The document provides information about KNR Constructions, an Indian infrastructure company. It discusses KNR's history since 1995, financial performance, order backlog, and key business segments. It also analyzes KNR's share price performance since its IPO in 2008, noting it increased over 14 times in value while many peers declined significantly. The document emphasizes KNR maintained conservative financial management with no equity dilution, and executed projects on time.

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Dec 2017
1
KNR Constructions
(Building the future)
A presentation by: Niteen S Dharmawat

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IMPORTANT DISCLAIMER: This presentation is prepared solely to provide information
about this company and take feedback from the readers. This presentation is NOT
meant for equity investment. It should NOT be construed as an investment advice for
buy/sell/hold or any other form of recommendation. This presentation does not
recommend any price or price target for the company discussed. Investment in equity
shares has its own risks. The information contained herein is based on my study and
upon sources that I consider reliable. I, however, do not vouch for the accuracy or the
completeness thereof. This material is for personal information and not intended for
any investment decisions. I am not responsible for any profit or loss incurred based
upon it & take no responsibility whatsoever for any financial profits or loss which may
arise from the discussion thread above/anywhere in communication. It is safe to
assume that I, my family, friends have vested interest in any of the companies/stocks
discussed/presented here. Please do your due diligence and take the help of a
qualified advisor/registered research analyst before you take any financial decision. I
am neither of these.

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KNR Constructions: Who?
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History and background
 Incorporated in 1995
 A history of executing infra projects before time and earning
bonuses from the customers
 Conscious about maintaining margins (EBITDA and Net profits)
 Very focused and conservative management
 Inventory of construction equipment
 Never diluted balance sheet to raise funds, say through QIPs.
 The asset light model helped them avoid debt burden while they
continued to grow modestly.
 Strong EPC Order-book
 Order book INR3,587 Crs (30th Sep, 2017)
 Road 2,728Crs, Irrigation 856Crs, Others 2.7Crs
Source: Company presentation, website

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KNR Constructions: Who?
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Financials
 CMP: 280
 Market cap: 3,940 Crs
 52W H/L: 292/148
 EBITDA margins: 16.45% (TTM)
 Promoter’s unpledged holding: 56.53%
 Altman Z Score: 5.23 I Piotroski score: 6.00
Want to know more about
Altman Z Score and Piotroski Score
click link & go to slide 65 & 66: goo.gl/t5Rwd9
Source: Company presentation, website, screener.in

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KNR Constructions: Who?
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Key verticals
 Roads, Bridges, Flyovers
 Irrigation projects (last addition)
Added new verticals and thereby
increasing the sphere of
opportunities
River linking projects: KNR completing one large projects by Mar 2018 to get
qualified for river linking projects. KNR to bid for dams and canals related projects.
River Linking projects $85 billion (5.50 Lac Cr) investment
 Mission: We would aim to add more business verticals to the
organization in the fields of construction of Elevated Metro Rail and
Railway Projects.
Game changer
opportunity
Another vertical in
makingSource: Company presentation, website, annual report

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KNR Constructions: Who?
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Numbers at a glance
Source: screener.co.in

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KNR Constructions: Who?
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What is the plan?
 Situation in road infra work is favourable
 NHAI revised target to 10k km in FY17-18 from 6.5K kms earlier. Tenders by
Dec 2017
 Bharatmala 5.35Lac cr investment. It will be in two phases. 1st phase 2018,
6 months from now bidding to start
 River linking projects: 5.50Lac cr investment. KNR building capabilities
 Fewer players to execute Bharatmala kind of projects
 Continue to focus on projects that can be executed in 2-3 year time frame
and also focus on large projects
 50-50% ratio in EPC-HAM
Source: KMP interviews, Company Annual Reports, NHAI website, Co website, media reports, market sources

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Why I got interested in KNR Constructions?
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 I am curious in stocks from the sector “hot in demand”
• Power, Infra and Reality in 2006-2008
• ICT stocks (IT, Communication and Telecom) in 1998-2000
 During such time of over exuberance, prices get distorted.
When they crash again prices get distorted on the other side
 Offers opportunity to buy good companies with sound
fundamentals, solid management and most importantly at
attractive valuations.

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KNR: IPO days (Jan 2008-Mar 2011)
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 KNR came with IPO in Jan 2008 at Rs170 per share
 Promoter holding post IPO in March 2008 was 71.52%
 IPO performed well, but post listing, the “hot sector”
experienced a burst
 KNR stock came down as low as Rs20 in 2008 itself
IPO at 170 in 2008
Rs20 in 2008

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KNR: Initial Post IPO days (Jan 2008-Mar 2011)
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What did promoter do?
 The promoters started buying from the open market:
• From Jan 2008 to Mar 2009: added 2,92,574 shares (1.04%)
• From Apr 2009 to Mar 2010: added 1,99,817 shares (0.71%)
• From Apr 2010 to Mar 2011: added 2,08,740 shares (0.74%)
 Reached the upper cap of 74%. So they couldn’t add
anymore
 Management buying was a reflection of commitment to the
company and confidence that it will perform
 KNR promoters had zero pledge, excellent track record in
project execution and displayed extreme conservatism in
managing the balance-sheet during all these years

