IRB delivered in-line revenue with EBITDA beat of 16% and APAT miss of 25%. IRB-GIC deal is now concluded. Rs 37bn of proceeds realised till date have been utilised towards IRB-GIC INVIT SPVs’ debt reduction to the tune of Rs 30bn making them FCF positive with no funding support requirement envisaged. Further, 1st tranche of Rs 65bn payment to MSRDC for MP expressway completed with Rs 55bn debt drawdown (of Rs 66bn sanctioned) and Rs 10bn equity. We maintain BUY with an SOTP based TP of Rs 142/Sh.
* APAT miss due to higher interest cost: Revenues for 4QFY20 were in line with our estimates at Rs 15.8bn (-19/-9% YoY/QoQ), EBITDA came in at Rs 6.5bn (-14/-8% YoY/QoQ) and APAT at Rs 0.97bn (-52/-39% YoY/QoQ). Interest cost was higher as interest related to newly commissioned Kundapur project which was getting capitalized earlier got expensed. Construction revenue stood at Rs ~12.5bn (-12% YoY) whereas toll revenue was Rs ~3.8bn (-28% YoY).
* Execution/Collections ramping up gradually: Both construction and toll revenues have reached 60-70% normalized pre-COVID levels post lockdown. While clarity yet to emerge on how things progress further, under construction projects will see at least 3month deferment at this stage. However, in all likelihood 3 Rajasthan projects will get completed by FY21. O&M revenues from both INVITs to be Rs ~4-5bn each per annum.
* BOT Toll continues to be preferred mode: IRB continues to maintain preference for BOT and TOT modes over HAM. The company had secured pre-qualification for 2 BOT Toll projects of Rs 25bn each, which are now up for bidding. The company is also looking to secure couple of more projects.
* BS deleveraging augurs well for growth: While morat till Aug-20 and enhanced WC limits has allowed company to conserve liquidity, consol net debt is also comfortable at Rs 51bn (0.76x) as on 4QFY20. Excluding Rs 55bn MP expressway debt tied post Mar-20, gross debt stands at Rs 85bn. IRB has raised Rs 12.5bn NCDs to refinance Rs 7bn corporate debt due in 1QFY21. COVID loans from NHAI will also be requested for 2 BOT & 1 HAM projects. About Rs 5bn is pending equity (IRB share) to be infused in 9 SPVs.
* All of the 12 BOT projects are now revenue generating and nearing completion. IRB will also leverage GIC partnership to bid for upcoming BOT and TOT projects, though it will have to bring in 51% of equity under such agreements. IRB started collecting toll for the Mumbai Pune Expressways in Mar-20 and for the lockdown period it got relief in interest payable on loans to the tune of Rs 740mn. For the post lockdown the relief will be in line with NHAI relief of 3-6months EOT depending on toll reaching 90% of pre COVID levels. We maintain BUY. Key risks (1) Sustainability of toll revenue collection rate in the BOT portfolio, (2) Dry BOT pipeline
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