Kotak Securties Limited - Srei Infrastructure Finance Limited

INITIATING COVERAGE April 15, 2008
Railways
For railway infrastructure development, GoI has planned the construction of dedicated
freight corridors between Mumbai and Delhi and between Ludhiana and
Kolkata. The railway infrastructure development plans also include construction of
10,300 km of new railway lines, gauge conversion of over 10,000 km and modernization
and redevelopment of 21 railway stations. The Government also indicated
the introduction of private entities in container trains for rapid addition of
rolling stock and capacity.
Gas
In the Eleventh Five Year Plan, an investment of around Rs.205 bn is required for
setting up gas distribution infrastructure, which comprises LNG terminal, gas transmission
lines and city gas distribution.
Telecom
Of the $500 bn of planned expenditure over FY07-12, around 13% would be
spent on the telecom sector, which amounts to around Rs.2670 bn. Under the
Eleventh Five Year Plan, GoI plans to achieve a telecom subscriber base of 600 mn,
with 200 mn rural telephone connections.
Infrastructure equipment requirement
With the intense need for faster implementation of infrastructure projects resulting
in increased mechanization, the demand for hi-tech construction equipment is rising.
Given the substantial infrastructure spending, the requirement for
infrastrastructure related equipment would be significantly higher in the Eleventh
Five Year Plan.
In view of the sizeable construction activity, the construction equipment industry is
poised for a big leap. The domestic equipment market is all set to expand five-fold
to around $13 bn by FY15 from around $2.3 bn in 2007 (Source: CII). Considering
the following table, this indicates that the cost of infrastructure equipment would
account for approximately 20% of the total construction cost under various
projects
Construction and infrastructure equipment cost (project wise)
Construction Construction component (%) Infra equipment as percent
of total project cost of construction cost
Road 100 22
Power-Thermal 20 23
Power- nuclear 30 23
Power-hydel 70 23
Airports 42 8
Ports 50 20
Irrigation & dredging 60 20
Urban Infrastructure 60 5
Railways 42 7
Source: KPMG, Company
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