L&T - Prima facie below-threshold returns from IDPL portfolio - Kotak

Our prima facie analysis of operating road projects of L&T IDPL, shows the blended portfolio IRR of eight operational projects is ~10%. We believe under-construction projects can be even worse as competition was higher over FY2011-12 (large premium payments committed to NHAI). In a recent note we highlighted that Hyderabad Metro may post mediocre returns with large risks, related to traffic, cost and real estate absorption. Such returns can (1) affect the value realization from monetization/induction of a strategic partner and (2) take the sheen off the stock, as debt grows, and projects may need support from the parent.

Source : Equity Bulls

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