VR Logo

On a firesale

IVRCL carries huge debts in its books and a revenue run-rate that barely manages to keep the engines running

IVRCL is down 95 per cent from its lifetime highs. It carries huge debts in its books, a revenue run-rate that barely manages to keep the engines running and operations that run at a loss.

Things are quite bad at IVRCL. Revenue declined 6.5 per cent (y-o-y) in the last quarter. Order book is not the concern. What is perplexing is the slow rate of order execution. As much as 30 per cent of the order book is estimated to be slow-moving and likely to remain so in the forseeable future.

The slowdown has smacked IVRCL into its present place. Things have gone to such head that today IVRCL pays out 95 per cent of its Ebitda towards interest payments (ttm). Net debt currently stands at 4.7x Ebitda.

It is no surprise that FIIs reduced their holding in IVRCL from 28.78 per cent a year ago to 17.6 per cent.

Should you follow the FII route?
In a bid to improve things, IVRCL has now resorted to asset monetisation -- in simple words -- selling assets and its stake in projects that it had earlier bagged. It has already sold 4 out of its 14 assets. In Q3FY13, it was the Rs 33.8 crore land sale in Noida, then there was the 74 per cent stake sale in three road BOT projects estimated worth Rs 400 crore. The total consideration value may be a little lower. The NHAI has objected to the proposed 74 per cent stake sale in the Chengapalli project because it is already under-development. Instead, it has allowed a 49 per cent stake sale in this project.

While stake sale can alleviate debt concerns, what matters most is that the speed of its project executions needs to pick up. With the economy not showing any signs of improvement but rather threatening to go further down, the fortunes of IVRCL may be inextricably tied down for some time to come. Sell.