IVRCL buoyed by hope

Bhavana Acharya BL Research Bureau | Updated on October 01, 2014 Published on October 01, 2014

The bellwether and broad market indices may be listless ahead of a long break, but the stock of troubled infrastructure company IVRCL is anything but that. News that Rs 4,000 crore worth of assets are planned to be sold, has pushed the stock up 6.8 per cent in trade so far. Earlier in the session, it was up 9.7 per cent.

With a debt-equity ratio of 3.8 times as of March 2014 and an interest cover ratio slipping below 1 time, IVRCL is in need of cash flows. The company entered the CDR process in January this year, which was subsequently approved.

On the block

IVRCL has already sold three of its road projects – Salem Tollways, Kumarapalyam Tollways and Chengapally Tollways - to Tata Realty. This can potentially make available funds of around Rs 600 crore and reduce debt worth Rs 1,200 crore.

Reports now indicate that IVRCL has put more of its project portfolio on the block. One is the operational Chennai desalination plant. Another completed road project – Jalandhar to Amritsar – may be hived off as well. All these projects contribute less than 10 per cent to revenues and are loss-making to boot.

Hopes are that asset sales proceeds can reduce the Rs 8,344 crore debt (consolidated) IVRCL is working with. Consolidated annual interest payments shot higher by 69 per cent in the previous fiscal, accounting for almost 16 per cent of sales. Cash flows are needed to continue execution of IVRCL’s strong order book of over Rs 20,000 crore. It was sluggish execution that was partly responsible for IVRCL’s debt woes to begin with.

Slow going

But the planned asset sales may take some time to pay off and improve IVRCL’s cash flow situation. For instance, the deal for the sale of the first three road projects is yet to conclude and money yet to come in, despite the sale process being started last year. Approvals from agencies such as the NHAI and lenders to the project are required for road project sales, all of which add to the sale timeline.

As per its CDR package, IVRCL has a 28-month moratorium and interest rate of 11.25 per cent. Of the total company debt of Rs 7,800 crore, the holding company debt of Rs 3,850 crore has been restructured. Besides, IVRCL has received Rs 215 crore in cash credit and Rs 175 crore of priority debt.

On Wednesday, IVRCL stock soared 6.15 per cent to end at ₹16.40, on the BSE.

Published on October 01, 2014
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