Margins to rise on proj completions, toll income: IRB Infra

IRB Infrastructure is confident of maintaining healthy margins in the coming quarters. Toll collections have increased in some areas, and a few projects are on the verge of completion, says Anil Yadav, CFO of IRB Infrastructure in an interview to CNBC-TV18.

Speaking on the Kolhapur toll issue, he says that the company was awaiting police protection from local authorities after the chief minister revoked the notification that suspended toll. Also, revenues from Surat-Dahisar project has risen by 8-10 percent, he adds. He is positive on paring their debt down. The firm’s forex exposure is also 10 percent of the total debt, which does not possess any risk, he adds. Also read: India Ratings maintains negative outlook on infra for H213 Below is the edited transcript of his interview to CNBC-TV18. Q: Can you take us through the highlights of your numbers? We have your revenue performance which quite clearly is above expectation; Rs 1,032 crore. Take us through how your EBITDA margins did? A: Total income from operation has increased from Rs 980 crore to Rs 1,033 crore up by 5 percent and EBITDA has also increased from Rs 456 crore to Rs 484 crore up by 6 percent. Profit before tax (PBT) is up by 1 percent from Rs 195 crore to Rs 197 crore. Q: You had EBITDA margins of 43.4 percent last year. What would your EBITDA margins work out to? A: Our EBITDA margin is close to 45 percent. Q: Could tell us where things stand on the Kolhapur toll issue? How much you would be losing right now? A: As far as Kolhapur, we have completed 95 percent of the work and after the committee’s report, Chief Minister has revoked the suspension of toll notification. We have not got police protection from local authorities and accordingly toll is not yet commenced. As far as toll collection is concerned, we are yet to commence the toll collection on that project. Q: If you can quantify how much you are losing on a per day basis and then maybe we can arrive at a number? A: On quarterly basis the estimated toll collection was Rs 10 crore. Q: When will you be able to start collecting toll? A: We are expecting a police protection from the state. Once the state will provide this police protection, we can start the toll. _PAGEBREAK_ Q: You cannot give us a time, will that happen within the week? A: We are expecting it to start soon. Q: How has the revenue been on the Surat-Dahisar toll, has that been the main driver of these numbers? A: Surat-Dahisar revenue if you compare with the corresponding quarter of the last year, the revenue was increased close to 8-10 percent. Only difference is this year is that monsoon has arrived early and last year's corresponding quarter monsoon started from July. So there will be a little bit impact of the monsoon, but still we have seen close to 8-10 percent growth in the toll revenue. Q: Are you seeing any difference in traffic flow itself in any of your toll collecting places? Has the slowdown begun to bite at all? A: We have not seen any dip in the toll collection so far. Still, we are seeing 4-5 percent kind of growth in all of our projects. Q: Do you fear it might hit soon? A: As of now we do not see any such indication. Q: Are there any more projects that will enter commercially operable space from where you can collect money in FY14 itself? A: Yes. FY14 Jaipur-Deoli project will be operational by end of this month and followed by Amritsar and Pathankot which will be operational by end of Q3. _PAGEBREAK_ Q: What should we expect by way of revenues for the full year? A: Once we start the collection then definitely we will share the revenue for those projects. Q: You wouldn’t have a number in mind? A: It is too early to state those numbers because we are about to start collection and in next quarter results we will definitely update with those numbers. Q: Your order book stands at Rs 7,700 crore, end of the last quarter i.e. March 31 you had told us to Rs 8,400 crore, is order accumulation falling behind? A: This is the order book reflected of whatever execution we have done in this quarter and considering as of now NHAI has not awarded any project in Q1 itself. So definitely after Q2 we see that there will be order coming from the National Highway Authority of India (NHAI). We will be waiting for those and thereafter we will pick those orders. Q: Are you comfortable with the debt situation because the interest costs are eating away about 40 percent of your EBITDA and any comment on that? A: As far as company is concerned, entire group debt and net debt to equity is close to 2.4 which is far below than industry average. This is close to 5:1 or 6:1. As far as debt is concerned or interest is concerned, we are very much comfortable. Q: What is the gross and net debt now? A: Gross debt is Rs 9,200 crore and net debt is Rs 8,000 crore. _PAGEBREAK_ Q: You think it will come down by year-end, are you paring it down? A: The plan-term loan repayment will happen as per the schedule. We are executing two projects that is Ahmedabad-Vadodara and Tumkur-Chitradurga are still under construction. There the debt will increase as per plan. Q: Then you will not be able to maintain this kind of EBITDA because your finance costs are likely to increase in the coming quarters? A: Thereafter the project will also become operational though then revenue will also increase. In coming quarter, this year and next year, we will be about to maintain this kind of EBITDA margins. Q: Just looking at your annual report, USD 159 million of unhedged forex exposure on your balance sheet that is posing a bit of a risk? A: Our debt is close to Rs 8,000 crore and our foreign exposure debt is hardly 10 percent of the debt. We don’t foresee that that is having any bearing on our interest cost or even on terms of the forex fluctuation. Q: I am reading the highlights of your Q4 investor presentation, you did see passenger traffic degrowth or contracts and fall, from 6.3 million to 5.2 million. It means you experienced 13.5 percent year-on-year (Y-o-Y) fall in passenger traffic. How is the experience this time? A: From where you are arriving this number I don’t think there is 13 percent fall in the toll revenue. If you compare with the toll revenue, there is Y-o-Y 10 percent growth on projects. Q: You have not seen any fall in passenger growth? A: No, we have not seen any fall in toll revenue. Q: This Rs 2 per share dividend that you have announced; do you plan to give more such dividends this year? It would mean a good dividend yield if indeed that has to continue? A: We have phased out our dividend payout and as far as company is concerned, we have policy to pay a dividend around 20 percent of profits for the year. We will continue with our policy of the dividend.