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998079356_ARSS IPO Note_Final00001


									                                                                                  ARSS Infrastructure Projects Ltd
                                                                                                                        03 February, 2010

Issue Details
Particulars                                             Introduction
Price band (Rs)                              410-450
Face value (Rs)                                    10   ARSS is engaged in construction activities of railway infrastructure, roads,
Issue open date                           8th Feb'10    highways, bridges and irrigation projects. It started operations as a construction
Issue close date                         11th Feb'10    company in the field of railway infrastructure development, mainly in the state of
Issue size (No)(in mn) @ UB                      2.29   Orissa and subsequently expanded business activities in the zonal jurisdictions of
Issue size (Rs mn)                              1030
                                                        East Coast Railway, South Eastern Railway, South East Central Railway, Southern
Pre issue equity capital (Rs mn)              125.54
Post issue equity capital (Rs mn)             148.43    Railway and North Western Railway. Company has developed expertise in railway
Post issue market cap (Rs mn) at UB          6679.30    construction projects, which includes earthwork, major and minor bridges, supply of
Pre issue Promotor Holding                   65.31%     ballast, sleepers, laying of sleepers and rails, linking of tracks etc. over the years
Post issue Promotor Holding                  55.18%     company has diversified into development and construction of roads, highways,
Listing                                   NSE, BSE
                                                        bridges and irrigation projects as well as undertaking EPC activities for railways.
                                           IDBI Cap,
                                             SBI Cap
                                             Sunidhi,   Objects of the issue
                                            Almondz,                                                                             (R s I n M n s)
Syndicate Member
                                        SBICAP Sec,     O bjec ts O f the Issue                                                    Am ount
                                                        Inves tm ent In J Vs                                                          50.0
IPO graded by CARE                                2/5
                                                        Funding Long Term work ing C apital require ments                            860.0
Registrar                             BSS Private Ltd
                                                        G ener al Cor porate P urpos e                                                  -- -
                                                        P ublic Is sue expens es                                                        -- -
Issue Allocation       % of net Issue Nos in mn
                                                        Total                                                                       1030.0
Public Issue                                2.29
    QIB                           60%       1.37
    Non QIB                       10%       0.23        Highlights
Employees                                   0.00
                                                                   As on 10th January, 2010, ARSS has an order backlog of Rs 28.77 bn to
    Retail                        30%       0.69
                                                                   be executed over next two years. Order book stands at 4.61x FY09
Bid Lot                                       15
                                                                   sales of Rs 6.24 bn. This gives high revenue visibility for the company.
Total                                         2.29
                                                                   Company operates in the eastern region and has consistently delivered
                                                                   high operating and net margin of ~ 17% and ~ 7%.
                                                                   40% of the current order book is from railways segment where ARSS
Amber Singhania                                                    commands a higher margin compared to other segments.                                                SBI has subscribed to 1 mn Equity Shares of Rs. 10/- each at a
                                                                   premium of Rs.305/- per Equity Share on 7th January, 2008.
Suryakanta Behera                                            Company has a fleet of strategic construction equipment assets worth
                                                                   Rs 2.24bn. It has 8 crusher units at six locations in various districts of
                                                                   Orissa and equipment storage, maintenance and repair facilities at
Phone: +91- 22- 66318634
                                                                   Crusher plants.

                                                                   For 9M FY10 ARSS has posted Net Sales and PAT of Rs 6.09 bn and
                                                                   Rs 0.5 bn respectively with an operating margin of 18.8% which has
                                                                   gone up significantly from OPM of 16.2% for FY09.

                                                                   ARSS has over 2700 employees on its payroll with a huge pool of
                                                                   qualified engineers and professionals.

                                                                   Company’s clientele includes Indian Railways, NTPC, Rail Vikas Nigam,
                                                                   NHAI, Indian Oil etc from public sector and JSPL and Vedanta group
                                                                   from private sector.
                                                                                               ARSS Infrastructure Projects Ltd


  Company is engaged in construction activities in India. ARSS undertakes construction of railway infrastructure, roads, highways,
  bridges and irrigation projects.


  Company started as a construction company in the field of railway infrastructure development. ARSS have developed an expertise in
  railway construction projects, which include earthwork, major and minor bridges, supply of ballast, sleepers, laying of sleepers and rails,
  linking of tracks etc. The major clients include Rail Vikas Nigam Limited, RITES, IRCON International Limited and railway authorities
  spread across various zonal jurisdictions of East Coast Railway, South Eastern Railway, South East Central Railway, Southern Railway
  and North Western Railway.

