Ride This Stock

Promoted by IL&FS, the Noida Toll Bridge Company Ltd (NTBCL) was formed as a special purpose vehicle for taking on a project on BOOT (build, own, operate, transfer) basis. The project was to construct a bridge across the Yamuna River connecting South Delhi to Noida, operate it for 30 years, and then transfer it back to the New Okhla Industrial Development Authority. The Noida Toll Bridge, famously referred to as DND Flyway, is an eight-lane bridge that connects Noida to South Delhi across River Yamuna. It is 552.5 metres long with a 27-lane toll collection plaza at the Noida end. It has a maximum capacity of 2,22,000 vehicles per day. Strengths Cash cow. The company has just one asset — the toll bridge. It incurred a one-time investment on constructing the toll bridge, and since then the bridge has been generating cash. Maintenance expenses are not very high, which accounts for the high operating profit margin of 76 per cent in FY11. A substantial portion of the company’s earnings go into debt repayment and servicing the interest cost. The rest is all profits. Since the entire revenue is collected as cash on the spot, there is no risk of bad debt. (A car comes to the toll gate, pays toll and then enters the bridge.) In fact, it gets even better: commuters who use the bridge daily prefer to buy cards, which means that they make a lump-sum payment to the company in advance. Assured return of 20 per cent. Under the concession agreement that the company signed with Noida Authority, the former was conferred the right to earn an assured return of 20 per cent on total project cost through collection of toll for 30 years, starting from December 30,