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KNR: Initial Post IPO days (Jan 2008-Mar 2011)
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What did MFs/FIIs do?
 Consistent sellers
 Beaten down by Infra/Reality/Power bug
 Sold almost 7% of total company equity
 Holding down from 14.58% March 2008 to 7.74% in
March 2011

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KNR: Initial Post IPO days (Jan 2008-Mar 2011)
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Company performance
 As of Mar 2011
• Revenue 793Crs
• 131CRs EBITDA
• 57Crs Net Profit
• Gross block (Plant & Machinery) Rs 399Crs
 Market cap Rs 280Crs for a company with the
conservatively managed balance sheet
Source: Company Annual Reports, Website, screener.co.in

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KNR: Second wave (Apr 2011 – Mar 2014)
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 I starting buying sometime in 2011 at around Rs100
 Came down to Rs45 in 2013 and Rs68 in 2014
 Remained below its IPO price most of the time
 Promoters holding
• At the upper cap of 74% so they could not add anymore
 FIIs/MFs holding
• Increased their stake marginally to 8.77% by March 2014 from 7.74% in March
2011
Rs68 in 2014
Rs45 in 2013

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KNR: Second wave (Apr 2011 – Mar 2014)
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Company performance
 Toughest period for entire infra industry
 KNR’s revenue (sales) and profits both came down
• Revenue 688Crs in 2013 v/s 793Crs in 2011
• Net profit 52Crs in 2013 v/s 57Crs in 2011
• Order book: 1296Crs in 2014 v/s 1443Crs in 2011
 Brighter side: its ability to execute projects
on/before time

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KNR: Third wave (Apr 2014 onwards)
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 After 2014 it started its upward journey, from 100 to 1400,
and never looked back
 FIIs and MFs started coming back and increased their
holding
 Market cap went up from around 280Crs to Rs3940Crs
Rs1400 (Rs280X5) in 2017
Rs121 on 16th May 2014
Source: BSEindia.com

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KNR: Third wave (Apr 2014 onwards)
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 The promoters holding
• Came down during from 74% (Mar 2014) to now 57.38% (Sep 2016 quarter)
• Who bought this 16% shares?
 FIIs/MFs holding
• Increased 23.3% from 8.06% (Mar 2014) to 31.36 (Dec 2016 quarter).
• Taken away whatever was offered by the management but also bought from
the public
 Company performance
• Started off with an ease in their business prospects
• Order book soared with the new government awarded infra projects
• KNR continued to execute the projects on/before time
What did they do
with the money?
Source: BSEindia.com

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KNR: OCF, NP and Equity dilution
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Jo jita wohi sikandar…
In INR Crs
Parameter Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07
Net Profit 157.25 161.12 73.01 60.98 52.13 52.76 56.83 50.28 43.66 29.54 19.87
CFO 316.55 256.54 36.94 133.23 1.04 130.37 81.8 33.96 116.41 43.93 32.75
Signal
Zero equity
dilution
Parameter Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Mar-08
Share capital 28.12 28.12 28.12 28.12 28.12 28.12 28.12 28.12 28.12
Source: Company Annual Reports, Website, screener.co.in

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KNR: What has happened to share price?
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Jo jita wohi sikandar…
KNR: 14 bagger in 6 years…
(1Lac became 14Lacs)
Punj Lloyd, JP Associates, GMR, IVRCL: Lost 95-98%
(1 Lac became 2k or 5k)
Value of Rs 100 invested in 2008?
 KNR Constructions: INR 1400
 Punj Lloyd: INR 20.70
 JP Associates: INR 18.00
 GMR Infra: INR 17.60
 IVRCL Infra: INR 4.30
(Rs100 invested in KNR in 2011 is Rs1400 as of 8 Dec 2017)

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Trader v/s investor
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Time V/S Return
KNR Case study from 2008-2017:
https://goo.gl/PR3gCe
A case study of how slow and steady wins the race

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IMPORTANT DISCLAIMER: This presentation is prepared solely to provide information
about this company and take feedback from the readers. This presentation is NOT
meant for equity investment. It should NOT be construed as an investment advice for
buy/sell/hold or any other form of recommendation. This presentation does not
recommend any price or price target for the company discussed. Investment in equity
shares has its own risks. The information contained herein is based on my study and
upon sources that I consider reliable. I, however, do not vouch for the accuracy or the
completeness thereof. This material is for personal information and not intended for
any investment decisions. I am not responsible for any profit or loss incurred based
upon it & take no responsibility whatsoever for any financial profits or loss which may
arise from the discussion thread above/anywhere in communication. It is safe to
assume that I, my family, friends have vested interest in any of the companies/stocks
discussed/presented here. Please do your due diligence and take the help of a
qualified advisor/registered research analyst before you take any financial decision. I
am neither of these.

21. Twitter - @niteen_india 21
About the presenter:
Niteen is an MBA and cleared CFA Level 2, CFA Institute USA.
A firm believer in long-term financial planning, and a 20
years veteran of the stock market. He also conducts free
investor awareness sessions.
He likes reading books/magazines/news papers on the
topics as diverse as general management, technology,
investment, fiction, marketing and the Gita.
He is a person who believes in "Everything else can stop but
learning".

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Thank you
Twitter: @niteen_india
Blog: http://dharmawat.blogspot.com/
Mobile: 9850571857
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