The Hindu Business Line : Unity Infraprojects’ profits hit despite insulation against price rise

Snapshot
Despite price escalation clauses, interest rate hikes and rise in diesel prices will impact the company’s profits
Of a Rs 3,000-crore order book, the civil construction segment accounts for 65 per cent, infrastructure 21 per cent and transportation the rest

S. Shanker

Mumbai, Aug. 26 Though pure play construction companies such as Unity Infraprojects Ltd have insulated themselves from the vagaries of price rise in raw materials, such as steel and cement, through escalation clauses, they still find the pressure of inflation diminishing profit margins.

Unity Infraprojects lends services to leading realty developers such as Indiabulls, Peninsula Land and Phoenix Mills. The I B terminal at the Mumbai Airport was built by it. The company has also been also been associated with prime projects such as Millennium Business Park, Seawoods Estate for NRIs at Navi Mumbai and the Sardar Vallabhbhai Patel Stadium (Mumbai).

“Ninety per cent of the order book has an escalation clause to address the price rise of key materials such as steel and cement, but hikes in interest rates, besides those in diesel and gas, impact our margins between 0.2 and 0.5 per cent,” said Mr Yogen Lal, Chief Operating Officer, Unity Infraprojects Ltd. For the first quarter this fiscal, on a sales of Rs 220 crore, the company clocked a net profit of Rs 15.6 crore.

Of a Rs 3,000-crore order book, the civil construction segment accounts for 65 per cent, infrastructure 21 per cent and transportation the rest.

For the first quarter of fiscal 2009, Unity bid for projects worth Rs 2,300 crore and bagged contracts in excess of Rs 900 crore.

Major orders secured during the quarter include a Rs 383-crore contract from the Haryana State Roads and Bridges Development Corporation and a Rs 154 .29-order for a regulated environmental building at the prison complex, Mandoli, Delhi. The company is currently building 10 malls in Maharashtra.

BOT project

In a 50:50 joint venture with BSEL Infrastructure, the company is building five malls and a four star hotel in Nagpur for the local civic administration on a BOT (build, operate and transfer) basis. The malls, at the existing market places, will be over 2.6 million sq ft, said Mr Lal, adding that the concession period was 30 years and repayment over the period would total Rs 540 crore at Rs 50 a sq ft.

In Goa, the company is constructing 7 lakh sq ft of IT space in association with BSEL at a cost of Rs 140 crore. The Infotech Corporation of Goa has provided land on a 90-year lease.

Hotel project

In a record of sorts, the company is constructing a 400-room hotel, (200 rooms of five-star standard and 200 in the four-star range) in 15 months — from their conceptualisation to their completion — for the Youth Commonwealth Games. The hotel is scheduled to open in September. While Kamath Hotels, Unity Realty and BSEL each hold 17 per cent each in this Rs 260-crore project, 49 per cent is held by a private equity fund.

Unity has recently equipped itself at a cost of Rs 15 crore to offer trenchless technology. It has a Rs 30-crore order from the city Corporation for laying a 5-km pipeline in Mumbai’s eastern suburbs.

On Tuesday, Unity stocks on the BSE closed at Rs 461.80, down 0.28 per cent over its previous close.

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