IRB Infrastructure Developers on Thursday said the company expects Rs 10,000 crore revenue in FY20.
In an interview to CNBC-TV18, VD Mhaiskar, chief managing director, said that construction revenue was lower as many projects were completed in the last quarter.
Watch: 'IRB Infra well poised to garner 4,700 crore construction revenue in FY19'
Mhaiskar said that Mumbai-Pune toll saw muted growth on account of diversions and repairs and the project will be rebid in August 2019.
Edited excerpts: I just want to start with the construction revenues. It was quite muted this time around. I understand that some of your new projects haven’t started just yet, can you tell us when will these projects start, what is the situation as far as financial closure is concerned and what can we expect in the next few quarters from the construction side?
To begin with, I would say that the construction segment saw a sequential growth of 11 percent and the tolling saw a growth of almost 14 percent sequentially. The year-on-year (YoY) growth comparison may not be relevant at this point, because we transferred seven assets last year to InvIT and the numbers are not strictly comparable.
As regards, construction revenue per se is concerned, we completed two of our projects a few months back and there are two more projects, which are at the fag-end of its completion. As a result, there was not much contribution from those projects and new four projects, which we bagged came in the last quarter.
So, the financial closure is on as far as those projects are concerned. As a result, the construction revenue was softer, but as regards, the full year guidance is concerned, we are well poised to achieve anywhere between Rs 4,600 crore and Rs 4,700 crore of construction revenue for the full year, and I think with that, we should be able to achieve all the milestones on all of the projects that we have in hand.
The worrying part was more that the earnings before interest, taxes, depreciation, and amortisation (EBITDA) did not grow as much as the street expected, maybe a bit lower. That is the question. Even with a fewer projects because you have transferred them to the InvIT, the margin performance could have been better, the EBITDA could have been better, can you give us more colour on the quarter that was, what may have been the hurdles or the tough spots?
We always cherish to have a higher EBITDA, but the EBITDA would be a function of topline and as the topline was down compared to year-on-year on a sequential basis, even the EBITDA was up. However, the point is that the toll revenues were softer on couple of projects this year, particularly the Mumbai-Pune saw a muted growth, because there is a diversion of traffic taking place at this point in time, because the Mumbra bypass which is the last mile connectivity between NH4 and NH8 is under repair. As a result, the Maharashtra Public Works department has issued a notification diverting that traffic. That saw giving a very muted growth for Mumbai-Pune. I think this is a blip and we should see that coming back very soon once the repairs are conducted and completed. So, one of the large projects underperforming because of factors which are beyond our control led to a lower EBITDA which would otherwise have been stronger.
When you say muted growth, what exactly was the traffic growth in the Mumbai-Pune project at the highway and what is the expectation going ahead?
Mumbai-Pune has always delivered 6-7 percent volume growth and this year around we saw only 1.38 percent volume growth in this quarter, because of the diversion of traffic. We expect that to come back to the similar number as soon as the diversion is called off.
You stop earning from that highway in 2020?
August 2019. The concession would come to an end in August 2019.
So after that no money, what impact will it have on FY20?
The project will be rebid. For FY20, we have already guided last quarter, when we came out with our audited results for a topline of around Rs 10,000 crore and a profit after tax (PAT) of Rs 1,000 crore that has been our stated guidance for FY20. The reason behind giving that guidance itself was that there was apprehension in the minds of investors that with Mumbai-Pune going out, how will the numbers roll out and that was the reason why we specifically gave out that guidance.
One clarification on the construction revenue front, you said that there are two more projects that are at the fag-end of completion right now, what kind of revenue contribution would you expect from those two projects and by when?
Construction will get completed by end of this year on both these projects. So around six months of work remaining and maybe around couple of Rs 100 crore each would be the balance cost that is remaining to be incurred.
More generally, how have the build-operate-transfer (BOT) revenues done, how have traffic volumes been?
If you look at the other large project that we have in our portfolio, which is Ahmedabad-Baroda, it has delivered around 13.5 percent total revenue growth, which was a very strong growth and we see that project on a comeback trail. We are also seeing a resolution to the diversion of traffic claim that we have with NHAI, we are taking it up aggressively with them and they are very well in the know of the situation there, plus the traffic coming back together, it is looking very promising.
So what is the order book currently, what is the order inflow target for the next one year?
We added close to Rs 9,000 crore of order in FY18, taking the order book to close to Rs 15,000 crore. This year, we would believe that the order book will again remain strong, will see a strong growth, because we see a good amount of pipeline of projects on the horizon. Government has already talked about Rs 80,000-90,000 crore worth of project on hybrid annuity plus EPC together, where hybrid annuity will be something which we will look at plus we see large opportunities looming in terms of the toll-operate-transfer (TOT) projects from NHAI, we did bid for the first one. There are three more likely to come up plus, we see couple of opportunities on the state side, where a large upfront payment kind of contracts might come up. So, these will be the opportunities, which we will look for and we will look for a similar kind of growth in the order book this year as well.
I think they are completely agnostic of the election scenario. Yes, there can be a delay in the dates for bidding, but I don’t see they have any correlation as such, it is an electronic bidding platform, which goes on in its own way and due to code of conduct, we might see couple of bids going postponed or preponed. But I think the government endeavour would be to prepone it and give out as much possible before the elections kick in so as to show good growth. So, we have reasons to believe that it will be more preponed rather than getting postponed.
Does the election in anyway disturb it, are projects frontloaded or are bids likely to peter out for fear of political uncertainty?