Reliance Infrastructure Q3FY17 Concall Summary

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Financial Highlights

Reliance Infra Q3FY17 results
  • Total income for the quarter is at 7247 crore, a 11% increase from corresponding previous quarter
  • EBITDA of 1990 crore increase of 20% from previous quarter
  • Net profit after Tax of 375 crore increase of 49% from previous quarter
  • Net Worth of 24889 crore which is a book value of Rs 946 and a consolidated book value of Rs 31,616 crore which is at Rs 1,202 crore
  • The company is expecting the exit of Mumbai distribution business not before March 2018 as there are multiple approvals required
  • The interest cost has gone up mainly due to butibori, the way butibori is accounted in books.
  • Depreciation is also gone up because of the fair value which has been reflected in assets  as per Ind-As requirement
  • There is impact of Rs 350 crore due to butibori as increase in finance cost
  • Depreciation is bit lower than 500 crore & is increased due to butibori
  • The company has regulatory income due to favorable order from from MERC which is roughly around 200 crores in the quarter 

  EPC business

  • Order book currently is 5500 crore
  • The company won 2 X 250 megawatt thermal power EPC project from Neyveli Lignite in Rajasthan. Started work near Bikaner & the project will be completed in 36 months
  • Another project declared in L1 & it is 2 X 800 mw BOP project & expect that loi will be issued in the month of March & with these 2 projects the total order book will be about 9000 cr
  • Total bids in pipeline are about 18000 crore
  • The key verticals which the company focusing are the power vertical which includes the entire generation, transmission, distribution etc.
  • There are also mega projects like bullet train, high speed train, the Mumbai Nagpur expressway.
  • The expected EPC orders on will be more than 2 lakh crore for FY18 & FY19
  • The company is bidding on all the above project & hope to win. Target win rate in the region is 10%, which will translate to 20000 crore of order a year, so the order book the company is focusing by the end of FY19 is to the region of 50000 crore
  • The Company has got approval from CCI for the asset monetization transactions
  • Already filed for CERC approval for transfer of license of 2 WRSS projects in to the SPVs
  • The hearings have commenced & discussion started with the lenders for the lender approval, & expect to move the project by March-April of this year
  • The company has met the senior management of Parbati Koldam & procured their approval for selling the company’s 74% to Adani. It could take between 3 to 6 months the WRSS transaction to be consumed. 

Road business

  • Filed DRHP for 10 road projects. The DRHP is for the value of 3000 crore with an option to retain 25% over subscription
  • In the process of getting NHAI approval & the lenders approvals, which is expected to get in first half of March
  • Expect to lauch InvIT in March second week & SEBI approval is expected in February
  • With this the company will be project manager for 10 road projects & continue to manage & do the balance completion of the projects.
  • The company will monetize 55-60% for these projects on the basis of the evaluation from bankers & as well the entire debt will get off the balance sheet on a consolidated basis
  • The company will complete the Delhi Agra project by the end of FY18 & expect to put this project in InvIT as a right of first refusal thereby realizing additional equity for the company & its shareholders
  • The company intends to raise 3000 crore & intend to dilute around 50-60% of the holding & continue to hold 40% 
    Investment around 3200 crore


Impact of Demonetization

  • No negative impact of Demonetization, on the contrary there was growth in business
  • Metro business grew at 18% in Nov to December, in terms of passenger growth
  • The road business was slight muted but still saw positive growth of 3% in Nov & Dec. The consumers are moving slowly to digital & for road business there was more than 10% digital payments in the 2 months
  • Power business did not see any reduction in demand 

Power business

  • Business continues to perform well
  • Collected nearly 3000 crore till Q3 out of which out of which 5500 which was approved by the regulator
  • There was a small anomaly in the cross-subsidy surcharge which has got corrected in the MYT order, which is now making the company's HT commercial and industrial customers and high end LT commercial and industrial customers more competitive.
  • It helps customers become more competitive compared to co competition & there was 400 million odd worth of migration which was still left pending & that reverse migration has started
  • The company expects that over a couple of quarters the entire base of customers who had moved only because of price would back to company
  • The company managed Delhi distribution with a steep demand of 6400 mw during summer & peak demand of 4160 mw for 4 discoms in the last quarter
  • The company continues to add customers to both Mumbai & Delhi networks
  • Added 61400 customers in the Q3 & serving 7 million customers, effectively it will be 35 million actual customers

Defence Business

  • The company has joint venture with Dissault Aviation & got CCI approval.
  • The project will be done both the offset for the 36 Rafale jets which government ordered
  • The total offset contract will be over a period of 7 years which works out to be around 30000 crore & the facility which is coming at mihan will be primarily doing this contract
  • This facility will also do MRO for these jets over the next 50 years & will be big value contract for the defence business
  • The company announced that the shipyard Reliance Defence & Engineering is the only shipyard which has been shortlisted by the US Navy.
  • This is for getting the refurbishment & servicing done for the entire Indian Ocean & the company is expecting around 100 such ships in the region to be serviced
  • The company expects 15-20 ships to be serviced on an annual basis as the total value of business expected is to the tune of almost 15000 crore over a period of 5 years
  • The company has signed contract for 14 fast patrol vessels totaling to almost 916 crore from the Indian coastguard & the shipyard has delivered highest weight Panamax class vessel, 74500 DWT which has sailed to its customers.
  • The company has a lot of bids on the shipyard site which are in active consultation by the government
  • Over the last couple of years the company has tied up with majors across various verticals
  • Expect the revenue to kick in FY18 itself

Infrastructure business

  • Earned a revenue of 244 crore in Q3FY17 which is growth of 13%
  • EBITDA margins are at high +85%
  • Mumbai metro is the densest metro carrying 3.5 lakh commuters on daily basis. Last week the company crossed the milestone of 250 million commuters
  • On arbitration award the company has got approvals from the banks for the bank guarantees to be given to NHAI & expect these will help reduce debt
  • There are also large arbitration awards of which judgments have been reserved especially like in case of Delhi metro or Yamunanagar or some other projects
  • The company’s CAPEX cycle is expecting a bit of tail end as it needs to do for Delhi Agra & Pune satara roads which is less than a 1000 crore to be spent over the next 1 year where debt & equity is fully tied up

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