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After two consecutive years of decline in net profits, the stock of IVRCL has not been treated too kindly by the market; declining 58 per cent in the last one year. Haunted by project execution delays as well as cost overruns, the company closed FY-11 with a mere 2.7 per cent increase in sales even as net profits fell 25 per cent.
IVRCL witnessed delays across quite a few projects, including its road project in Goa, a hydro power project as well as irrigation projects in Andhra Pradesh. This led to revenue flow drying up. Much of this was due to delays in receiving clearances. Adding to this woe, the company had to face cost overruns in some of its rural electrification projects as well as some jobs in Kerala. This too led to its March quarter EBITDA margins decline to 8.8 per cent from 10.6 per cent a year ago.
IVRCL, though, managed to showcase a strong order book of over Rs 21,000 crore, thanks to contract order flows from its asset developer subsidiary IVRCL Assets Holdings. This order book, which accounts for close to four times FY-11 sales, may be executed in the next 27-30 months, provided there are no further delays.
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