For the roads sector, the slowdown in orders from the National Highways Authority of India has been one of the main threats in the recent past. But when you are sitting on an order book of about Rs.9,100 crore (as on 31 December), like IRB Infrastructure Developers Ltd, which is nearly thrice its consolidated revenue of the last fiscal year, then at least near-term revenue visibility is protected.
While that’s comforting, it’s even better that the company delivered better-than-expected December quarter financial results on Wednesday. Investors welcomed that and the stock went up by 5% in reaction to the numbers on a day when the broader markets were dull.
For the December quarter, IRB’s consolidated revenue increased by 22% over the same period last year to Rs.914 crore. That was faster than the 15% revenue growth seen in the September quarter. Growth in the December quarter was primarily driven by the construction business, which accounted for 70% of IRB’s revenue and increased by 27%. The company derives the remaining portion of its revenue from the BOT (build, operate and transfer) business, which increased at a slower pace of about 11%.
Unfortunately, net profit growth was much slower than revenue growth, rising 8.6% to Rs.142.7 crore. The reasons for slower net profit growth include decline in operating profit margin and higher depreciation costs. IRB’s operating margin fell by one percentage point to 44.6%. “When you have a huge portion of revenue coming from a business (in this case the construction business) which has relatively lower profit margin, the profitability is affected to some extent,” Virendra D. Mhaiskar, chairman and managing director of IRB, said while commenting on the results. For the quarter, the construction business’ Ebitda margin came in at 30% against 87% for the BOT business. Ebitda stands for earnings before interest, tax, depreciation and amortization.
The company has reported strong numbers so far this fiscal year. Operating margin for the nine months ended December was as high as 44%. Still, the negative news flow involving the company management is keeping sentiments muted for the stock. The IRB stock has underperformed the BSE-200 index since the beginning of this fiscal year.