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You are here : IndiaNotes >> Research & Analysis >> Companies >> BF Utilities Ltd. >> Research

BF Utilities - A nice buy

Punit Jain | 10 Jul, 2012  | Follow Author | Add to my Favourites 

BF Utilities, a part of the Bharat Forge group, is engaged in developing the Bangalore - Mysore Infrastructure Corridor. The high potential project has been stuck for over a decade due to land handover issues, and the firm is making losses. However recent reports indicate that it may be close to resolving legal disputes, and is raising a second round of PE funds for project execution. The share has recently crossed its 200 DMA. Investment in BF Utilities is an act of faith in the management, an understanding of how badly this project is needed, and a confidence that the risk return balance is tilted in favour of investors at this price. Investors with a High Risk, High Gain appetite may look to invest now for a 3-year horizon.


CMP: 444

Mkt Cap: 1,674 crore

P/E: 488 times

Advice:  Invest


BF Utilities (BU) is part of the Pune based Bharat Forge Group, and is focused on Roads and Power projects.

Let’s analyse this stock to see where it’s heading. 


Business Snapshot:

• Turnover in year ending March ‘12 was Rs 131 crores, and losses Rs 206 cr.

• The key asset of BU is the Bangalore Mysore Infrastructure Corridor (BMIC) also called NICE, a 164 km tolled expressway to connect the cities, that includes a peripheral road in Bangalore, 5 New Townships along the Expressway (the first Section A involves 7,290 acres land), a Town Planning Authority status, and a Concession period for the toll of 40 years. The BMIC is 75% owned by BU.

• The Hubli Dharwar bypass in Karnataka is a 30 km road on NH4 that lets highway traffic bypass the two cities, speeding up traffic. NH4 connects Mumbai/ Pune with Bangalore/ Chennai. Traffic has grown at 14% CAGR over 5+ years. Operational since 2000, this is 70% owned by BU.

• A windmill farm of 18.33 MW power over 300 acres in Satara, Maharashtra is 100% owned by BU.

• Shareholding pattern of BU is: Promoters 66.1%, MFs/ DII 0.5%; FIIs 2.7%, Bodies Corporate plus others 12.2%, Individuals retail & HNI 18.5%. Thus Promoters hold majority stake – a good sign. 

• Ashok Kheny, the MD of NICE is an expert on engineering, design and construction of projects for transportation and infrastructure.

• The BMIC project is divided into Sections A, B and C. While the toll road in Section A is 95% complete, handover of land is pending, see Fig 1.


Details and Updates of the BMIC project:


• BU has invested 2,000 crore in building the BMIC corridor, which will cut travel time between the two cities by half. The project involves construction of the main highway, 5 new townships and mega infra and entertainment projects like the largest Cricket Stadium in India, a Sports Academy, the tallest residential building (88 floors), a racecourse, residential complexes, and utilities like power & water.

• A 56-km peripheral road project is conceived as a Bangalore bypass for the busy NH 4 and NH 7 traffic between Mumbai/ Pune and Chennai.

• The project is partly operational, with rest held up due to pending handover of land by the Government of Karnataka (GoK). Of Section A, a total 4,188 acres out of 7,290 acres of total land has been and transferred by GoK, Fig 1. The BMIC project has been stuck for the last 7 years with snail like progress due to political opposition from the GoK for this project.

Fig 1 – The BMIC project Sections (BF Utilities reports)

• The recent update is that 574 cases that were filed against the BMIC project mostly related to land acquisition issues have been together dismissed by the HC and SC. In one of the cases the complainant’s case was adjudged frivolous, and a penalty of Rs 10 lakhs was imposed on him.

• The specific orders by the courts for handover of land to BMIC were ignored, and a Contempt of Court hearing is to come up in July 2012. The PWD and Commerce and Industries Secretary of GoK have been asked to hand over the land to BU.

• After being in the works for nearly a year, the second round of private equity fund raiser by NICE is close to being finalized. A number of Private Equity companies are in discussion with BU on raising funds for this phase of the project, involving investments in the highway, as well as development of the townships and specific projects. There have been talks with Prestige Developers, a Bangalore based Real Estate construction firm for joint development of properties. 

