In an interview, Virendra D Mhaiskar explains how IRB Infrastructure has the ability to take on various facets in infrastructure in the construction, tolling, maintenance and operation areas.
How has the fourth quarter been for you?
The fourth quarter has been very satisfying. The company bagged around 12,000-cr worth of projects from the road ministry and nearly Rs9,000-cr worth of orders that have been picked were under BOT and HAM.
How was traffic growth this quarter? What is the overall outlook?
The overall growth was very satisfying. Although demonetization and GST made the market a big challenge, and lead to soft traffic, the growth for the company was around 6 – 7 per cent in volume. Whether it was InvIT or IRB, the growth of both the portfolios have been satisfying and we have managed to achieve the desired results.
Your blended margin on an average was 49 49.2 per cent. Please break it down so that we can understand how the segmental side went.
IRB has two verticals, namely – BOT revenue and EPC side. BOT works on 85 per cent EBITDA margin and EPC on usual 28 – 29 per cent margins.
The consolidated EBITDA margin changes depending on the projects. As of now, the BOT margins for the company are high since we have three BOT projects coming up in Rajasthan, the EBDITA margins have been okay.
As the mix changes, the resultant EBITDA margin on a consolidated basis changes. This time because the BOT revenues have picked up as three Rajasthan projects are coming in, the EBITDA margins have been okay.
Although construction is a low EBITDA business, it has also increased. To see the growth that has occurred, it is good to see it as an individual vertical and see if the EBITDA margins have improved.
The EBITDA margins have been maintained in the construction sector and the BOT side also has around 85 – 86 per cent EBITDA margins.
What is the outlook from here on? It looks like margin will be maintained at current levels in both segments and volume will be achieved. So, benefit will come in. Do you think the scope of margin improvement as well?
IRB Infrastructure plans to implement hybrid annuity model (HAM) projects in the next couple of years. The EBITDA margins will be low for HAM since there is not much funding involved.
The cash flow for HAM projects is positive. NHAI is now starting to pay mobilization advance. Due to this, the EBITDA margins would be close to profit before tax (PBT). The profit after tax (PAT) will be 10 – 11 per cent but EBITDA in case of HAM will be lower. Together with hybrid and EPC, the EBITDA margins will be softer on construction, but we will retain the PAT margins.
You participated quite aggressively in the bidding round which got all bunched up in one quarter. What kind of segment mix would you like to have across your portfolio, four to six quarters down the line?
We have the proficiency to undertake all the facets of infra in construction, operation, maintenance and tolling. We will continue to bid across all the facets of the going forward.
Government is now concentrating on HAM more than BOT since it believes there is not much capital in BOT. Whatever be the decision of the government, we will continue chasing it and bid for all different projects.
You are the premium company as far as highway road construction in India is concerned. Other players have come up in 5-7 years, but they could not handle their portfolios and hence are on the block. Do you see value for you as a company to consider picking some of them?
IRB Infrastructure is completing 10 years of listing. I am sure we have generated value for our customers.