During the past decade, the Indian energy sector has seen a substantial shift from fossil fuel backed source to renewable energy. According to the National Electricity Plan 2022, the country needs an additional 17000 GW of hydropower capacity over the next 10 years. The central and state governments have also brought in various measures and enablers to help the industry related to Jal Jeevan Mission, irrigation, hydropower, water, and river linking projects.
Om Infra Limited is a Jaipur-based company established in 1971, having diverse business activities related to hydro mechanical equipments, turn key solutions for steel fabrication, hydro power developments, Real Estate, Entertainment centres, and Hotels. The company is a pioneer in the field of turnkey execution from Design, Detailed Engineering, Manufacture, Supply, Installation, Testing and Commissioning of complete range of Hydromechanical equipments for Hydroelectric Power & Irrigation projects, PWD and various other Corporations.
The company has an excellent manpower of skilled personnel fully capable to execute the projects in a timely manner plus having key and critical plants, tools and equipments required to execute turnkey contracts for small, medium and large hydro electric power projects.
The company is also in a very niche and monopolistic business, having all types of equipments such as liners, trash tracks, mechanical and hydraulic hoists. Om Infra has an order book of around 3000 crores currently with a mix of hydro and water projects as well as Jal Jeevan Mission projects.
This order book has grown by almost four times over the last five years. From a perspective of margins, projects in the hydro, water and pump storage projects which are typically irrigation, dam building and hydro power mechanical projects are generally executed over the 2-3 years period, giving the company around 18-20% EBITDA margin.
The company management has indicated that the nature of these projects requires them to put in upfront expenses for procurement while revenue is booked only on completion of the projects. Due to this, the EBITDA margin comes to around 12-15% upon completion of the projects.
Key liquidity events happening over the next few quarters are quite important for OM Infra. It expects to receive an amount of Rs 380 crores and Rs 60 crores from its real estate project in Jaipur and Kota. In 2006 the company had purchased land in the MHADA project for Rs 106 crores which now they have tied up with DB Realty for developing the project. Om Infra expects a realisation of around Rs 750 crores from this project subject to certain factors.
It also expects around Rs 600 crores from long pending arbitration closures from NEEPCO which it has been fighting against in courts over the last 15 years. It also expects a claim amount of Rs 28 crores and Rs 50 crores from the Ministry of Power and NTPC respectively. All this should bring a significant cash flow into the company. The largest arbitration award is expected to be the Bhilwara Jaipur Toll road project wherein Om Infra had developed the 212 km road project in Jaipur to Bhilwara stretch.
The State government had made it toll free in 2018 and subsequently the company had submitted claims worth Rs 570 crores. The matter has recently been adjudicated in favour of the company at the arbitrator level and OM Infra expects a significant cash flow of around Rs 1000 crores over the next few years.
The company has posted very good Q1FY24 financial results and the management is very bullish for full FY24 to be extremely strong on the back of several projects around the country and significant cash inflow from pending litigations and awards.
Portfolio investors can purchase the OM Infra stock currently quoting at Rs 92 on the bourses for long term gains.
Rajiv Kapoor is a share broker, certified mutual fund expert, and MDRT insurance agent.