets and 100 per cent in cash-and-carry through the automatic route.

The 2009-10 budget has also given sops to the realty sector. Developers of affordable housing projects (units of 1,000-1,500 sq ft) have been granted a tax holiday on profits from projects initiated in the financial year 2007-08. Such projects would have to be completed before March 1, 2012. At the same time, the finance minister allocated US$ 207 million to grant a 1 per cent interest subsidy on home loans up to US$ 20,691, provided the cost of the home is not more than US$ 41,382. This subsidy is expected to give a further boost to the housing sector.
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Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any

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person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

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