1. 1
Infrastructure
Ahluwalia Contracts (India) Ltd.
We met the management of Ahluwalia Contracts Ltd to get a feel of ground reality on factors effecting construction sector
and company's key future strategies to emerge afloat. ACL is an integrated EPC company engaged in construction of
building structures across residential and commercial segment like hospitals, malls, luxury hotels, corporate buildings,
among others. Company has done well to stage a remarkable turnaround with significant improvement in profitability and
new order bookings. Given below are the key takeaways from the meet:-
Staging a turnaround
ACL has staged a remarkable recovery over the past financial year
(OPM + 650 bps, Earnings +8.4x) through selective bidding and
sound business strategy. Firstly, all new orders are backed by price
escalation clause and share of fixed price contracts stands reduced
to mere 10% of OB (INR 4 bn) vs +50% earlier. Secondly, ACIL is
largely focusing on government projects (65% share currently vs
14% in FY13) owing to payment issues from private players. Thirdly,
balancesheetisbeingstrengthenedthroughsaleofnon-coreassets
and capital infusion by promoters (INR 500 mn) resulting in debt
repayment worth INR 835 mn in FY15 (Net D/E 0.23x).
Superiorexecutionanddecliningcompetitionbodeswellforcompany
ACL with over 80 ongoing projects across 50 cities has superior
execution capabilities, having executed slew of projects across
residential and commercial complexes over the past five decades.
This in addition to declining competition owing to stressed balance
sheet of most of other real estate contractors bodes well for the
company. Competition is now limited to mere 3-4 players namely
Shapoorji Pallonji, L&T, Simplex and NCC as most of the other
companies do not have balance sheet strength to bid for composite
EPC contracts.
3.9x order book/bill provides healthy revenue visibility
ACL has an order backlog of INR 41.5 bn (execution period 30-36
months), which translates into book to bill ratio of 3.9x, thereby
providing healthy revenue visibility over next 2 years. The company
has witnessed order inflows of INR 13.8 bn in FY15 (INR 8.2 bn in
FY14) and INR 10.3 bn in Q1FY16 (inc. L1 of INR 3.5 bn) on the back
of sharp pick up in government tendering (DDA, NBCC). Bid pipeline
Shareholding (%) Mar-15
Promoters 66.87
FIIs 15.62
DIIs 5.08
Others 12.43
Relative Price Performance
July 03, 2015 VISIT NOTE
stands at INR 20 bn (2 DDA projects worth INR 6 bn, IIM Raipur
INR 3 bn, Hospital projects INR 4 bn) and ACL is targeting to add
projects worth INR 16 bn & INR 20 bn in FY16 & FY17 respectively.
ACL is targeting to increase share of govt. orders to +70% as it
does not expect private sector capex to revive any time soon.
Better quality orders to improve margins
Margins are expected to improve further by 150-200 bps (after
650 bps improvement in FY15) as more than 90% of new orders
are being given on composite basis vs earlier practice of awarding
separate packages for civil works, electrical works, etc. Composite
orders enjoy higher margins owing to higher value projects and
sensible bidding from players due to low competition.
Tie-up with Russian company
ACL has entered into technology tied up with KUB STROY Russia to
build structures using a patented high-speed pre-cast construction
technology. The company expects huge opportunity in the
institutional and affordable housing segment and expects this
technology to play a key role in mass housing projects.
Outlook & Valuation
ACL is well placed to benefit from increasing opportunities in
construction space owing to its superior execution capabilities.
Management has guided for revenue CAGR of 23% over FY15-17E
on the back of healthy book to bill of 3.9x. Declining share of fixed
price contracts along with increasing share of govt orders and
limited competition for composite EPC contracts will ensure
improved margins. Moreover easing working capital cycle and
minimal capex would result in further reduction of debt. Currently
the stock is trading at a P/E of 23.5x FY15 earnings.
