investment tips to buy best infrastruture stocks in India

We all know that infrastructure and real estate sector stocks are worst affected in bear market.

How the future is going to be far infrastructure sector?
According to estimates of government spending on infrastructure it looks the growth prospects huge and tremendous.

Indian Twelfth Five Year Plan spending on infrastructure $989 billion while the current is at $492.
The infrastructure includes construction of roads, dams, city projects, power projects, bridges, tunnel and irrigation related projects and many more other across the country.
Investing for long term like more then 3 to 5 years will prove excellent returns in infrastructure related shares.

Economic conditions and benefits to infrastructure sector
Taking into consideration current economic condition, going forward infrastructure sector will be beneficial like,
1. Interest rates are coming down and it is expected to come down more in coming quarters.
Infrastructure companies needs to borrow huge amount of money for their capital expenditure.
So if interest rates come down then they will definitely going to benefit.
2. Inflation is decreasing and going forward it is also expected to come down.

What is meaning of Low debit companies?
Low debit companies means companies having less very less loans or borrowings. Companies having high debit could see drop in their net profits and hence the result is falling EPS (Earning per Share) because they have to pay the high interest rates while the earnings are falling so during downtrend of business such high debit companies prove risky and investment in low debit companies could prove beneficial.

What is meaning of Cash rich companies (Cash flow)?
A company’s good cash flow is the sign of its well being and its capacity and ability to with stand the cyclic downtrend.

Benefits of Cash rich companies
In the long term, after expansion phase is complete ‘
1. Company should be cash positive to withhold of expenses still the revenue starts coming from that expansion unit.
2. An investor is also benefited will cash rich companies like probabilities of getting dividend payouts.
3. Cash rich companies also get benefited in tight monetary policy present situation where the borrowings of funds has made
difficult for companies. So good cash flow companies need have to depend on borrowings because they have good cash flow.

Important note - Still Indian Markets are directionless and indecisive due to which any further market correction may bring some more pressure on all researched stocks mentioned in following subsections.
The market volatility situation is for short term duration and in long term the markets will recover as Indian companies are having good fundamentals and good growth prospects.
Taking into consideration current market situation it is advisable to buy stocks in steps rather than buying in bulk in single trade.

                                                Larsen & Toubro (L&T)

1. The company is the largest engineering and construction player in the country; it could be the best play on India’s
    growing investments in infrastructure and industrial capital expenditure (capex).
2. A strong balance sheet provides L&T the flexibility to increase its leverages in case of shortage of funds in the future.
3. Its well diversified revenue stream allows the company to leverage its resources and also helps it remain largely insulated
    from any slowdown in a particular segment.
4. Recently, the company won a contract worth Rs. 2,460 crore from Mumbai Metropolitan Region Development Authority
    to implement the first Monorail System in Mumbai, which is to be completed within 30 months.

Order Book
Company order book as on September 2008 is 63,000 crore, which is above 46% compared to September 2007.

Debt equity ratio - 1:1

PE (Price to Earning ratio) FY09 - 15.2

                                  IVRCL Infrastructures & Projects

Brief introduction of company
The company is a major player in the water and irrigation (about 69 per cent) segments and most of its projects come from the government sector (over 70 per cent in FY08).

Debit equity ratio
The debit equity ratio is 0.69 as Mar’08

PE FY09 - The PE is at 6.8

                                             Simplex Infrastructure

Brief introduction of company
The company has presence in different verticals of infrastructure segments such as power, marine, industrial, roads, railways, bridges, urban infrastructure and housing. Also, its recent foray into the mining, onshore drilling and power T&D segments, will prove to be the future growth drivers. The diverse portfolio provides comfort as it will also provide stability in the event of any slowdown in a particular segment or geography.

Debit equity ratio - 1.0

Order Book
The company order book stands at Rs.10,600 crore.

PE FY09 - 7.2

                                      Hindustan Construction Company

Brief introduction of company
The company generates about 80 per cent of its revenue from projects sponsored by government owned entities. This is seen in positive light, as it is expected that the flow of orders from the government should start improving, while existing projects could be put on a fast track of completion.

Order Book
The company order book stands at Rs.1200 crore.

Debit equity ratio - 1.6

PE FY09 - 11.6.

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