Gammon Infrastructure Projects Ltd. IPO Analysis

March 12, 2008

Keynote Capitals set “Subscribe with a long term view” recommendation on Gammon Infrastructure Projects Ltd. IPO.

Gammon Infrastructure Projects Ltd. IPO details:

Price Band: Rs. 167 - 200 per share
Issue open between: March 10 - March 13, 2008
Book Running Lead Managers: IDFC-SSKI, Macquaire
To List on: NSE and BSE
Market Cap post-listing: Rs. 28.91 billion or $711 million (based on the cap price)

Synopsis

Gammon Infrastructure Projects Ltd. (GIPL), part of the Gammon Group is in the business of investing, developing, operating and maintaining infrastructure projects on PPP basis. Currently, GIPL has 14 projects in its portfolio, of which 4 are in the operational phase; 7 are in the development phase and the rest in the pre-development phase.

In our view, the diversity in its asset portfolio is a major strength. Its projects are into diverse segments, viz., roads, bridges, ports, hydro power and biomass power. Of these, six are based on annuity basis, three on annuity & toll basis and the balance five on toll basis.

An excellent play on the growth of infrastructure in the Indian economy.

Given the diversified portfolio of assets, the mix of toll-based and annuity-based revenue streams, the synergies it can draw from the Gammon brand and its execution capabilities, we believe GIPL will be well positioned to leverage its capabilities for bidding and securing larger size projects, going forward.

Proven engineering capabilities of the Gammon Group coupled with GIPL??™s experience in successful development and timely implementation of projects, provides it with competitive advantage.

GIPL??™s projects have long gestation period. Along with the implementation risks, other concerns are related to the recurring capex required for implementing large infrastructure projects

The IPO is priced at a p/e of 116.27x annualised H1-FY08 earnings. Given the group background, execution capabilities and diversified project portfolio, investors may consider investing with a long term view. However, we believe the current issue size may not adequately support GIPL??™s growth plans. Going forward, the company may need to explore further fund raising.

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Gammon Infrastructure Projects Ltd. IPO Analysis

Posted in IPO