BackIVRCL’s fate is a cliffhanger as losses mount
Any revenue ramp-up is unlikely in the near term and the firm is losing ground on all fronts
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Infrastructure firm IVRCL Ltd’s September quarter results were pathetic. The stand-alone entity, which is into engineering, procurement and construction (EPC) contracts for large infrastructure projects, saw a 22% drop in net revenue from a year ago.
In spite of total expenses coming down on a year-on-year (y-o-y) basis in absolute terms, the contraction in revenue led to higher losses. Operating loss for the quarter widened to Rs180.5 crore from Rs154.3 crore in the year-ago period.
Importantly, the auditors have qualified the substantial erosion in net worth of the company, stating that the firm needs substantial cash flows to meet creditors, lenders and other statutory obligations of the firm. Uncertainties on corporate guarantees and disputes, losses on divestment in subsidiaries and outstanding loans with the lenders on loans given to subsidiaries engaged in build-operate-transfer (BOT) projects are grave concerns.
To be sure, the company’s management said that most of the firm’s road assets that are operational are reporting decent operating profit. But then, interest costs on loans for the stand-alone entity account for nearly a third of the net revenue. It is even higher at the consolidated level due to cost overruns on delayed projects.
The standalone net loss at Rs354.5 crore took the stock down on Friday. Its accumulated losses as on 30 September 2016 were Rs2,517.6 crore. The firm’s net worth has eroded significantly (Rs41.4 crore as on September 2016) over the last five to six years when the entire infrastructure sector was plagued with project delays and cost overruns due to issues relating to project clearances. Current liabilities are way beyond the current assets of the firm.
What’s more, the demonetisation process may temporarily pull down revenue as toll collections are likely to see a decline due to a drag on economic activity.
Any revenue ramp-up, therefore, is unlikely in the near term and the firm is losing ground on all fronts. The lenders hold about 61% of IVRCL’s equity post structured debt restructuring. The onus is now on the lenders who own a majority stake in the firm to find a white knight that could bail out the firm from its crisis.
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