Fitch assigns AA-(ind) & F1+(ind) to IVRCL Infrastructures

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Fitch assigns AA-(ind) & F1+(ind) to IVRCL Infrastructures

This article was posted on Feb 22, 2008 and is filed under Press Releases

Fitch Ratings has today assigned an issuer rating of ‘AA-(ind)’ (AA minus(ind)) to IVRCL Infrastructures and Projects Limited (IVRCL). The outlook is Stable. Fitch Ratings has also assigned a National Long-term Rating of ‘AA-(ind)’ (AA minus(ind)) to its existing INR6.5 billion fund-based bank limits and the INR25.9 billion long-term non-fund based bank limits, and a rating of ‘F1+(ind)’ to its existing INR5.6 billion short-term non-fund based bank limits. Fitch Ratings has also affirmed the rating of ‘F1+(ind)’ to IVRCL’s commercial paper programme of INR3.0 billion, which is backed by the fund-based working capital bank limits.

The ratings factor in IVRCL’s demonstrated track record in the construction/infrastructure business and proven expertise and sound execution capabilities in the water supply and environmental segments. IVRCL has had significant growth in revenues over the last two years, supported by equity infusions, including a qualified institutional placement of equity and the conversion of Foreign Currency Convertible Bonds in FY2007. The fund-raising improved the liquidity position of the company and has significantly reduced its financial leverage.

The ratings also take into account the company’s robust unexecuted order book position of INR101 billion, which is diversified over water (30% of order book value), buildings (12%), roads (5%), power (14%), irrigation (32%) and Build-Own-Operate-Transfer (BOOT) projects (7%). Excluding BOOT projects, the order book is INR94bn, which is 4.1x FY07 revenues. While the construction industry has seen increased competition over the last three years, Fitch expects profit margins of IVRCL to remain fairly stable over the next two years. Fitch believes that the industry’s positive outlook stems from the emphatic need to boost infrastructure in India in line with the aggressive targets set out under the XI Plan.

The key challenges for the company in view of its increasing order book position continue to be in ensuring sustained quality of project delivery, and managing projects within budgeted schedules and costs. Fitch expects overall debt levels to increase over the short-to-medium term as IVRCL will also need to access additional finance to fund the increasing working capital requirements of its contracts and BOOT projects. However, the agency expects financial leverage to remain comfortable during this time.

The real estate subsidiary of the company, IVR Prime Urban Developers Limited (IVR Prime), made an Initial Public offering in FY08, raising about INR7.5bn. IVR Prime had outstanding loans of INR3.0bn from IVRCL (excluding value of deferred installments of INR4.5bn payable over four years on behalf of IVR Prime), of which INR1.4bn has been repaid from a part of the proceeds from the IPO. IVRCL has also acquired the entire shareholding of Alkor Petroo Limited, a company that has contracts for Oil & Gas exploration in Egypt and Yemen. Should the company commit large investments in these new businesses, IVRCL’s credit profile could get stressed.

IVRCL is one of the larger construction companies in India with a major presence in the water supply and environmental sectors. The company has diversified into the construction of roads and bridges, buildings and industrial structures and power. In FY07, IVRCL had revenues of INR23bn, EBIDTA of INR2.1bn and net income of INR1.4bn. The total debt/EBIDTA was 2.4x (5.1x in FY06) and total adjusted debt/equity was 0.47x as of March 2007 (1.56x as of March 2006). On a consolidated basis, IVRCL had revenues of INR24.9bn, with EBIDTA of INR2.9bn and net income of INR1.76bn, with total debt/EBIDTA of 2.7x and total debt /equity of 0.49x. In the nine months ended December 31 2007, IVRCL had revenues of INR23.3bn, with net income of INR1.3bn.

Sourced From: Sampark Public Relations Pvt Ltd

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