Order book at Rs 11.8Kcr if Agra-Etawah proj comes by: IRB

Q: Very impressive traffic growth in quite a few sectors, is that because Q4 is usually a good quarter or are you seeing signs that this is a sustainable traffic growth pace?

A: This is Q4 running where we have seen sustained good volume growth in traffic and that makes us believe that this is a pick-up in the overall economy leading to higher traffic volume growth and has sustained for last four quarters. A lot of catching up over the last few years of traffic whatever was observed has been made good by this significant double digit growth that has been witnessed by us over the last four quarters.

Q: What would you guide for FY16 as a whole in terms of traffic revenue growth?

A: We don’t give guidance but there is a definite correlation between the gross domestic product (GDP) growth and the traffic volume growth, which is close to 0.9 to 1 times of real GDP growth and we have to remember that most of our portfolio is in the Western hub, which contributes significantly higher to the overall GDP growth number and that is visible from the volume growth that has been witnessed in the past four quarters. So we certainly see good volume growth going forward as well.

Q: What will your construction segment look like in terms of how much the growth could be in FY16 because you have many projects that you started execution on whether it is the Yedeshi project, the Rajasthan project, even Agra-Etawah Project, so given all of this, how much could your growth be at least in the first half of the year?

A: Assuming Agra-Etawah to come through, the order book would stand at around Rs 10,800 crore. Agra-Etawah we don’t expect to start construction in this financial year considering the financial closure involved and considering the balance order book, we see good strong visibility for next three years to come and if that is the timeline in which this order book would be executed.

Q: I am clean bowled by the margin improvement that you have shown, is 57.5 the sustainable level of margin that we should expect?

A: As the portfolio tilts towards more operational projects, certainly EBITDA margin is bound to go up because once the project is operational, it is 85-90 percent EBITDA margin project because your operations and maintenance (O&M) cost don’t go beyond 15 percent.

In this quarter if we see the break up of the construction revenue vis-à-vis the toll revenue, it has been almost divided in the middle. So with close to Rs 500 crore of topline on construction as well as tolling, the EBITDA margins have seen significant upmove and going forward we believe that the break up of revenue between tolling and construction is likely to remain more or less 50:50. So in that case, the EBITDA is likely to continue in this range.

Q: What are the projects that IRB Infra has that will get commissioned in the next six-twelve months?

A: Ahmedabad-Baroda expressway project will be the one significant project in our portfolio which is bound to get completed in next couple of quarters so that would be a significant addition to the portfolio. Other than that, none other project falls due for completion in this financial year. Q: Next to railways it is roads that have got the maximum budgetary support of Rs 40,000 crore, the NHAI is also trying to revive some of the stalled projects. On the other hand, we have the negativity of the land acquisition act reforms – changes not going through and still lingering as an ordinance, what is the reality at the ground? Are more projects being tendered? If and when they are tendered, are you seeing more appetite on the part of both BOT and engineering, procurement and construction (EPC) contractors?

A: Yes, there has been a higher allocation of funds for the road sector but we have to keep in mind that there are so many different purposes for which this money is going to get used.

It will involve land acquisition cost, which has certainly moved up, there will be utility shifting, there will be grand payments due to various concessionaires and other than that would be the EPC projects. So considering all that, this increased allocation was much needed.

Coming to the project pipeline, yes, we see a very strong project pipeline at this point in time and we expect NHAI to bid out close to 8,000 kilometers worth of projects and around 50 percent of that are likely to be coming up for bidding on BOT basis. That is the kind of pipeline, which we have seen.

As far as competition is concerned, EPC has been witnessing significantly aggressive competition and on BOT also we have not seen any of the projects not receiving any response situation which we had seen in the last year. So I can say that yes competition is coming back even in the BOT part.

Q: Can you give us an expectation or rather what is happening on the ground, is it traffic growth picking up PAN India or is it picking up only in areas where you have a higher presence which is in Western India?

A: As of now, it looks to be a PAN India effect but as we don’t have projects in other geographies, I can certainly say that the Western half has definitely witnessed a double digit volume growth and that certainly to do more with the GDP growth rate numbers as well.

Q: There are a lot of projects on the block because everyone doesn’t have a strong balance sheet like you, will you be looking for an inorganic purchases?

A: Inorganic purchases can only happen if there is a significant discount at which one is available because at this point in time we see a robust pipeline of projects up for bidding.

Whatever capital we have, we will conserve that for bidding on fresh projects and any kind of acquisition would only be if there is a significant discount at which it is available.

Q: On Goa-Kundapur and Solapur-Yedeshi, how is the construction progressing and when do you think we could expect to see completion?

A: Goa-Kundapur is progressing as per the milestone that we have set with NHAI and is likely to be completed in 2016-2017. Solapur-Yedeshi has just commenced and that also is progressing well.