RPP Infra bags projects worth Rs 34 crore

RPP Infra Projects has bagged two separate orders worth Rs 34.3 crore from Indra Gandhi Centre for Atomic Research, Kalpakkam and Andaman PWD respectively.

The order awarded by Indra Gandhi Centre for Atomic Research, Kalpakkam is worth Rs 16.3 crore and involves construction of roads, storm water drainage and other miscellaneous works in Kalpakkam Phase II unit, to be completed within a period of 10 months. The company has already executed projects in the Phase I unit, which makes this order a mere follow-on. The other order awarded by Andaman PWD is worth Rs 18 crore and involves carrying out sea wall protection work at Mus, Car Nicobar in Andaman & Nicobar Islands. This contract is expected to be completed in 16 months.

Now with the receipt of these orders, the total order book of RPP Infra Projects as on date stands at Rs 2284.3 crore, which is a massive 10.9 times its FY11 sales of Rs 207.7 crore, implying a revenue visibility for the next 9-10 years. But a large portion of the order book (Rs 1500 cr) is attributed to a massive housing project that the company is executing for the Republic of Gabon.

RPP Infra Projects is a South India based company, engaged in the business of infra development such as highways, roadways, bridges, civil construction works, irrigation, water supply and power projects etc. It mainly caters to the south Indian states of Tamil Nadu, Karnataka, AP and Union Territory of Andaman & Nicobar Islands. As a matter of fact, the company has already worked with the Andaman PWD in the aftermath of the tsunami in 2004.

Recently, the company also forayed in to the Sri Lankan Infra space and is currently executing mass housing projects for the Sri Lankan Railways. The company has also started developing business operations in African countries by undertaking similar mass housing projects in Gabon and the Ivory Coast.

On the financial front, the company has reported a stellar performance in the recently concluded Q2 results season. Its top-line grew by a robust 99.63 per cent to Rs 71.75 crore as against Rs 35.94 crore reported in Q2FY11, on the back of fresh revenue generation from its overseas mass housing project in the Republic of Gabon and Sri Lanka. Consequently the bottom-line also posted a whooping 123 per cent rise to Rs 7.67 crore as against Rs 3.43 crore in Q2 FY11.

One of the key areas that one looks into while judging the future of an infra company is its debt exposure and on this front, RPP’s current D/E stands at 0.75x with an interest cover ratio at 4.63x, implying that the company’s current EBIT’s can cover up to 4x its interest outgo. On the valuation front, at CMP of Rs 64.95 the counter is currently trading at a PE multiple of 5x its annualized EPS of Rs 13.

But having said all this, the overall outlook for the infrastructure industry looks pretty gloomy as most of these companies are facing sever cash crunch and high cost of borrowing on their loan tie-ups, which has resulted into a delay in most of their projects.

Companies in this sector have also seen a heavy erosion in margins on account of high inflation and rising interest rates. Though there is an air of expectation in the market that the RBI might take a pause in its hawkish stance, but as far as the infrastructure sector is concerned, it would take a while before the companies can turn their fortunes over.