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Informist, Thursday, Jan. 30, 2025

By Aman Aryan

MUMBAI – Extension in the bid submission for orders from the National Highways Authority of India and delay in issuance of letters of acceptance across the sector are likely to weigh on IRB Infrastructure Developers Ltd.'s earnings for the December quarter. Subdued order awards amid a slowdown in government spending could also drag down the company's top line and bottom line during the quarter compared to a year ago.

The transport infrastructure developer's consolidated net profit for the December quarter is expected to fall 6.7% on year to INR 1.75 billion, according to the average of the estimates of four brokerage firms. Estimates for net profit range from INR 900 million by HDFC Securities Ltd. to INR 2.35 billion by Kotak Institutional Equities. If the estimates turn out to be true, this will be the first on-year fall in net profit in six quarters.       

The company's consolidated revenue is also expected to fall on similar lines as its net profit. IRB Infrastructure's consolidated revenue for the December quarter is likely to fall 7% on year to INR 18.32 billion, the average of the estimates from four brokerage firms showed. HDFC Securities has the lowest revenue estimate of INR 16.80 billion, whereas Anand Rathi Share and Stock Brokers has the highest estimate of INR 20.99 billion.

Road construction operations picked up sequentially in the December quarter. Construction accounts for over 60% of the company's revenue, while the build-operate-transfer and toll-operate-transfer segment accounts for over 35% of the revenue of the company. Nearly 2,200 kilometres of road were constructed in the December quarter compared to 700 km in the previous quarter, Motilal Oswal Financial Services said, adding that further pickup is expected in the March quarter.  

The brokerage house also expects the company to report higher other income, which will partially offset the impact of muted construction income in the December quarter. Revenue from the company's construction segment and build-operate-transfer segment is expected to dip 20% and 2% on year, respectively, the brokerage added. Kotak Institutional Equities, on the other hand, expects a 10% fall in the construction revenue for the company.

Toll collections, another source of revenue for IRB Infrastructure, grew over 20% during the quarter to INR 16.56 billion, according to the company's monthly toll collection disclosures.   

IRB Infrastructure's earnings before interest, tax, depreciation, and amortisation for the December quarter is expected in the range of INR 7.70 billion to INR 8.82 billion, estimates from three brokerage firms showed. The company's EBITDA was INR 9.78 billion in the year-ago quarter and INR 9.33 billion in the previous quarter. Kotak Institutional Equities expects the company's operating margin for the quarter at 47%. IRB Infrastructure's construction segment is expected to report an EBITDA margin of 24.5%, whereas the build-operate-transfer segment is expected to report an EBITDA margin of 88% during the quarter, Kotak Institutional Equities said.

The order pipeline for companies in the infrastructure industry remains strong, Motilal Oswal said. With likely higher construction activities from the March quarter and moderating commodity prices, road contractors anticipate some improvements in profitability and margins going forward, the brokerage added. HDFC Securities said the pace of execution is likely to increase and the NHAI awarding mix is likely to shift towards equity-intensive build-operate-transfer toll projects. Investors should watch out for new order wins in the construction segment, Motilal Oswal said.

At 1216 IST, shares of the company traded at INR 53.12 on the National Stock Exchange, up 1.6%. The stock is up 2.4% from its closing price of Oct. 31, a day after it had released its earnings for the September quarter after market hours. Of the three brokerage reports on the company available with Informist, one has an 'add' rating and one has a 'reduce' rating. One is neutral on the stocks.

The company will release its earnings for Oct-Dec on Friday. 

Following are the Oct-Dec earnings estimates for IRB Infrastructure Developers based on reports compiled by Informist from four brokerages in descending order of the estimate of net profit:

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Edited by Avishek Dutta

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