Analysts recently visited the site of the Delhi Airport Metro Express, a 95:5 joint venture between Reliance Infrastructure and Spanish company CAF, which is the technology partner. The express link would connect New Delhi Railway Station and Indira Gandhi International Airport. The total project cost is estimated to be Rs2,885 crore and it is scheduled to be operational from the December 2010 quarter.
According to Rupa Shah of Prabhudas Lilladher, the expected traffic on this route is estimated at 10-11% of the total number of commuters at Indira Gandhi International Airport, currently pegged at 0.13 million passengers per day or 46 million passengers per annum.
The project also includes real estate development potential of about 60,000 square metres. Analysts maintain that the link would benefit from strong traffic potential, driven by its value proposition of reliable, convenient and fast connectivity. Further, the time of commuting is expected to be just 18 minutes as against around 90 minutes now. The link is also likely to attract traffic between residential areas and central business districts. The financial viability of the project is most likely to be based on airport traffic, percentage commuting through the link and encashment of real estate. “According to our earlier DCF-based estimates, we had expected Reliance Infrastructure to breakeven in this project on account of aggressive bidding and slowing airport traffic. However, we would like to re-visit our estimates once the metro is operational,” Shah of Prabhudas wrote in a note to clients dated December 7.
Meanwhile, Reliance Infrastructure’s September quarter results were adversely impacted by lower other income and higher tax rate. Revenues increased 5.6% year on year to Rs 2,571.9 crore. Revenues from the power business, which contributed 63% of gross revenues, declined 17.4%, primarily due to lower pass-through of fuel costs and power purchased. The remaining revenues came from the engineering, procurement and construction business and increased 120% due to a pick-up in execution at power generation and transmission projects under construction. Net profit declined 9.2%. Analysts like the stock, which is currently trading at Rs 1,071.35 per share. Investors could consider it on declines.
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