• Anil Ambani in his personal capacity had invested in NICE several years ago. He recently exited and sold his 8% stake at a price that valued the project at 4000 crore. He exited with a 4-5 fold profit.


Ownership and structure



Pricing Snapshot:


BF Utilities Price 5-year view


• The share has fallen from a peak of 2,977 in July 2007 to a recent low of 259 in Dec 2011, see Fig 3.

• The previous high price was perhaps based on success of all aspects of the project – an excellent peripheral road in Bangalore, and a world-class highway to Mysore, plus very lucrative land assets on the way, all completed on time. And a sentiment favouring infra projects.

• The disappointment at the political and government/ legal hurdles sent the share price in a spiral, falling 85% in 5 years.



BF Utilities Price 6-month view



• From this recent low, the share has recovered 71% to today’s CMP of 444, see 6 month chart Fig 4.

• The 200DMA was crossed last week with high volumes, after a period of 1.5 years, indicating a bullish period. 


Financial Snapshot:


• The company has been running into losses for the last 3 years.



Mar '08

Mar '09

Mar '10

Mar '11

Mar '12













 Net Profit






 Earnings Per Share







Figure 5 - Financial - JainMatrix Investments

Opinion about BF Utilities:


• The two cities are developing economically on the lines of Mumbai-Pune, with excellent growth and synergies. The 143 km distance is part of State Highway 17, and is a key connection from Bangalore to West Karnataka, north Kerala and north and west Tamil Nadu. So the BMIC has tremendous development potential. It is also badly required, for the growth of South Bangalore and Mysore.

• Even though the BU financials are in negative, the business is well managed, and the expectation is that if the pending land is handed over to BF Utilities in the next quarter, it may be possible for the management to complete the highway and a fair proportion of the townships by end 2013.

• On legal issues, it is likely that the GoK authorities have, under SC duress, no option but to handover the promised lands, and allow the BMIC executives to proceed on the infrastructure project. The current BJP government have eased up and not opposed it, unlike previous governments.

• The current highway has just two lanes each way and is quite congested with travel taking around 3-4 hours. Current data is about 1, 00,000 vehicles take this route every day. This indicates that good demand/ potential exists for this new highway by itself. A ballpark estimate of 50% of this traffic, attracted to the BMIC, paying a conservative 100 Rs each way indicates Rs 182 cr annual revenue.

• Most good infra projects attract and stimulate growth. In addition the new townships as well as a new constructions planned will by themselves attract customers from Bangalore, and generate independent revenues and profits.


Advice and Recommendation for Investing:


• Valuation of Real estate firms is difficult. The project has been valued in a wide range, from 4000 - 15,000 cr. But this is all higher than current market cap of 1600 crores.

• Much of the value is dependent upon a successful handover of committed lands, followed by execution, commissioning, launch and success of multiple assets.

• But from a risk return perspective, we can see that at current market price, the share has been lower than this CMP for only 18% of the time in the last 5 years. This includes the 2008-09 fall. On the up side, the peak has been at 6.7 times the CMP, so there is a significant potential upside.

• The project is showing signs of overcoming teething hurdles and progressing on legal, land acquisition and financial closure aspects.

• The management believes in building roads and assets as soon as they have clear titles, as construction costs today are lesser than those in the future. So many sections are already operational and revenue generating.

• For the High Risk, high gain investor, this investment can be looked at from a 3-year perspective for a gain of 200 – 300%.



• This project has been in construction for almost 16 years, and it’s possible that social and political pressures may still delay or stall this project.

 - However these fears appear to be receding based upon impending Supreme Court action, as well as the companies own speeding up of raising of funds for development works.

• Valuation of the share is difficult. The traditional issue with land bank owners is the wide range between the costs of acquisition, the current market price and the possible value once access and infra development takes place. This is an unknown.


The author can be contacted over email at


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Disclaimer: The author has taken due care and caution to compile and analyze the data. The recommendations are his/her personal views. He/she shall not accept any liability whatsoever arising from the use of any of the above content.


Sources have been mentioned at relevant places in the article. In spite of this, the author does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. The author does not hold positions in the stock.

Note: Data used in analysis is as of 6th July 2012

673.75 +8.30
674.80 +9.40
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About Punit Jain

The author has a firm called JainMatrix Investments ( which offers an Investment Advisory Service. He can be contacted at

For more information please write in to

Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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