Higher interest rates and high input prices are some of the key concerns for infrastructure companies at present. Many infrastructure stocks have taken a further beating in the past few days and Lanco Infratech Ltdis no exception.

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The stock shed 29% in two trading days to Rs33 per share after the announcement of December quarter results on Monday after market hours. The bellwether Sensex fell by 2.4% in the same period.

More than the numbers, investors could be worrying more about the fact that the firm changed its depreciation policy again in such a short span of time. In the March quarter, Lanco had changed its depreciation policy to written down value (WDV) for all the new power projects capitalized during FY10 and onwards. This time, it has changed the depreciation policy for all the thermal power plant capitalized in FY10 and onwards to straight line method (SLM) from WDV with retrospective effect.

The company maintains that because of the change in the depreciation policy, the reported consolidated net profit of Rs164 crore for the December quarter is higher by Rs133 crore.

“However, adjusted depreciation stands at Rs84.3 crore as against reported negative Rs76.5 crore. Adjusted profit after tax stands at Rs110 crore, which is a growth of 16.9% year-on-year (if SLM method is taken in this quarter),” wrote analysts from Prabhudas Lilladher Pvt. Ltd in a post-results note.

The performance of the power business was adversely affected, as price realizations remained muted. The Amarkantak and Kondapalli units operated at lower plant load factors of about 72%. Though the power business revenue was up by 66%, it has declined by 36% compared with the September quarter.

Meanwhile, the EPC business performed well and revenue from it rose by 53%. Valuations are attractive at current levels, but then this looks a lot like a bear market.

Graphics by Yogesh Kumar/Mint

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