Volume growth aided rise in toll income in Q3: IRB Infra

IRB Infrastructure surpassed analysts’ expectations with profit growing by 27.9 percent to Rs 169.6 crore year-on-year on back of strong revenue growth. Revenue rose 38.3 percent to Rs 1,333 crore in the quarter ended December 2015. Speaking to CNBC-TV18, Virendra Mhaiskar, Chairman & MD of the company said strong volume growth aided toll income improvement in the last quarter. The volume growth was close to 8-9 percent in Q3, he added.“For this quarter the construction turnover has been at around Rs 808 crore and the revenue from the tolling has come in at around Rs 524 crore which is a healthy growth of almost 10 percent on the tolling side,” he said. There was minimal hike in tariff due to negative inflation, he said. Going forward, Mhaiskar expects toll income to improve in the fourth quarter. Below is the verbatim transcript of Virendra Mhaiskar’s interview with Sumaira Abidi, Surabhi Upadhyay & Anisha Jain on CNBC-TV18.Sumaira: Could you give us some colour on what engineering procurement and construction (EPC) revenues looked like this quarter?A: For this quarter the construction turnover has been at around Rs 808 crore and the revenue from the tolling has come in at around Rs 524 crore which is a healthy growth of almost 10 percent on the tolling side and on the construction side, almost 30 percent over the earlier quarter. Anisha: In terms of the traffic growth where is exactly that you are seeing this traffic growth coming from and in terms of the hikes etc have you taken any tariff hikes in this particular quarter?A: Most of the projects this year there has been very minimal tariff hike because of negative inflation. Most of the volume growth, which is in the range of 8-9 percent is being seen is on account of volume growth itself. So, the volume growth has continued to be quite strong and that has aided in the increase in the toll income for this quarter.Surabhi: What is your visibility on volume growth going forward and is there any scope of any kind of tariff increase in the coming quarters? Also if you could throw some light on perhaps if there is any additional asset that is coming on stream which might bump-up the tolling revenues in the months to come as well?A: Ahmedabad-Baroda which was one of the large projects has now become operational although we have received partial toll rates. That will get improved by around 7-8 percent once the full tolling is allowed. However, that is one large project where tolling has commenced this quarter. Only one month revenue has got reflected in this quarter. So, to that extent next quarter you will see that number improving for the whole quarter coming in. Also commensurate with that the amortisation will go up because we have now capitalised the entire cost of the project and amortisation of the same would also start. So, that effect will also play out in the next quarter but other than that we are not expecting any other asset to become operational in next one or two quarters.Surabhi: What is the outlook on the construction business? We have spoken quite a bit about tolling revenues but how are you looking at the construction business and the sort of plans you have there. A: The present order book is around Rs 16,000 crore and that gives very good visibility on the construction vertical. At the moment there are four operational projects, I mean four under construction projects where construction is on. We expect to start Agra-Etawah also early next financial year. So, then we will have five big projects under construction which will give us very good visibility on the construction vertical as well. We see going forward good growth happening on that vertical.Anisha: In terms of finance cost then it has gone up by around 11 percent on year-to year basis. The last time we talked to you, you told us that the interest cost is expected to come down by around 50 basis points. Is this something which will reflect only from fourth quarter onwards?A: I will explain that, the cost of funds have certainly come down. The average cost of funds for the company is now at something which is less than 11 percent. However, absolute number will keep going up because as more and more projects become operational the capitalisation process will stop and that loan will start reflecting into profit & loss side which will increase the interest cost. However, on an individual level if you see the interest rates that has come down which has definitely resulted in some savings. However, the absolute numbers goes up because of more number of projects becoming operational.