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Q1FY12 result highlights
Quarterly performance: IVRCL’s Q1FY12 performance was sharply below our estimates led mainly by lower revenues and
margins. Revenues remained almost flat yoy at Rs11.2bn (below estimate of Rs12.2bn) due to sluggish execution during the
quarter. EBIDTA margin dropped 170bp yoy to 7.4% driven by lower revenues as well as higher commodity prices (below
estimate of 9.3%). EBIDTA declined by 17%yoy to Rs832m (below estimate of Rs1.1bn). Interest expenses grew by 39%yoy
to Rs628m led by higher debt levels & higher borrowing costs (in line with estimates). Debt as on June 30th 2011 increased
to Rs24bn from Rs21bn as on March 31st 2011 led by higher advances to subsidiaries as also to suppliers. IVRCL has
indicated that debt levels have since come down (post June 30th 2011) to Rs22bn. Depreciation charges grew by 45%yoy to
Rs228m. PBT declined by 88%yoy to Rs49m and PAT declined by 85%yoy to Rs42m (sharply below our estimate of
Rs183m). Order backlog declined by 9.7%yoy to Rs183bn (excluding L1 of Rs33bn). IVRCL removed ~Rs19bn of slow
moving orders from Saudi Arabia from the order backlog during the quarter.
Key positives: None
Key negatives: Rise in debt levels to ~Rs24bn and increase in interest rates
Impact on financials
We have downgraded our EBIDTA estimates by 18% in FY12 and 16% in FY13 to account for lower than expected traction in
revenues and margins in Q1, cancellation of Rs19bn order from Saudi Arabia as also further delay in final award of
Maharashtra-Goa border-Karnataka-Goa border project. This has translated into a sharp 42% earnings downgrade in FY12E
and 36% in FY13E with our revised EPS being Rs4.1 in FY12E and Rs5.4 in FY13E.
Valuations & view
We expect near term stress on IVRCL’s earnings led mainly by sluggish revenue growth and high leverage. The stock,
however, has corrected very sharply (46% over 3 months) and we see limited downside from current levels. Any softening in
interest rates and fund raise by stake divestment in infra assets/land monetization would be key triggers for the stock in the
near term. As a result, we maintain our Outperformer rating on IVRCL with a price target of Rs73.
Order backlog down 5%yoy
IVRCL’s order backlog declined by 9.7%yoy to Rs183bn (excluding L1 orders of Rs33bn). The order backlog (including
L1) comprises of orders worth Rs42bn from the water segment, Rs41bn from irrigation, Rs48bn from buildings, Rs11bn
from power, Rs62bn from transport and Rs13bn from Oil & Gas and mining segments. Of the L1 orders, IVRCL has
received a contract worth Rs12bn for under ground mining from Hindustan Copper based on qualifications of HDOR’s
subsidiary Davy Markham. IVRCL has removed orders worth ~Rs19bn from Ministry of Water & Electricity, Saudi Arabia
Other highlights
• IVR Assets & Holdings reported standalone revenues of Rs1.6bn (+59%yoy). It reported an EBIDTA loss of Rs20m
against EBIDTA of Rs26m in Q1FY11 and net loss of Rs313m against net loss of Rs50m. The performance of IVR
Assets has been impacted mainly on account of interest on holding company debt of Rs8.4bn (Rs5.8bn from IVRCL)
• HDOR reported 41% drop in revenues to Rs1.5bn with EBIDTA declining by 62%yoy to Rs114m. PAT declined by
63%yoy to Rs61m during the quarter. HDOR has debt of Rs2.8bn. HDOR’s OB stands at Rs15bn currently.
• IVRCL has booked ~Rs3bn revenues from execution of own projects during the quarter. The outstanding order
backlog of own projects is ~Rs45bn.
• Toll collection from 3 operating road projects came in a ~Rs2.4m/day and is below management’s initial estimates.
Collection from the Chennai De-salination project stood at Rs4.4m/day.
• Financial closure for the Sion-Panvel project has been achieved with the debt component being Rs13bn and the
interest rate being ~11.5% currently (floating rate).
• The Chandrapur project has been financed with debt component of Rs3.4bn with the current interest rate being 12%
(floating rate).
