Sadbhav Engineering moves up on premium deferment

Bhavana Acharya BL Research Bureau | Updated on March 12, 2018 Published on July 01, 2014

The stock of Sadbhav Engineering is up 5.5 per cent in trade so far. The company signed a supplementary agreement to defer premium payment on two of its road projects by the NHAI, which first came about last month.

Premium is the payment made by road developers to the Government for the right to develop roads and collect tolls.

Debt relief

The first of the two projects – a 35.7 km Hyderabad-Yadgiri stretch – turned operational in December 2012. The second, an 80.9 km stretch between Rohtak and Panipat, became operational only this January. Both, however, are profitable at the operational level. For the 2013-14 fiscal, the Hyderbad-Yadgiri project turned a profit of Rs 10.6 crore and the Rohtak-Panipat generated a 1.4 crore profit.

Finance costs, however, are quite substantial, with an outstanding debt of Rs 1350 on the two projects; about a quarter of Sadbhav’s total consolidated total debt. The premium amounts on the two projects total around Rs 60 crore, with a yearly 5 per cent increase.

Sadbhav has been allowed to defer premium payment from this fiscal until 2026-27 fiscal. It frees up cash flows for Sadbhav, allowing it to push through execution of its orders on hand. It also means that debt needed for working capital drops, in turn reducing overall interest outgo, which jumped 49.7 per cent for the company in the previous fiscal.

Sadbhav’s current outstanding order book is Rs 8,940 crore, covering FY-14 revenues a good 3.8 times.

Published on July 01, 2014
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