Friday, November 4, 2016

Is Noida Toll Bridge Company a Good Investment Bet?

Noida Toll Bridge Company is very good company but ill conceived by its parents. It had attracted my attention an year back but I had to reject it because it has only one project under the belt. It is a project specific, special purpose vehicle company, with no scope for expansion. Therefore the fate of the company as well as the investors is forever tied-up with that single project.

Its fate is sealed as the concession to collect toll is limited to recovery of the investment and a fixed, pre-specified return, with a variable length concession period.

Recently, the Allahabad High Court has ordered the company to stop collecting the toll on the grounds that the investment and the specified return is already recovered by the company. After the order the market price of the share has been hammered.

Graph showing steep fall in the share price of Noida Toll Bridge Company Share
Graph shows the steep fall in the share price of Noida Toll Bridge Company Share

The company has gone on appeal to the supreme court.

If the company had been conceived to plan, design and execute similar projects worldwide and if the company could indeed follow such a course, it would have been a wonderful investment bet. Alas, it is not to be so.

In the end, the prospects of the company are finished.

Please do not be lured by the steep fall in the price. There may be a special opportunity in its liquidation but such bets are for experts who specialise in such special situations and not for others - not even I.

Assets Slide

Slide explains concept and shows various assets as example
Slide Depicts Concept and Examples of Assets

Liability Slide

A Businessman Trapped in Excess Liabilities and Debt
Businessman Trapped in Excess Liabilities and Debt

What is a Liability?

a business man trapped in excess debt
Businessman trapped in excessive debt

Meaning and Definition:

What a business owes is a liability. It is a debt or obligation of an organization contracted during the course of business. In financial terms liabilities are a source funding assets. Liabilities have a credit balance in the books of accounts. Therefore, all credit balances appearing in the balance sheet are liabilities.

Those liabilities that need to be paid over a long period of time are long-term liabilities. Those repayable within a year are current liabilities.


Long-term Liabilities
Short-term (Current) Liabilities
Long Term Loans
Short-tern borrowings
Supplier Bills Payable
Taxes Payable
Preference Share Capital
Salaries and wages payable
Equity Share Capital
Short term provisions
Reserves and Surplus
Installments of term loans maturing within a year


We have already seen that liabilities are one of the sources of finance but excessive debt or liabilities is very dangerous for the business as inability to repay debts on time may cause insolvency or bankruptcy! Therefore many parameters like the debt-equity ratio, current ratio, quick ratio, and TOL/ TNW are used to closely monitor the liability levels of the business.

Further Reading: