Lanco Infratech - Recovery Delayed; Result Update Q2FY15:: Edelweiss

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Lanco Infratech’s (Lanco) adjusted loss came in at INR4.3bn in Q2FY15 as lower PLFs in the power division and delay in pick up in EPC operations played spoilsport. Griffin, once again, slipped into the red at the operational level with lower-than-anticipated production and fall in realisations. On the positive side, receivables from discoms declined INR5.5bn QoQ. Recovery in EPC operations has been delayed to Q4FY15 due to delay in release of working capital funds as part of CDR. We expect operations to improve once the EPC division gets back on track; this, along with Udupi project sale, should provide funding relief to Lanco.

Weak operations accentuate losses

The improvement in power plant operations trend reversed in Q2FY15 with lower PLFs on account of fuel issues/planned shutdown/lower demand due to monsoon. As a result, operational plants posted INR1.5bn loss (INR852mn loss in Q1FY15). Griffin posted EBIT loss of INR2.3bn (profit of ~INR340mn in Q1FY15) as realisations fell AUD4/tonne QoQ to AUD41/tonne. EPC revenue surged 36% QoQ, but was still lower than expected due to delay in release of working capital funds as part of CDR. Till date, ~40% (INR8bn) working capital funds have been released; management expects EPC operations to pick up in Q4FY15, post infusion of balance funds.

Liquidity to improve post asset sale/resolution of regulatory issues

Once the sale of Udupi project to Adani Power is completed, Lanco will receive net cash of ~INR12bn. Management is also focusing on early resolution of regulatory issues in Amarkantak Unit II and Anpara projects, which are currently hampering operations of these plants. While Lanco has already increased the tempo of EPC work on external projects, execution in internal projects is expected to ramp up from the next quarter.

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https://www.edelweiss.in/research/Lanco-Infratech--Recovery-Delayed;-Result-Update-Q2FY15/27613.html