Water: Key demand driver

Focus on infrastructure projects, particularly water supply schemes, holds the key for IVRCL, as they contribute a major chunk of the company's revenues.

he opportunities in this segment are quite huge. For instance, the aggregate budgeted allocation by Union and State governments for water supply projects was Rs 12,895 crore for 2003-04, representing a rise of about 12 per cent over the previous year.

International financing agencies such as the World Bank and the Asian Development Bank (ADB) are also taking an active role in funding water supply projects. For instance, the ADB recently funded three projects worth Rs 79 crore, all of which which were bagged by IVRCL. In the interim Budget too, the Finance Minister proposed accelerated integrated drinking water supply schemes for major cities such as Delhi, Bangalore, Chennai and Hyderabad.

The company's order-book position is also strong. At end-November 2003, it was Rs 1,500 crore, with completion periods of 30-36 months. In addition, the company has also pre-qualified itself for projects worth more than Rs 4,000 crore. These factors augur well for maintaining revenue growth in the next couple of years.

Expansion of equity base

The company recently raised Rs 100 crore by issuing 80 lakh equity shares at Rs 125 to two FIIs. The expanded equity base is likely to have several positive outcomes. They are:

On the other hand, earnings growth may not necessarily support the expansion in equity in the near term. Investors must also consider the following risks:

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