Mundra Port and SEZ (MPSEZ) has set foot on the country?s east coast, aiming to design and develop a coal terminal at the government-owned Vishakapatnam (Vizag) port for a concession period of 30 years with 24 months of construction period. The terminal is likely to be developed at a capex of R300 crore with a capacity to handle 6.5 mtpa of coal cargo (expected to be operational by CY13). The company has offered to share 40.1% of its revenue with the Vizag Port Trust as royalty.
Though the size of the investment is currently small in the overall scheme of things, it nonetheless marks the company?s entry into the east coast, a long pending development. The venture would help the company understand the east coast better, technically as well as commercially. The company will thus be able to lay the foundation for the next phase of investment on the east coast, with either brownfield or greenfield projects.
The company was so far exempted from paying MAT on its profits because of its SEZ developer status. However, with the recent Budget proposal to levy MAT on SEZ developers/units, the company will have to pay MAT (i.e. 20% of book profits until 2016, post which it falls under normal tax rate regime) against which it can book MAT credit. Hence, there is unlikely to be any impact on the company?s earnings, but valuation could be hit because of the cash outgo.
While we await more details on the project, given its small size, we do not expect any major value accretion to our SoTP. Since Vizag terminal is slated to come in only by FY14 and MAT is purely a cash-flow item, we do not see any impact on our existing earning numbers.
However, due to MAT cash outgo, we revise our SoTP target to R151 from R164. We maintain buy/sector outperformer status on the stock.
Edelweiss
