Basic analysis of IRB infrastructure – future plans and more

Industry Overview

India’s infrastructure sector is developing rapidly and key trends are positive and optimistic. The roads and highways market in India is expected to witness a compound annual growth rate (CAGR) of 36.16% during 2016-2025 due to increasing government initiatives to improve transport infrastructure in India.

The government has been national infrastructure pipeline (NIP) is an investment plan announced by the Central Government to strengthen infrastructure in identified sectors to effectively deliver world-class infrastructure across the country and improve the quality of life of all citizens.

As a result, in the last eight years, the length of national highways has increased by 48.12% from 97,830 km in FY15 to 1,44,955 km in FY23. The Ministry of Road Transport and Highways has set a goal of driving distance of 200,000 km by 2024-25. A basic analysis of IRB infrastructure helped us understand more about IRB infrastructure.

Fundamental Analysis of IRB Infrastructure – Finance

Sales and Net Profit

IRB Infrastructure revenue grew 10% from Rs. 5804 Cr in FY22 to Rs. 6402 Cr in FY23. This is the second year of continuous growth for the company. Revenue growth slowed in FY20 and FY21 and it also faced a 23% degrowth in FY21. Therefore, IRB revenue has declined at a CAGR of 1.17% since FY21.

IRB Infrastructure’s net profit surged to 99% growth from Rs. 361Cr in FY22 is Rs. 720Cr in FY23. The increase in operating profit is interpreted to be due to an expansion in margins due to a significant reduction in financial costs. Longer term, it looks dire, with net profit declining at a CAGR of 4% after FY21.

profit

The company’s operating margins remained quite strong at 50% in FY23, a 200-fold increase over FY22. The company’s largest operating expenses are road construction and site costs, accounting for 32.4% of operating revenue. These costs increased by just 9%, expanding margins.

However, the company’s net profit margin remained unchanged at 11%, up 400 bps due to lower finance costs. Finance costs, which accounted for more than 33% of revenue in FY22, declined 20% due to debt repayment, boosting margins.

rate of return

return on equity IRB infrastructure Although still at a very low level of only 5%, it is an increase of 200 bps compared to the previous year. The very high equity base maintained by the company causes the IRB to report a very low return on equity. Additionally, a highly leveraged balance sheet means that a significant portion of the company’s profits are provided as interest.

While return on equity has continued to increase over the past year, the same cannot be said for return on capital employed. The company’s ROCE has remained steady at 9% over the past three years.

debt analysis

IRB’s balance sheet liquidation and equity capital increase resulted in a significant reduction in the company’s debt. Debt-to-equity hit a five-year high of 2.53x in FY19, before falling significantly to less than 1x in FY23.

As the company’s debt status has improved, the interest coverage ratio has remained in the 1 to 3 times range. An interest coverage ratio greater than 1.5x is a good measure of the ICR of any company. I learned more about finances from fundamental analysis of IRB infrastructure.

Basic analysis of IRB infrastructure – future plans

1. Going forward, the company will accept Build Operate Transfer, Toll Operate & Transfer projects under Private InvIT on IRB Infrastructure.
2. However, hybrid annuity model projects are housed within the company itself and will eventually generate revenue for the company upon completion.
3. This year, IRB Infrastructure delivered the BOT-based NH27 six-lane project over a 20-year contract period. The project is worth Rs. 2,132Cr. Another project for eight-lane of Hyderabad Outer Ring Road was commissioned by the company for an amount of Rs. 8,362 Cr.
4. The company’s current order amount is Rs. 20,572 Cr as of FY23. Among these, there are construction EPC projects worth Rs. 8805 Cr is expected to be implemented in the next 2-3 years. These are some future plans for the IRB infrastructure listed in the Basic Analysis of the IRB Infrastructure.

Basic Analysis of IRB Infrastructure – Key Indicators

key indicators IRB infrastructure They are listed below.

Read more: Morning Doji Star Candlestick Pattern

conclusion

In conclusion, a basic analysis of the IRB infrastructure shows that the IRB infrastructure is India’s leading highway developer We have over 17,200 miles of completed projects and a strong presence across 11 states. In FY23, the company reported 10% revenue growth at Rs. 6,402 crore and net profit increased by 99% to Rs. Achieved $720 million due to expanded margins and reduced financing costs. However, long-term growth was sluggish.

The company’s operating profit margin remained solid at 50% and its net profit margin improved to 11%. IRB successfully liquidated its balance sheet, lowering its debt-to-equity ratio to almost 1x. However, due to the high capital base and leverage, returns such as ROE and ROCE are relatively low.

The current order book is Rs. IRB’s infrastructure of Rs 33,708 Cr, including the recently undertaken Hyderabad Outer Ring Road project, is well positioned to capitalize on India’s infrastructure growth. However, a company’s ability to execute projects efficiently and remain profitable is critical to its long-term success.

Written by Nasir Hussein

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