Reliance Infrastructure, including Reliance Power (45% stake), is targeting to achieve financial closure for projects worth Rs269 billion by 1QFY10.

There have been delays given the tightness witnessed in the credit markets during 2HFY09. For RELI, total equity commitment towards existing projects stands at Rs26.3 billion, of which Rs21.8 billion is outstanding (equity commitment in FY10 stands at Rs10b).

Net Cash and cash equivalent stands at Rs46.8 billion (Rs206/share), including investment in preference shares of Rs22 billion.

Amount invested through ICDs has reduced from Rs77.4 billion in March’07, to Rs51 billion in March’08 and Rs27 billion in December’08; and management stated that most of the outstanding ICDs would mature by end FY10.

RELI has emerged sole / L1 bidder in three road projects, at a project cost of Rs94.4 billion. This includes the Western Freeway Sea Link Project, connecting Bandra to Haji Ali (Mumbai) at a cost of Rs53 billion, including upfront payment of Rs16b to MMRDA towards the Bandra-Worli sealink.

In EPC business, Hisar (1200MW, Rs38b) and DVC Purulia (1200MW, Rs34b) projects should cross the margin recognition threshold in 1QFY10, which should improve profitability.

Outlook

We expect the company to report net profit of Rs10.5 billion (up 58.9% y-o-y) in FY09, Rs9.9 billion in FY10 (down 5.4% y-o-y) and Rs10 billion in FY11 (up 1.9% y-o-y).

The stock quotes at PER of 10.5x FY09E, 11.1x FY10E and 10.9x FY11E. We arrive at a target price of Rs785/share.

This comprises of: Power business Rs90/share, Delhi business Rs34/share, EPC business Rs49/share, cash and cash equivalent Rs251/share and holding in Reliance Power Rs361/share (20% holding company discount).

We maintain a BUY recommendation.