Jainam Research recommends to avoid the MEP Infrastructure Developers IPO

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IPO Note: MEP Infrastructure Developers Ltd.
Issue Details
IPO Price Band : Rs. 63-65
Date of Opening 21-April-2015
Date of Closing 23-April-2015
Issue Size (Shares) 4,02,89,225
Issue Size at Rs.63-
65
Rs. 254 - 262 Crore
Face Value(Rs.) 10
Minimum Application
Lot
225 Equity Shares
Issue Type 100% Book Building
Listing BSE- NSE
Industry Infrastructure
Background:
MEP Infrastructure Developers Limited is a Mumbai-based
organization with presence across the country. Established
in 2002 as a Toll Management Company, today MEP has
extended its experience to BOT and OMT Projects and
construction of Bridges. Company has completed 73
projects with an aggregate of 131 toll plazas and 2530.04
lanes across 12 states in India.
The company's toll collection and OMT projects have been
awarded to it by statutory corporations or government
companies primarily being NHAI, MSRDC, RSRDC, RIDCOR,
MJPRCL and HRBC.
Some of the toll collection projects completed by it include:
(i) Five Mumbai Entry Points operates an OMT contract
pursuant to a re-award; (ii) Chalthan toll plaza, Gujarat; (iii)
Ahmedabad, AUDA Ring Road, Nadiad, Anand and
Vadodara on the Ahmedabad - Vadodara Expressway,
Gujarat; (iv) Rajiv Gandhi Sea Link, Mumbai, Maharashtra;
(v) Chirle toll plaza and Karanjade toll plaza, Maharashtra;
and (vi) The toll plazas on Hanumangarh - Kishangarh
road, Rajasthan.
Avoid
Outlook & Valuation: MEP Infrastructure Developers Limited is a Mumbai-based organization with
presence across the country. As per financial information company has incurs loss in last 5 years
which is Rs.117.54 cr in FY2014 from Rs.1.27 cr in FY2010. Company paying major part of the
revenue as a interest which tends to make it loss making company. Substantial revenue of the
company comes from Mumbai entry points so termination or reduction in revenue from it impact
adversely and policy of government regarding toll collection also impact adversely.
Hence, We recommend our investors to “AVOID” IPO of MEP Infrastructure Developers Ltd.

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research.report@jainam.in
What we like about company :
 Established and leading player
Company is an established and leading toll operator in India with an overall
experience of over 12 years in the business. Company has completed 75 projects,
with an aggregate of 133 toll plazas and 841 lanes, across 12 states in India.
Company has 18 ongoing toll collection projects with an aggregate of 33 toll
plazas, five ongoing OMT projects covering 2,530.04 lane kilometres with an
aggregate of 15 toll plazas and one ongoing BOT project covering 42.02 lane
kilometres with five toll plazas, spanning 10 states in India.
 Integrated structure with in-house capabilities
undertake most of the activities related to our toll collection as well as OMT
projects in-house, including tendering for the project, conducting traffic survey,
forecasting revenue, achieving financial closure and collection of toll. This helps
in reducing reliance on sub-contractors and third parties and decreases costs.
 Diversified project portfolio across different states in India
Company has a diverse project portfolio of toll collection as well as OMT projects
spanning across 12 states in India, being Andhra Pradesh, Gujarat, Karnataka,
Maharashtra, Odisha, Rajasthan, Tamil Nadu, Uttar Pradesh, Telengana and West
Bengal. Company’s ongoing project portfolio is a combination with 12 Short
Term toll collection projects, six Long Term toll collection projects, five OMT
projects and one BOT project.
 Ability to achieve financial closure for projects
The company has completed 75 projects with an aggregate of 133 toll plazas and
841 lanes. Commercial operation of a project is typically commenced only upon
achieving financial closure and its ability to achieve financial closure for its
projects is demonstrated by the number of projects completed by it over the past
years. The company finances the payments to be made to the authorities for its
projects by way of fund based as well as non-fund based loan facilities from
banks/financial institutions.

