IVRCL to split into EPC company and Asset company

IVRCL Ltd. informed the exchange that the Board of Directors of the company approved a split of its business into two different entities, Engineering procurement and Construction (EPC) company and assets-land/Build-operate-transfer (BOT) company. The board also approved conversion of a part of its debt into equity pursuant to invocation of strategic debt restructuring (SDR) by joint lenders forum.

IVRCL 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.

IVRCL is a debt ridden company. It is seeking to restructure its business by splitting the company into two operation for improving revenue prospects. From last 3 years being in the shadow of the beginning of a slowdown in investments in the infrastructure space coupled with delays in road projects the company started to show a substantial decrease in net revenue and increase in losses.

In addition, three years ago in 2012 IVRCL merged its property development business IVRCL Assets and Holdings Ltd. further increased the consolidated losses for the company. 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 a significant increase in losses the company was unable to pay its debt. In time the company received a Rs.7350 crore strategic debt restructuring package from lenders, and is in the process of divesting some of its BOT assets to cut down on the debt.

Right now all the BOT assets of the company are sucking out cash which the company is not able to direct to execute EPC projects. The 18 month window from lenders under SDR will help company to cut down debt on BOT assets and the split will help the company to execute EPC projects and improve financials.

On the financial front IVRCL's operating revenue decreased by 22.76 per cent to Rs 3815 crores in FY15 as compared to Rs 4939 crores in FY14. The company faced a loss of Rs 1568 crores in FY15. For FY15 the company has debt of Rs.8668 crores which is an increase of 12.87 percent from last year. The debt burden of the company also increased from 53.82 percent for FY14 to 60.31 percent for FY15.

The share price of the company is trading at Rs. 9.72 which is an increase of 5.77 per cent from the previous close.