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With a 53 per cent decline over a one-year period, the stock of Shriram EPC (SEPC) was among the worst performers in the engineering and infrastructure space. Weak pace of execution as well as high interest costs in the March quarter resulted in a 30 per cent dip in profits in that period over a year ago.
SEPC's joint ventures, subsidiaries as well as association with group companies in the green energy space, did not receive favourable valuations from the market as renewable energy themes were beaten down.
Its joint venture in the wind turbine manufacturing space, Leitner Shriram Manufacturing's long-term debt rating for instance was downgraded by Fitch Ratings in June to ‘BBB-‘ from ‘BBB'.
The rating indicates moderate default risk as a result of lack lustre EBIDTA margins and leverage of 6.1 times in FY-11. The report states that the Leitner Shriram required equity level support to meet financial commitments.
Risks attached to this joint venture could be one reason for SEPC's lack lustre stock performance. For the quarter ended June, revenues expanded by 15 per cent over a year ago, even as profits dipped as the wind business was shifted to the joint venture. Consolidated order book at Rs 4,490 crore was 2.7 times FY-11 sales
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