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IFRS accounting for concession arrangement boosts construction revenue/profit …
�� IL&FS Transportation Networks’ (ITNL) FY10 revenue jumped 96.1% to INR 24.0 bn
(FY09 INR 12.3 bn) and PBT catapulted 5.5x to INR 5.2 bn (FY09 INR 0.8 bn). PBT
margins soared from 6.6% in FY09 to 21.8% in FY10.
�� The company follows IFRS principles for accounting of service concession arrangements
(SCA); consequently, construction income in SCA is recognised on POCM basis upfront
during construction phase.
�� Construction income, the primary revenue driver, jumped ~ 7x from INR 1.7 bn in FY09
to INR 11.6 bn during the year.
�� Rights under SCA have increased from INR 6.9 bn in FY09 to INR 14.8 bn in FY10 and
receivables under SCA catapulted from INR 7.3 bn in FY09 to INR 12.0 bn in FY10. (with
corresponding impact on investing cash flows)
�� IFRS adoption, however, is limited to accounting of SCA while other transactions are
accounted as per IGAAPs.
… operating cash flow, however, subdued
�� ITNL’s FY10 cash from operating activities post interest stood at INR 0.2 bn [FY09
INR (1.6 bn)] despite a PBT of INR 5.2 bn (FY09 INR 0.8 bn).
�� Operating cash flow also includes unrealised profit from construction income in SCA
which gets offset by contra investing cash outflows.
Segmental analysis
�� During FY10, geographical revenue mix shifted from outside India to within India, with
increase in the latter’s revenue share from ~34% in FY09 to ~ 59% in FY10.
�� Business segment revenues increased sharply for surface transport business from
INR 9.1 bn in FY09 to INR 22.2 bn in FY10, with margins in the segment soaring from
13.7% in FY09 to 32.8% in FY10.
Loan book rise to facilitate new projects; D/E maintained
�� ITNL’s loan book increased from INR 19.0 bn in FY09 to INR 33.7 bn in FY10 primarily to
finance new road projects.
�� D/E was, however, maintained at 2.0x (FY09 2.1x) on the back of INR 5.9 bn raised by
the company by issuing 22.8 mn fresh equity shares of INR 10 each at a premium of
INR 248 /share.
Accounting policy highlights
�� The company considers infrastructure construction/ upgrading services cost incurred to
be exchanged against toll collection rights. Thus, gains/ losses on intra group
transactions are treated as realised and not eliminated on consolidation.
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