The tragedy of infrastructure firms in recent times is that not only do they have to contend with rising interest rates and raw material costs, but also red tape and procedural delays, not always of their own making. While some of it may perhaps be justified, as in the case of environmental concerns and land acquisitions, these delays are destroying profits and damaging balance sheets.

Such has been the story of IVRCL Ltd in the last fiscal year. For the fourth quarter, the company’s stand-alone revenue growth was 8.6%. Revenue of many projects was deferred due to slower execution. Its road projects such as the Goa-Karnataka and Sion-Panvel stretches were delayed, political issues stilled the irrigation business in Andhra Pradesh, to name just two.

At the same time, it could not cap its expenses, which rose 11%, as it had to set aside some money as a one-off due to cost overruns. Thus, operating profit plunged by one-tenths and margins declined by 1.82 percentage points.

The performance of its subsidiaries isn’t encouraging either.

Hindustan Dorr Oliver Ltd, the engineering arm, reported a decline in revenue and profits in the fourth quarter while IVRCL Assets and Holdings Ltd’s losses widened.

That also meant that the parent firm continued to infuse cash into these units as loans and advances. As a result, net working capital stretched to 176 days in fiscal 2011, compared with 146 days the previous year.

The company’s debt to equity ratio also worsened to 1.1 times. With lending rates on the rise, interest charges in the fourth quarter jumped by a quarter from a year ago, and net profits fell by the same margin.

Yes, the order book looks robust at 23,900 crore. However, brokerages estimate that anything from one-fourth to one-third of the book is slow moving or stuck.

Moreover, Tata Securities estimates that the company needs to invest another 750-800 crore in existing road projects, of which at least a quarter has to happen in the current fiscal year.

While the company is looking to sell some real estate assets to fund these projects, it will still have to raise fresh debt at increased rates, putting further pressure on the balance sheet.

That will likely subdue investor interest in the stock even though it is trading at seven-tenths of its book value.

We welcome your comments at