The Hindu Business Line : IVRCL Infrastructures: Buy

A robust order-book, pre-qualification for a wide range of infrastructure projects and expanding margins that lend earnings visibility make IVRCL Infrastructures & Projects an attractive option; buy with a one-to-two year perspective. The stock trades at 14 times its expected per- share earnings for FY07.

As there is likely to be renewed emphasis on the infrastructure sector, especially in rural areas, IVRCL is likely to be a prime beneficiary. IVRCL is a key player in irrigation and water supply projects. Acquisition of Hindustan Dorr-Oliver has further strengthened its position.

A well-diversified portfolio and comfortable networth, which is critical for bidding, are factors that will ensure that IVRCL gets its fair share of business from government projects in road, water and power segments. The current order book of Rs.6, 200 crore is about 6 times the company's FY05 revenues. The surging order book, once converted to revenues, is likely to expand profit margins.

Earnings dilution, if foreign borrowings are not utilised for projects, and delays in implementation of government projects, are key risks to our recommendation.

Benchmark Split Capital: Buy

Investments in Class `A' units of Benchmark Split Capital Fund can be considered. These units last traded at a price of Rs 90. Purchases can be considered even at slightly higher prices. These units offer capital protection as well as opportunity to reap gains if stock prices keep rising - an attractive option for relatively risk-averse investors.

Investors in Class `A' units are assured of a price of Rs 100 per unit on redemption in August 2008, effectively 30 months from now. That is, an annual return of 3 per cent is assured even if Nifty were to decline by 22 per cent or more. If Nifty declines by less than 22 per cent, annual returns will be higher than 3 per cent.

Investors will also get 40 per cent of the appreciation in Nifty's value, if any, from 2,369.8, the Nifty level at the launch of the fund. If by August 2008, Nifty were to rise only by 15 per cent from present levels to only 3,500, investments at a price of Rs 93 would fetch a return of 27 per cent.

Vidya Bala
Suresh Krishnamurthy

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