Order visibility strong in construction, BOT segments: IRB Infra

IRB Infra reported a 10.3 percent jump in net profit to Rs 182 crore while the total income rose 36.8 percent to Rs 1,517 crore in the first quarter of FY17. Its consolidated earnings before interest, tax, depreciation and amortization (EBITDA) improved 300 basis points in Q1. The construction and build, operate, transfer (BOT) segments continue to have good visibility as far as order book is concerned, says VD Mhaiskar, CMD of the company. Speaking to CNBC-TV18, Mhaiskar says that current orders will be executed in next 2.5-3 years and hence, there are no worries over the growth. Traffic visibility, which rose in last quarter, aided higher toll revenues for the company. Sustained growth in traffic too is expected in future according to Mhaiskar. Below is the verbatim transcript of VD Mhaiskar's interview to Sonia Shenoy & Anuj Singhal on CNBC-TV18.Sonia: I wanted to talk a little bit about your order book. The construction order book this time stands at Rs 8,750 crore but that seems lower than what you have done in the last couple of quarters. Are you seeing a slowdown in orders? A: I don’t see a slowdown in the order book. This doesn’t include the one new order where we stand as the preferred bidder. What you are seeing is excluding that new order that we are likely to get. So considering that, we have a very good visibility on the order book for next three years. Anuj: If you were to add those numbers, if you could tell us the kind of order book? A: It will be a surplus of Rs 10,000 crore is what I can say.Sonia: If you can just take us through the two segments, the construction segment EBIT has gone up 15 percent; it is very strong. What kind of growth are you envisaging in the construction business itself over the next couple of quarters? A: I think the margins have not improved. They have just been the same what they were earlier because in the trailing quarter, what had happened, we had explained it that quarter also that there was some utility shifting payments which NHAI does routed through us because of which the construction turnover was higher and the margins last time looked a little lower. However, now this quarter there was no such utility shifting payment so whatever is the turnover is the work done turnover because of which the margins have come back. So, it is again in-line with the margins what we had all along in the construction segment. As I said, the construction segment has very good visibility in terms of order books so we see a steady construction order book execution over next two and half to three years. Anuj: Since you have that kind of visibility, could you also tell us what kind of numbers do you think you will be able to post on the topline front and on the bottomline front since you said that you have quite a bit of visibility for the next three or four quarters?A: We have visibility but as a policy we don’t give guidance. So, all what we can say is that this order book is to be executed over two and half to three years and from that one can make out what kind of order book ramp up can happen or the execution ramp up can happen. Plus Agra-Etawah is a new project where we have just begun the construction so that should also start reflecting in the construction order book going forward in the next three quarters. Sonia: On the consolidated margins at 51 percent, what could the sustainable margin run rate be?A: The consolidated EBITDA if we have to talk about then I would say that it would keep on changing depending up on the product mix whether it is the construction order book that has done well in that particular quarter or whether it is the BOT segment that is doing well. However, if I have to look at the individual segments then I think the construction margins and the BOT segment margins, have been very sustained manner been stable and I think the consolidated revenue has improved from the trailing quarter by almost 300 bps and on a year-on-year (YoY) basis it has gone down because of the construction segment performing better than the BOT segment. Sonia: What kind of traffic growth do you see on some of your key road projects that you just referred to over the next couple of quarters? A: For last seven quarters running now we have seen sustained traffic volume growth being there in the range of 7-8 percent. All key projects have delivered very strong traffic numbers which has resulted in the tolling revenue jump from Rs 519 crore to Rs 601 crore. From a trailing quarter perspective also if you see, they have gone up from Rs 583 crore to Rs 601 crore. So, we see a good visibility on the traffic volume ramp up as of now. If things remain where they are and if the economy continues to do well I think there is little reason to be worried about the traffic growth.Sonia: Your traffic growth, Rs 601 crore is what you said in terms of toll revenues, that is lower than the Rs 650 crore that you did last quarter and the growth is about the same. So you have been stagnant.A: No, last quarter the trailing quarter toll revenue was Rs 583 crore for March 2016 and that Rs 583 has become Rs 601 crore this quarter and YoY it has jumped from Rs 519 crore to Rs 601 crore.