IL&FS Transportation - Impacted By Growth Pangs; Result Update Q2FY15 :: Edelweiss, PDF link

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IL&FS Transportation’s (ITNL) Q2FY15 revenues came in at INR15bn (INR14.1bn estimate), aided by INR2.6bn of claims booked by the company. Higher other income resulted in PAT coming in at INR989mn (INR386mn estimate). ITNL’s order book remains strong (~INR139bn order book is 3.3x TTM EPC revenue). However, surging debt has pushed debt:equity to 3.7x, leading to high interest costs negating the gains from revenue build up. This, along with delays in scale up of toll collection in certain projects, has led us to revise our target price to INR289 (INR299 earlier).

Top-line growth aided by claims booking

EPC revenues were aided by the INR2.6bn claims booked arising from delays in receiving land required for project execution in Moradabad-Bareilly and Jorabat-Shillong projects (concession period extension already approved by independent engineers). Adjusted for these claims, EPC revenues declined YoY due to slower-than-anticipated pick up in work on new projects. With corresponding costs also booked, there were no margins for the claims booked. Toll/annuity income was 18% higher YoY with toll collection on certain projects impacted by monsoons/floods. Though other income at INR712mn jumped 166% YoY, interest costs spurted 36% YoY to INR4.9bn due to leverage build up, resulting in PAT falling 11% YoY to INR989mn.

Rising leverage a concern

With steady progress on under development projects, debt:equity ratio has inched up to 3.7x. Incremental equity commitment is ~INR9bn (excluding sub-debt to be infused in certain projects). In this context, the proposed QIP will be a key monitorable going ahead.

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https://www.edelweiss.in/research/ILAndFS-Transportation--Impacted-By-Growth-Pangs;-Result-Update-Q2FY15/27556.html