Key Data
BSE Code 532811
NSE Code AHLUCONT
Bloomberg Code AHLU IN
Reuters Code AHLU.BO
Shares O/S (mn) 67.00
Face Value 2
Mcap (INR bn) 15.05
52 Week H/L 293.80/99.00
2W Avg. Qty, NSE 70227
Free Float (INR bn) 4.99
Beta 1.92
Y/E March (INR mn) FY12 FY13 FY14 FY15
Net Sales 13636 13882 9603 10599
Growth (%) -19.29% 1.80% -30.82% 10.37%
EBIDTA Margin (%) 1.30% -3.51% 4.34% 10.84%
APAT (406) (769) 76 641
Growth (%) -157.23% 89.34% -109.87% 744.97%
EPS (3.24) (6.13) 0.60 9.57
P / E (10.71) (1.79) 33.86 26.01
P / BV 1.55 0.67 1.14 4.94
EV/EBIDTA 19.65 (39.92) 6.28 13.81
Net Debt-Equity Ratio 0.46 0.82 0.81 0.23
RoACE (%) (2.88) (9.01) 12.59 22.01
RoAE (%) (13.50) (31.71) 3.53 22.75
SENSEX: 28021 CMP: INR 225
Rohit Agarwal
rohit.agarwal@spagroupindia.com
Ph. No. 91 33 40114800/ 839
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Ahluwalia Sensex

2. 2
Infrastructure
Financials
Income StatementY
Y/E March (INR mn) FY12 FY13 FY14 FY15
Net Sales 13636 13882 9603 10599
Growth (%) -19.29% 1.80% -30.82% 10.37%
Cost of goods sold 7219 7980 4545 5412
Power & Fuel Cost 321 335 271 0
Employees Cost 2676 2576 1926 1501
Total Expenditure 13459 14369 9187 9451
EBIDTA (without OI) 178 (487) 417 1149
Growth (%) -88.55% -374.27% -185.51% 175.75%
EBITDA Margin % 1.30% -3.51% 4.34% 10.84%
Depreciation 429 352 122 212
EBIT (251) (839) 295 937
EBIT Margin % -1.84% -6.04% 3.07% 8.84%
Interest Expenses 264 334 363 386
Other Income 110 411 285 117
EBT (406) (762) 217 668
Tax Expenses 1 0 0 26
PAT (406) (762) 217 641
Excep./Extraordinary Items (0) 7 141 0
APAT (406) (769) 76 641
Growth (%) -157.23% 89.34% -109.87% 744.97%
APAT Margin (%) -2.98% -5.54% 0.79% 6.05%
Balance Sheet
Y/E March (INR mn) FY12 FY13 FY14 FY15
SOURCES OF FUNDS
Share Capital 126 126 126 134
Reserves 2681 1919 2136 3243
Total Networth 2807 2044 2262 3377
Secured Loans 2134 2452 2245 1460
Unsecured Loans 0 75 141 90
Total Debt 2134 2527 2386 1551
Total Liabilities 4941 4572 4648 4928
APPLICATION OF FUNDS
Net Block 1512 1385 1307 1773
Capital Work in Progress 308 408 677 175
Investments 135 15 15 63
Total Current Assets 8939 8420 8344 8259
Total Current Liabilities 6114 5818 5858 5496
Net Current Assets 2825 2602 2486 2763
Net Deferred Tax 162 162 162 154
Total Assets 4941 4572 4647 4928
Cash Flow
Y/E March (INR mn) FY12 FY13 FY14 FY15
EBT (406) (762) 217 668
Depreciation 429 352 122 212
Interest 264 334 363 386
Inc./Dec. in working capital (57) 239 (193) (57)
Tax paid (1) 0 0 (137)
Other Income (110) (411) (285) (117)
Cash flow from operations (a) 120 (248) 223 954
Inc./Dec. in investments (55) 120 0 (49)
Change in Fixed Assets (460) (3) (33) (677)
Change in CWIP (156) (100) (270) 502
Others (264) (334) (363) (386)
Cash flow from investing (b) (935) (317) (666) (610)
Inc./Dec. in capital 0 0 0 499
Inc./Dec. in debts 492 393 (142) (835)
Dividend paid 0 0 0 0
Interest paid (264) (334) (363) (386)
Others 372 522 638 598
Cash flow from financing ( c ) 600 581 133 (125)
Opening cash balance 1053 838 855 545
Cash Flow during the year (a+b+c) (215) 17 (310) 220
Closing cash balance 838 855 545 765
Key Ratios
Y/E March FY12 FY13 FY14 FY15
Per Share Data (INR)
Adjusted EPS NA NA 0.60 9.57
CEPS 0.18 NA 1.57 13.05
BVPS 44.73 32.58 36.04 50.40
Return Ratios
RoACE (%) NA NA 12.59 22.01
RoAE (%) NA NA 3.53 22.75
Balance Sheet Ratios
Net Debt-Equity Ratio 0.46 0.82 0.81 0.23
Current Ratio 1.46 1.45 1.42 1.50
Interest Cover Ratio (0.53) (1.28) 1.60 2.73
Efficiency Ratios
Total Asset Turnover 2.78 2.92 2.08 2.21
Inventory Days 53 49 67 65
Debtors Days 123 110 155 141
Creditors Days 81 77 117 108
Valuations
P / E NA NA 33.86 26.01
P / BV 1.55 0.67 1.14 4.94
Market Cap / Sales 0.32 0.10 0.27 1.57
EV/EBIDTA 19.65 NA 6.28 13.81

3. 3
Infrastructure
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