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IRB Infra Expects FY12 PAT At Rs 500Cr

  • Infra player, IRB Infra expects to clock nearly Rs 500 crore profit in FY12. VD Mhaiskar, chairman and managing director, IRB Infra in an interview to CNBC-TV18 said, “We are pretty much on the target to achieve close to Rs 3,000 crore topline as we had indicated at the beginning of the year and close to 500 crore PAT.”He said that IRB’s current order book provides revenue visibility in the near-medium term.Meanwhile, Mhaiskar expects inflation to remain sticky in the near-term and doesn't see interest rates coming down anytime soon. “Given where the inflation numbers are, I don’t think RBI will be in a position to start softening anytime soon,” he added.
  • Q: We are dealing in a tough macro environment; the IIP data turned out to be negative, inflation continues to be at stubbornly higher levels which hurt the raw material. When we speak to with respect to the order inflow the comments that we get is quite disturbing that the order flow has slowed down. Could you paint us the picture on what all these means for IRB Infra?
  • A: The existing picture is quite concerning. Inflation has been very high and that can have an impact on the raw material prices. The weakening rupee can spiral the petroleum products because we are largely dependent on the imports. So, we will have to be careful going forward with regards to the crude prices and how they react in the present environment.
  • As far as inflation is concerned, we have a good tariff model in the road sector which supports hedging on inflation to a good extent. This is because tariff hike is linked to inflation in most cases. As far as tightening of interest rate is concerned, I believe we are pretty much done with. But given where the inflation numbers are, I don’t think RBI will be in a position to start softening anytime soon. So, inflation is going to be sticky and I don’t see interest rates coming down anytime soon.
  • Q: The understanding is that the outlook for the road sector itself is not so bad. Can you give us an idea of how many projects are waiting to happen out of the NHAI or generally the road construction sector? How much can your order book bloat by depending on what is available in terms of tenders?
  • A: Road sector is one vertical within the infrastructure space which has been delivering quite well over the last one year. We have seen almost 4,000 km getting awarded this fiscal itself. They are very much tune to complete at least 6,000 km roads being awarded for the entire fiscal.
  • There is a robust pipeline which is getting awarded on a very steady manner and to that extent we are not worried. We are already done with our order book growth for this year and so are well placed as far as that point is concerned. Even for the next two years we are seeing good amount of pipeline in the road sector, so that is not a very big concern.
  • Q: What about the toll collections, one would assume that the amount of traffic that passes would be linked to growth and that is why we are getting scary number of growth slowdown. How would you project? Would you think that revenues could get impacted by perhaps slowing traffic?
  • A: That would depend on what growth rates one has presumed in this model. If one has to look at the overall GDP growth, then there is a definitive correlation within the GDP growth and the traffic growth which is usually around 0.8 to 0.9 times of the real GDP. If I go by that then we will have to see in which geography the project exist.
  • This is because largely the Western half of the country contributes significantly higher to the overall GDP number and 0.8 or 0.9 of that can still comfortably give 6-7% of traffic growth. So if one is basing his workings on a 6-7% annual traffic growth, then I don’t see a problem as far as those projects are concerned. But if somebody has to presume a much higher growth rate to keep his project viable then the slowdown impact will be quite significant in those cases.
  • Q: What are you penciling in by way of an FY12 performance with respect to revenues and even margins because in Q2 you have seen margins decline by close to about 500 bps?
  • A: That is largely because of Surat-Dahisar project, where debt has gone up as a result of which the margins on overall basis look to be down. But, we are pretty much on the target to achieve close to Rs 3,000 crore topline as indicated at the beginning of the year and close to 500 crore PAT. We are pretty much inline to achieve that kind of growth.
  • Q: What is the next project going on stream that will give you revenue?
  • A: Kolhapur is complete, Surat-Dahisar, although the project is complete the revenues were already there being a six lane project. The project which are in execution phase are progressing well. In the next fiscal we should be in a position to complete at least two of the four projects - Jaipur -Tonk - Deoli and Talegaon Amravati projects.

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