Noida Toll Bridge Co. Ltd. - Limited Downside and Annuity Potential


(Rishi) #41

This business discussion has gone quiet!

Looking for clues to the reduced tax rate of Noida Toll since Q1FY’15. Has anybody got pointers?


(Aksh) #42

This is why the stock was hammered on friday

Board approved a draft proposal, bringing an end to the concession period for the key Noida Toll Bridge project in 2031…

http://economictimes.indiatimes.com/markets/stocks/news/noida-toll-bridge-ends-day-14-down/articleshow/48016548.cms

When Delhi-Noida flyway went toll-free for a day…


(sushilkc) #43

Considering these protests to make NTB toll-free, i think it will become toll free much before the agreement date. With one toll on Delhi-Gurgaon expressway already removed, people have an example in front of them and demand / protests to make NTB toll-free will only increase. Probability of further hike in fare is substantially reduced from here. Government will anyday favor public (votes) rather than investors

Disc : Sold long back seeing public protests against fare hike and sub-sequent roll-back of hike.


(Aksh) #44

This is a very good learning example as to how even seemingly good ideas can turn out to be not so good when lots of uncertainties are created when the sector/business is regulated by Govt. agencies. What is concerning is why board has approved draft proposal to bring an end to the concession period when in actual concession period should be extended and more land development rights should be granted to NTBCL because of short fall in guaranteed 20% return over the project cost? If Govt. authorities are forcing the company to change the terms of agreement by trespassing legal boundaries, as they always do, the company can always approach the courts? In fact, I’m really surprised as to why the company already hasn’t approached the court for more land development rights and extended concession period so far? There seems to be much more than what is available in public domain. Worth trakcing the developments just for the learnings.

Disc: Not Invested


(Abhishek Saha) #45

I just saw a blogger use PE multiple for understanding valuation of this company. Don’t think that’s an appropriate metric any more, as there is no terminal value in 2031. The only way to value this is by discounting dividends till 2031.


(Manish M) #46

IL&FS Transportation Networks Ltd acquired 1% in Noida Toll Bridge in June 2016. http://www.bseindia.com/xml-data/corpfiling/AttachLive/70F09B2F_4940_4FEA_BB85_6D023C982524_111104.pdf


(aadhar.aggarwal) #47

This article says that some IAS people have designed the whole noida toll in a wrong way. If the Govt. doesn’t scrap the contract then it would be unfair to the tax payer. Thoughts?


(Aksh) #48

Superb article. Thanks for sharing. It’s been a very good case study as to why a regulated entity is generally not a good investment however cheap it may look optically. No wonder NTBCL has not made any money for the investors eventhough few renowned investors were very bullish on it.


(viv_vjti) #49

Thanks for sharing the article. But the numbers specified in the article about net profit and operational expense are wrong. I have checked last five years financials of the company. Other members please comment/guide about the claims of operational and net profit numbers quoted in the article.


(aadhar.aggarwal) #50

@cool_aksh they have paid a very good dividend for past 2 years. why do you say they haven’t made money for investors?

@viv_vjti even i find the numbers in the article exaggerated/incorrect. especially that approximately 100 crores is given to the management per year. do you have any idea if actually the principal amount has kept on increasing like the article mentions?


(Aksh) #51

if you read the entire thread, understand the issues around it and compare its price performance even with index you would know why I say so…


(Rohan) #52

Any news of the High court ruling? Last update was that the case was to be heard finally on 15th September as the judge was not available earlier. Supreme court had given a 3 month window to the high court to rule on 30th June.

Very unlikely that it will be ruled in favour of the residents who are demanding abolition of toll


(Muser) #53
  • The company and current price look good based on the free cash flows being generated. But these cash flows are uncertain, considering the concession agreement could possibly be renegotiated.

  • The public protests, possible biased nature of the original contract, and prior instances of such contracts being renegotiated in other countries are not encouraging.

  • One potential income stream in the future are the in-principal development rights which have been granted. However, the nature, quantum, and time of these benefits are not known. These benefits may also get impacted if contract renegotiation happens.

Perhaps it makes sense to reduce exposure


(Dhiraj Dave) #54

@Muser

Appreciate your view point.
I have gone through a paper from planning commission website suggesting various issue with Concession agreement of Noida Toll Bridge
http://planningcommission.gov.in/sectors/ppp_report/4.Case%20Studies/6.Concession%20for%20Delhi%20Noida%20Bridge.pdf

The main concern expressed by author are:

  1. it would open ended indefinte return of 20% offered to Noida Toll Bridge company without any equity risk being assumed by them and hence was unreasonable
    2)The process followed was not transplant and ILFS has conflict of interest as advisor and promoter dual roll

However, I have following observation on above report

  1. During 2003-2005, the company faced problem and debt was restrctured. If the agreement was so much one side loaded, Noida would not suffered losses in past. The main reason for loss was lower then expected traffice but ILFS did infuse new money in the company when it was in problem and we all know that the company underwent CDR for debt restructuring which it came out.

  2. There are report which suggest that Noida Toll Bridge promoter ILFS was involved in drafting the concession agreement and has drafted this agreement which give indefinite freedom to the company to increase the tariff. While the mater would be decided in the court, one point which come my notice is equity stake of ILFS in Noida Toll Bridge. If ILFS knew that they have designed agreement in such a way that it would give hand some pay off to them, Why would they not own maximum equity stake? On the contrary to allgeation, ILFS hold around 25% stake in the company.

In case the tariff are abolished without adequate compensation to Noida, it would have major implications for infastructure investment in India. Tormorrow anyone can raise objection of unfair contact get same cancelled.

In view of above, I believe that while Noida Toll would not be able to get indenfinite term of tollng as originally envisaged concession agreement (which I believe due to being first contract of private public partnership then intenational attempt to get maximum from the people), it would also get return at around 15-16% IRR on the project. We may need to consider what value that comes to determine.

Discl: I have investment in the company and my view may biased. I am not legal expert and court/governement authority may take decision based on the fact to which I do not have access.


(Muser) #55
  • If the concession contract is renegotiated, which is a possibility an investor should not rule out, the process will be protracted and the outcome uncertain.

  • The company & investor interest may be protected to some extent to save face. Probably the original 20% return promised will be diluted and some land development rights may be provided.

  • If the original business case is changed, valuation changes.

  • When many such uncertainties exist together, invested capital and returns are at risk. Its time to be extra-cautious, reduce exposure or even exit.

  • Overconfidence bias and endowment effect can wreck havoc.


(atulgupta80) #56

@muser I fully agree with you. Too many uncertainties without any mean to decide probabilities and any negative outcome will be enough to cause significant permanent loss of capital.


(atulgupta80) #57

@muser risk materialized DND toll free now


(Muser) #58

As expected. Guess the company will appeal to SC

-------- Original message --------
From: atulgupta80
Date:26/10/2016 17:12 (GMT+05:30)
To: [email protected]
Subject: [ValuePickr Forum] [Stock Opportunities/Not-so-Hidden Gems] Noida Toll Bridge Co. Ltd. - Limited Downside and Annuity Potential
atulgupta80 October 26 @muser risk materialized DND toll free now

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(Rahul Mittal) #59

But today the circuit will cross DND for sure… Hope everyone knows d right side…


(viv_vjti) #60

Company is planning to move to Supreme Court against the orders of Allahabad High Court.
Any idea about the SC’s decision in such cases in past.In Feb 2014 Delhi High Court had banned toll collection on toll plaza at Sirhaul on Gurgaon Expressway. Any idea in regards what happened in the supreme court in that case. Seniors please advise.