3. M – 5/6, Malhar Complex, Dumas Road, Ichchanath, Surat – 395007. Tel (0261) 305 5555, www.jainam.in,
research.report@jainam.in
Risk (Reasons not to invest Inox Wind Ltd. IPO):
 Substantial portion of revenue from the Mumbai Entry Points Project
A significant portion of its total revenue on a consolidated basis is generated
from the Mumbai Entry Points Project, in terms of which it undertakes the
maintenance of and collection of toll at, the five Mumbai Entry Points, pursuant
to a contract dated November 19, 2010 with MSRDC (the 'Mumbai Entry Points
Contract'). The letter of award for the Mumbai Entry Points Project was issued by
MSRDC in favour of a consortium between the company and ITIPL. MIPL, one of
the Subsidiaries of the company, was incorporated as a special purpose vehicle to
operate the Mumbai Entry Points Project and subsequently, the Mumbai Entry
Point Contract was executed between MSRDC, ITIPL, the company and MIPL, with
MIPL as the contractor.
 Company incurring loss and huge amount of debt
The company incurring loss in last five years which is Rs.117.54 cr in FY2014
from Rs.1.27 cr in FY2010. Company paying major part of the revenue as a
interest which tends to make it loss making company.
 Stiff competition
The company operates in a competitive environment. Some of its competitors
may have greater financial resources than us. Further, some of its competitors
may be bigger than it in business volume and may have greater financial capacity
than it which enables them to undertake larger projects or to obtain better
financing arrangements.
 Substantial portion of revenue from short term projects
Out of the 18 ongoing toll collection projects operated by it, 12 are Short Term
Projects, as on March 19, 2015. A substantial portion of its total revenue on a
consolidated basis is derived from its Short Term projects which accounted for
41.52%, 37.52%, 67.70% and 60.83% of its total revenue on a consolidated basis
for the seven months ended October 31, 2014, Fiscal 2014, 2013 and 2012,

4. M – 5/6, Malhar Complex, Dumas Road, Ichchanath, Surat – 395007. Tel (0261) 305 5555, www.jainam.in,
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respectively. Any such early termination may result in it losing the cost incurred
by it for operating such projects and may lead to losses or lower than expected
profits on such contracts. Further, there is no assurance that it will be able to
obtain re-award of these Short Term projects upon expiry of the contract period.
Business Strategy
 Focus on Long Term Projects
Company’s portfolio of ongoing projects includes 12 Short Term projects
awarded by NHAI and RIDCOR. Company intend to reduce their dependence on
Short Term contracts in the future and focus on Long Term Projects. Company’s
Mumbai Entry Points Project, which is first and the largest OMT project on the
basis of revenue, was awarded in 2010 and is operational until 2026.
 Focus on acquisition of operational roads constructed by third parties
Company intend to acquire, on an opportunistic basis, the OMT and/or toll
collection rights from third parties for the roads constructed by them which are
fully operationalised with a well established traffic. Company intend to acquire
such maintenance and/or toll collection rights either individually or jointly with
other parties subject to availability of projects on terms that are favorable.
Objective of IPO
 Repayment / pre-payment, in full or part, of certain loans availed by our
Subsidiary, MIPL
 General corporate purposes

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Financials:
Balance Sheet (Rs. in Lacs):

6. M – 5/6, Malhar Complex, Dumas Road, Ichchanath, Surat – 395007. Tel (0261) 305 5555, www.jainam.in,
research.report@jainam.in
Profit and Loss Account (Rs. in Lacs):

7. M – 5/6, Malhar Complex, Dumas Road, Ichchanath, Surat – 395007. Tel (0261) 305 5555, www.jainam.in,
research.report@jainam.in
Cashflow Statement (Rs. in Lacs):

8. M – 5/6, Malhar Complex, Dumas Road, Ichchanath, Surat – 395007. Tel (0261) 305 5555, www.jainam.in,
research.report@jainam.in
Source: DRHP-MEP Infrastructure Developers Ltd.

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research.report@jainam.in
Research Team
Reports Published By Research Department:
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Abbreviation: Sup= support, Res= resistance, DMA= daily moving average, OI= open interest. Some figures are
squared up to the nearest.
Tejas Jariwala Research Analyst 0261- 3087016 tejas.jariwala@jainam.in
Jimit Zaveri Jr. Research Executive 0261- 3082016 jimit.zaveri@jainam.biz
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