  Chart: Railway works undertaken

                                                                    Supply of ballast, construction of bridges, subways etc
       Construction Work

       Engineering Work                                              Linking of tracks, laying of sleepers and rails

           Civil Work                                                Earthwork, excavations, construction of roadbeds

  As on 10th January, 2010 ARSS has orders worth Rs 11841.3 mn in this segment.


  ARSS also has developed expertise in the business of road construction, which includes road widening, strengthen, repair and
  maintenance activities. In the last nine years, company have built over 300 km of road network (including highways), primarily in
  eastern India. Major clients include state Government organizations like Central PWD and the State PWD.

    Construction Work                                         Earthwork, sand filling, excavation, construction of establishments,
                                                              drain works, construction of granular sub-bases

    Widening and Improvement                                  Increasing lanes, providing rigid pavements, broadening of roads,
    Work                                                      strengthening of roads etc

    Repairs and Maintenance Work                              Repair and maintenance of certain damaged sections of the roads

  As of January 10, 2010 Company has Rs 11640.5 mn of work order for roads and highways.


  ARSS ventured into irrigation projects during the year 2008-2009. The scope of activities includes digging of canals and construction of
  dam. Currently ARSS is involved in two irrigation projects and clients include state Government organizations like Haryana Irrigation
  Department and Executive Engineer Konar Canal Divisions.

  Company has entered into joint venture and MOU with Patel Engineering Limited to pre-qualify and bid for larger projects.
                                                                                                                                (In mns)
  Nature of Work                                            Client                                 Amount   Project Status Start Date
  Const of Koshallia dam and its appurtenant works          Haryana Irrigation Department              1130    Joint Venture   7-Mar-08
  Construction of Baharagora distributory dam               Exec Engg Konar Canal Division              360     Independent  24-Dec-07

Sunidhi Research                                                                                                                  Page 2 of 8
                                                                                           ARSS Infrastructure Projects Ltd

  Strong and diversified Order Book

  Order Book as on January 10, 2010 stands at Rs 28775.3 mn. The composition of Order Book is well diversified over various
  segments such as railways, roads and highways and ROB(s).

                                                                                                                                (In mns)
  Particulars                             As on 10th Jan 2010             FY09                        FY08                   FY07
                                                Amount             %   Amount              %      Amount         %      Amount            %
  Railway work                                   11841.4         41%    9912.1           65%       8122.3      53%       2762.8        43%
  Road work                                      11640.5         40%    4214.9           28%       6085.4      39%       3715.6        57%
  Irrigation                                          727         3%     571.0            4%        870.5       6%            0          0%
  Other work                                       4566.4        16%     554.5            4%        364.8       2%            0          0%
  Total                                          28775.3        100%   15252.6          100%      15443.1     100%       6478.4       100%

  Revenue Break Up

                     9M FY10 Revenue Break Up                                                  FY09 Revenue Break Up

                                                                                                  Work*                Railw ay
                                                                                                  22%                   Work
       Irrigation,                                                                                                      27%
           7%                                       Railw ay               Irrigation
                                                   Work, 46%                   5%

                     Work, 33%                                                                        Road Work


                Project management expertise and track record

  ARSS has executed over 86 projects involving construction of approximately 300 km of roads and highways, 200 km of rail tracks, 10
  minor and major bridges and other general civil engineering works over the span of nine years.

                Large fleet of construction equipment

  As of December 31, 2009 total investment in plant, machinery and equipment was Rs. 2247 mn. Company has 8 crusher units at six
  locations in various districts of Orrisa with a total capacity of 1000 mtpa.

  ARSS has own construction equipment comprising of Hydraulic Excavator, Tippers, Excavator cum Loader, Vibrator Roller, Vibrator
  Soil Contractor, Motor Grader, Hot Mix Plant, Batch Mix Plant, Concrete Batching Plant, Wet Mix Plant, Transit Mixture, Crane and
  other miscellaneous equipment.

                Long-term relationship with reputed clients

  Majority of the contracts are received from Government, Public Sector Undertakings and other Government agencies, which reduces
  the risk of default and delayed payment. As on January 10, 2010 the percentage of work order from Government and Government
  entities was 87.50%.

  As of January 10, 2010, 73.11 % of Order Book of Rs 28775.3 mn comprised of repeat order works from Government and
  Government authorities.

