Expect 15-20% growth in topline and PAT: IRB Infrastructure

IRB Infra posted a 22.4 percent increase in its net profit at Rs 149 crore. However, the company’s operating margins slid due to the change in revenue mix, says Anil Yadav, Group CFO, IRB Infra.Speaking to CNBC-TV18, Yadav says the company’s order book stands at Rs 9,650 crore, which will be executed in the next 2-3 years.He expects 15-20 percent topline as well as profit after tax (PAT) growth in FY16 and believes the interest costs will come down by 50 basis points in the coming quarters, giving an yearly savings of Rs 60-70 crore.The Ahmedabad-Vadodra project is in advanced stage of completion and its amortisation will start reflecting soon in the balance sheet, he says, adding that he expects traffic growth of 10-15 percent in FY16.Below is the transcript of Anil Yadav's interview with CNBC-TV18\\'s Sonia Shenoy and Anuj Singhal.Anuj: Your EBITDA has gone up but margin has fallen, if you could tell us what happened?A: As far as EBITDA is concerned, EBITDA has increased compared to the corresponding quarter of last year from Rs 552 crore to Rs 635 crore. Profit has increased from Rs 122 crore to Rs 150 crore. If you look at increase in the profit it is 22 percent and increase in EBITDA is approximately 15 percent. We operate in two segments, one is BOT where the EBITDA margin is 85-88 percent and construction segment where the margin is 27-29 percent. If construction revenue will be higher then margins comparatively will be lower.Sonia: If I look at your P&L there has been a big jump up in your cost of raw materials consumed as well as your contract and site expenses, that has gone up to almost Rs 314 crore versus Rs 197 crore same time last year, are these expenses that will recur in the quarters to come thereby putting further pressure on your margins?A: If you look at the construction margins that remains at same level of 29 percent. It was 29 percent in September quarter of last year and 29 percent in this quarter also. As the construction revenue has also seen a 50 percent jump, it has increased from Rs 452 crore to Rs 677 crore. So, since construction revenue has increased the corresponding cost has also increased.Anuj: Last year you doubled your H1 performance for full year. Would it be safe to assume that Rs 315 crore of profit for six months, Rs 630-640 crore is the kind of number that we can look at compared to Rs 540 crore for last fiscal?A: We don't provide any particular guidance on the numbers. As the Ahmadabad-Vadodra project will start that interest and amortisation will start coming to the P&L. We believe that in terms of the topline growth and bottomline growth we anticipate 15-20 percent growth in terms of the topline and 15-20 percent growth in the PAT margins.Sonia: How much is the percentage of construction business? In the full year how much will it be and will it dilute your margins further because the percentage is going up. Should we expect to see the margins in and around this 52-53 percent range itself?A: We have a construction orderbook of Rs 9500 crore and which will be executed over a period of 2-3 years. On per annum basis we will have around Rs 2500-3000 crore of construction revenue and that will be the yearly run-rate, an increase of 10-15 percent year on year basis.Anuj: A word on your interest costs, it has been quite stable at around Rs 235-240 crore every quarter. Is that likely to remain that because it takes away about 50 percent of your EBITDA?A: As banks have already started reducing their bank rates interest costs will come down and its impact can be seen in the coming quarters.Anuj: How much impact, if you could quantify in terms of EPS?A: We have a gross debt of roughly Rs 13000 crore of debt. We see roughly 50 basis point of reduction in terms of interest costs. Yearly saving will be in the range of Rs 60-70 crore.Sonia: You said your orderbook in the construction segment is about Rs 9500 crore. What are the projects that are currently under construction and which are expected to be completed in the second half of the year? Can you give us a status check on the Ahmadabad-Vadodra project as well?A: Ahmadabad-Vadodra project is on an advanced stage. We anticipate to receive the completion certificate very soon. Apart from that there are projects like Solapur-Yedeshi, Yedeshi-Aurangabad, Kaithal-Rajasthan and Karwar-Kundapur which is in the state of Karnataka. These will be the four projects which will be predominant where execution will be going on in coming quarters.Sonia: What about the BOT side? The last time you had indicated to us that you are confident of bagging at least 400 kilometers of BOT projects this fiscal. Till August you had done only about 125 kilometers. How much have you done up until now and by the end of the year how much can you do?A: We have a yearly target of 300-400 kilometers per annum. We have already bagged one project of roughly 125 kilometers plus. Now the bidding is going on and we anticipate that we should easily bag roughly 300 kilometers what we had targeted.Anuj: Couple of tolls have been stopped in Maharashtra, has that had any kind of impact on your numbers?A: There is an impact but those projects were very small in size. Those were contributing hardly two percent of the total BOT revenue of the group. Car and state transport busses are exempted in Thane Ghodbundar road. These all put together hardly contribute 2-2.5 percent of the total toll revenue.Anuj: We now know that NHAI would be quite aggressive with new projects. If you could give us any kind of forward looking statements in terms of the kind of revenues that you are likely to generate over the next 2-3 years?A: We have stated that we have orderbook of Rs 9500 crore plus which will be executed over a period of 3 years. So, that gives a good visibility in terms of construction. We are seeing a healthy growth in terms of the traffic also across major projects in our portfolio. So, we believe that there will be 10-12 percent growth in terms of revenue in toll business. Plus we are adding Ahmadabad-Vadodra, that will also increase the toll revenue of the group.