IVRCL surges with the news of de-merger plan in next board meeting

The share price of IVRCL Ltd. surged by 20 percent on monday as a media report indicated that it is likely to consider the de-merger plan in the next board meeting which is likely to be held this week. The exchange today asked for clarification of same.

In the forthcoming board meeting of the infrastructure company it is likely to discuss the de-merger of property development and the EPC business into a separate entity. The company is seeking to restructure its business operation for improving its revenue prospects. This is because from the last 3 years it has been in the shadow of the slowdown in investments in the infrastructure space, delays in road projects etc. The company started to show substantial decrease in net revenue and increase in losses.

In addition, 3 years ago in 2012 IVRCL merged its property development business IVRCL Assets and Holdings Ltd. which further increased the consolidated losses for the company because prior to the merger the net profit of the company stands at Rs.50.6 crores in year 2011-12.

Last year because of substantial decrease in net sales and increasing losses the company was unable to pay its debt. So the lenders consortium has approved a debt restructuring package of Rs.7350 crore for IVRCL which should help the company in decreasing the debt burden. But after this also for the year ending March 2015 the company has a debt of Rs.8668 crores an increase of 12.87 percent from last year. The debt burden of the company also increased from 53.82 percent for March 2014 to 60.31 percent for March 2015.

Still on November 27,2015 the company  informed the exchange that it has made an allotment of 2.42 crore equity shares of Rs.2/- each, at issue price of Rs.24.39/- per share to CDR Lenders who have signed the Master Restructuring Agreement. This allotment is towards conversion of funded interest term loan (FITL) into equity, for the period of July 01, 2015 to September 30, 2015.

The debt restructuring programme with the forthcoming de-merger can help in improving financials of the company in upcoming years.

The share price of the company is currently trading at Rs.10.78 an increase of around 20 percent from the previous close.

IVRCL Limited is engaged in the business of development and execution of engineering, procurement, construction and commissioning (EPCC) and lump sum turnkey (LSTK) facilities. The Company's segments include Engineering & Construction, Real Estate and Manufacturing. It operates in various infrastructure projects, such as water supply, roads and bridges, townships and industrial structures and power transmission for central/state governments, other local bodies and private sector.