Toll revenues at Sadbhav Infrastructure Projects Ltd, the country’s largest private sector road assets operator, rose by a mere by 2.3% year-on-year (yoy) in the June quarter. This growth pales in comparison to 13.9% reported in the year-ago period. Revenue growth has been slipping in the past few quarters – from 12.5% in the September quarter to 6.2% and 7.3% in the December and March quarters respectively. This underscores the weakness in the economy and the resultant drop in movement of road traffic.
The management attributes the steep drop in June quarter growth to two assets. One in Maharashtra (MBCPNL) where toll revenue fell by about 5%, due to lower passage of commercial and passenger vehicles. Note that this asset posted robust double-digit growth last year.
Meanwhile, the Rohtak-Panipat route seems to have been cannabilised by an alternate route that came up after Sadbhav’s project. Although the firm is battling the same with the regulators, the issue may prolong. Investors may note that rating agency Care Ltd had downgraded this asset along with another in the same belt, due to delay in interest payments to lenders and risks to cash flows ahead.
Sadbhav shares have fallen 30.5% in the last one month on the National Stock Exchange, reflecting the weakness in its fundamentals. However, the stock opened 6% higher on Wednesday on hopes that the firm would resolve its indebtedness through asset monetisation.
In fact, the deal struck for divesture of nine road assets at Sadbhav Infra is likely to see fruition by mid-August. With this, investors hope that the firm and its parent engineering, procurement and construction firm Sadbhav Engineering Ltd should be able to repay loans and release funds for equity needed in future projects.