Rel Infra Q2 net flat at Rs 362 cr on high interest cost

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Rel Infra Q2 net flat at Rs 362 cr on high interest cost

Reliance Infrastructure’s July-Sept quarter net profit marginally rose to 361.63 crore when compared with Rs 360.18 crore which the company posted in the year-ago period. Sales, however grew 49% at Rs 5855.34 crore Year-on-Year

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Moneycontrol Bureau

Reliance Infrastructure has recorded a muted growth in its July-Sept quarter net profit at Rs 361.63 crore when compared with Rs 360.18 crore which the company posted in the year-ago period, mainly due to escalating interest cost of Rs 80 crore.

Sales, however grew 49% at Rs 5855.34 crore Year-on-Year.

Meanwhile, shares of the company closed the day at Rs 475.50, up 4% on the Bombay Stock before the results were announced by the company.

Nirmal Bang Securities in its research report has said that it expects the earnings of companies in the infrastructure sector for the quarter ended September 2011 to remain flat because of suppressed operating margin and higher interest costs.(REL-Infra had to incur Rs 80 crore toward interest cost during the quarter when compared with Rs 60 crore Y-o-Y.)

The reports further stated that to curb rising inflation, the Reserve Bank of India (RBI) raised its repo rate by 350bps to 8.25% in the past two years, which has increased average interest costs for companies to 11-12% and impacted the sector's profitability. "We expect net profit of companies in our coverage universe to remain flat YoY and decline 11% sequentially," it said.

Giving an outlook on the sector, the firm said that by FY13 it expects infrastructure companies like Rel-Infra to report an improvement in earnings growth, driven by ongoing concerns waning (slower order inflow, rising interest rates, regulatory issues, delay in project execution) and the low base of FY12. Apart from all this, the current valuation indicates that all risks and concerns have been factored in and the investor sentiment towards the sector is at its lowest level.

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