Sunidhi Research                                                                                                                  Page 3 of 8
                                                                                                          ARSS Infrastructure Projects Ltd

    Competitor Analysis
                                                                                                                                                                In Mns

                                                     Order FY09     FY09   FY09    EPS            FY09   FY09      EV /    OB /   Mcap /           Price
    Company                  Price *    Equity MCap Book ** Sales EBITDA    PAT   FY09     P/E    OPM    NPM    EBITDA    Sales    Sales     BV     / Bv ROCE     ROE
    Supreme Infra                187     138.0  2581  6820  3822     651    270    19.6    9.6   17.0%   7.1%       7.2     1.8      0.7    83.7     2.2  16%     23%
    Pratibha Industries          309     166.8  5154 25000  8074     932    447    26.8   11.5   11.5%   5.5%       7.4     3.1      0.6   134.7     2.3  19%     20%
    Kalindee rail                210     122.4  2570  4000  2812     253    104     8.5   24.6    9.0%   3.7%      12.2     1.4      0.9    84.9     2.5  14%     10%
    Unity infra                  592     134.0  7933 40400 11479    1599    695    51.9   11.4   13.9%   6.1%       7.1     3.5      0.7   312.5     1.9  16%     17%
    Subhas Projects              144      73.3  5278 40000 12671    1547    532    14.5    9.9   12.2%   4.2%       6.1     3.2      0.4   110.0     1.3  22%     13%
    Sadbhav Engg                1221     125.0 15263 45000 10625    1083    633    50.6   24.1   10.2%   6.0%      22.2     4.2      1.4   281.7     4.3  10%     18%
    Tantia Construction          130     155.7  2025 20860  4495     582    173    11.1   11.7   12.9%   3.8%       8.1     4.6      0.5    70.7     1.8  13%     16%
    ARSS Infra @ UB              450     125.5  5648 28775  6244    1012    510    40.7   11.1   16.2%   8.2%       7.1     4.6      0.9   118.2     3.8  26%     34%
    * Prices as on 2nd February 2010
    ** OrderBook as on December 2009
    *** All data are for FY09 except orderbook
    # Post issue ARSS's equity would be Rs 148.4mn

    Some of the important projects being currently executed on standalone/joint venture basis are as follows:

              Construction, rehabilitation and widening of Cuttack - Paradeep road, Orissa, for a contract value of Rs. 2082.6 Mns.
              Construction of Roadbed including Major and minor Bridges, Facilities and General Electrification in connection with
              construction of New BG line between Haridaspur and Paradeep in East Coast Railway in the State of Orissa, India. The
              contract value for the project is Rs. 1009.6 Mns.
              Work Order for execution of Rail Infrastructure Work of Rs. 2610 Mns for the Angul project of Jindal Steel & Power
              Construction of new broad gauge line, bridges, earthwork cuttings, road over bridges, road under bridges and sub ways
              between Salem-Karur, Chennai. The contract value for the project is Rs. 513.9 Mns.
              Construction of Kaushilia Dam and appurtenant works in Panchkula district of Rs. 1129.9Mns

    Shareholding Pattern
                                              Equity shares held before the Equity shares held after the
     Category                                             issue                        issue
                                                    No of Shares           %  No of Shares             %
     Promoter and Promoter Group                       8,199,950        65%       8,199,950         55%
     SBI                                               1,000,000          8%      1,000,000           7%
     Others                                            3,354,050        27%       3,354,050         23%
     Public Issue                                               --         --     2,288,889         15%
     Total No of Shares                               12,554,000       100%      14,842,889        100%

    Promoter Back Ground
    Subhash Agarwal - 18 years of industrial and entrepreneurial experience in the execution of railway and road projects
    Rajesh Agarwal - Over 14 years of industrial and entrepreneurial experience; He is a Civil Engineer by education
    Anil Agarwal - 14 years of work experience in railway and road projects
    Sunil Agarwal - 10 years of work experience in the field of construction
    Risk factors

              Company has high working capital requirements as per the industry standards.
              Increase in various raw material cost could adversely affect the operating margins of the company.
              ARSS’s order backlog is dependent on Government and Government agencies to a large extent and any change in
              Government related policies or regulations may affect business and financial performance.
              Large part of order book is from road projects and railways which are dependent on land allocation from government and
              private agencies. Any delay in land allocation would delay the projects.
              One of the Promoters is involved in a criminal proceeding and is accused in a murder case. However as specified by the
              company the High court of Orissa has issued a stay order on the hearing and the matter is sub-judice.

Sunidhi Research                                                                                                                                      Page 4 of 8

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