IRB Infrastructure whistles past demonetisation blues

Healthy toll revenues and promising order book are key takeaways from results

Following slightly lacklustre September quarter results and overestimating the impact of the recent note ban on IRB Infrastructure, analysts had muted expectations over its December quarter (Q3) results. But, to the surprise of many, IRB Infra managed to meet the Street expectations, while net profit growth for the quarter was better than anticipated. This is why despite its revenues posting the slowest quarterly growth in recent times, the Street decided to reward IRB Infra’s stock with gains of nearly five per cent on Wednesday. Overall, upbeat market sentiments also played a part in lifting the stock. 

Consolidated revenues at Rs 1,441 crore grew 5.6 per cent in Q3, while net profit expanded 9.6 per cent, ahead of revenue growth, to Rs 184 crore, over the year-ago period. Lower depreciation and amortisation costs, down 20 per cent at Rs 181 crore, helped net profit growth in Q3. As IRB Infra had fully amortised certain toll projects, it saw some relief on this front. Operating profit margins stood at 53.7 per cent, up by 100 basis points year on year. Segment-wise, much as anticipated, revenues from toll operations lent strong support (up 16 per cent to Rs 606 crore) compensating for flat growth in the construction segment. However, as September and December quarters tend to be weaker for construction activities due to monsoon rains, this blip isn’t a concern. As for toll revenues, commissioning of operations at Agra-Etawah (Rs 20 crore of revenues in Q3) lent support to toll collections, while booking claims worth Rs 151.7 crore for loss of toll revenues due to demonetisation also helped.

Healthy order book is another positive for investors as IRB Infra closed Q3 with pending orders worth Rs 12,011 crore, offering it over three years of revenue visibility. Also, with order book of this size, IRB Infra stands as the leader in the roadways business, given its judicious mix of toll and construction projects.

Nevertheless, debt remains a monitorable. Consolidated debt as on December 31 stood at Rs 14,838 crore; translating into a debt-equity ratio of 2.8. While this is not an alarming number, given the segment it operates (3-4 by industry standards), meeting its stated timelines for floating its investment trust (end of FY17) assumes high importance. IRB Infra’s management is, however, confident of the same. 

“Approval from regulator is in final stage,” Anil Yadav, finance chief, IRB Infrastructure, says. Any delays on this front, however, could limit IRB Infra’s ability to bid for new projects.