• Orders from AP irrigation account for Rs28bn of the order backlog. Revenues from AP irrigation stood at ~Rs750m
during Q1FY12 and IVRCL expects revenues of Rs3-3.5bn from AP irrigation projects during FY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q1FY12 result highlights
Quarterly performance: IVRCL’s Q1FY12 performance was sharply below our estimates led mainly by lower revenues and
margins. Revenues remained almost flat yoy at Rs11.2bn (below estimate of Rs12.2bn) due to sluggish execution during the
quarter. EBIDTA margin dropped 170bp yoy to 7.4% driven by lower revenues as well as higher commodity prices (below
estimate of 9.3%). EBIDTA declined by 17%yoy to Rs832m (below estimate of Rs1.1bn). Interest expenses grew by 39%yoy
to Rs628m led by higher debt levels & higher borrowing costs (in line with estimates). Debt as on June 30th 2011 increased
to Rs24bn from Rs21bn as on March 31st 2011 led by higher advances to subsidiaries as also to suppliers. IVRCL has
indicated that debt levels have since come down (post June 30th 2011) to Rs22bn. Depreciation charges grew by 45%yoy to
Rs228m. PBT declined by 88%yoy to Rs49m and PAT declined by 85%yoy to Rs42m (sharply below our estimate of
Rs183m). Order backlog declined by 9.7%yoy to Rs183bn (excluding L1 of Rs33bn). IVRCL removed ~Rs19bn of slow
moving orders from Saudi Arabia from the order backlog during the quarter.
Key positives: None
Key negatives: Rise in debt levels to ~Rs24bn and increase in interest rates
Impact on financials
We have downgraded our EBIDTA estimates by 18% in FY12 and 16% in FY13 to account for lower than expected traction in
revenues and margins in Q1, cancellation of Rs19bn order from Saudi Arabia as also further delay in final award of
Maharashtra-Goa border-Karnataka-Goa border project. This has translated into a sharp 42% earnings downgrade in FY12E
and 36% in FY13E with our revised EPS being Rs4.1 in FY12E and Rs5.4 in FY13E.
Valuations & view
We expect near term stress on IVRCL’s earnings led mainly by sluggish revenue growth and high leverage. The stock,
however, has corrected very sharply (46% over 3 months) and we see limited downside from current levels. Any softening in
interest rates and fund raise by stake divestment in infra assets/land monetization would be key triggers for the stock in the
near term. As a result, we maintain our Outperformer rating on IVRCL with a price target of Rs73.
Order backlog down 5%yoy
IVRCL’s order backlog declined by 9.7%yoy to Rs183bn (excluding L1 orders of Rs33bn). The order backlog (including
L1) comprises of orders worth Rs42bn from the water segment, Rs41bn from irrigation, Rs48bn from buildings, Rs11bn
from power, Rs62bn from transport and Rs13bn from Oil & Gas and mining segments. Of the L1 orders, IVRCL has
received a contract worth Rs12bn for under ground mining from Hindustan Copper based on qualifications of HDOR’s
subsidiary Davy Markham. IVRCL has removed orders worth ~Rs19bn from Ministry of Water & Electricity, Saudi Arabia
Other highlights
• IVR Assets & Holdings reported standalone revenues of Rs1.6bn (+59%yoy). It reported an EBIDTA loss of Rs20m
against EBIDTA of Rs26m in Q1FY11 and net loss of Rs313m against net loss of Rs50m. The performance of IVR
Assets has been impacted mainly on account of interest on holding company debt of Rs8.4bn (Rs5.8bn from IVRCL)
• HDOR reported 41% drop in revenues to Rs1.5bn with EBIDTA declining by 62%yoy to Rs114m. PAT declined by
63%yoy to Rs61m during the quarter. HDOR has debt of Rs2.8bn. HDOR’s OB stands at Rs15bn currently.
• IVRCL has booked ~Rs3bn revenues from execution of own projects during the quarter. The outstanding order
backlog of own projects is ~Rs45bn.
• Toll collection from 3 operating road projects came in a ~Rs2.4m/day and is below management’s initial estimates.
Collection from the Chennai De-salination project stood at Rs4.4m/day.
• Financial closure for the Sion-Panvel project has been achieved with the debt component being Rs13bn and the
interest rate being ~11.5% currently (floating rate).
• The Chandrapur project has been financed with debt component of Rs3.4bn with the current interest rate being 12%
(floating rate).
• Orders from AP irrigation account for Rs28bn of the order backlog. Revenues from AP irrigation stood at ~Rs750m
during Q1FY12 and IVRCL expects revenues of Rs3-3.5bn from AP irrigation projects during FY12.
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