Reliance Infra Net Soars Due to Tax Write-Back

Anil Ambani group company Reliance Infrastructure has posted a strong net profit despite a decline in revenues for the quarter ended March 31, 2013. The company has reported a total income of Rs 6187 crore, down by 13%. The net profit before profit share of associates and minority shareholders for the quarter has doubled to Rs 655 crore, thanks to the write-back in tax up to Rs 211 crore.

The company has reported 28% growth in its electricity business, which adds more than 60% in its topline. The EPC business revenues however have shrunk by 44% during the quarter on a YoY basis. Infrastructure business which is a small business segment has put up a good set of numbers as the revenues from this business segment have increased by 76%.

On the margin front, the company has reported huge expansion of the EBITDA margins. Its EBITDA margins for the quarter are at 13.71% against 6.81% a year before. Sequentially however, there is some drop due to a rise in fuel costs, depreciation and employee cost.

For the quarter, its other income declined by 28% to Rs 166 crore. The finance cost is marginally reduced to Rs 409 crore. Sequentially too, there is a drop in the finance cost which seems like a good sign. At the PBIT level, the profit of the company has reported a growth of 37%. The write-back of taxes to the tune of Rs 211 crore has, however, provided an upward push to the net profit.

The company’s total debt - long and short-term - stood at Rs 20,614 crore. The debt to equity ratio is at 0.8x which is comfortable at this time. The interest cover ratio is at 0.5x which is thin. The current ratio has declined to just 1x, indicating liquidity is weak.

For FY13, the company has reported a cash component of Rs 492, which is down by 64% on a YoY basis. The loans and advances have increased by Rs 3300 crore while the current investments have also decreased. All this has put its cash ratio under pressure.

On the business front, the company has said that Maharashtra Electricity Regulatory Commission has allowed the recovery of cross subsidy surcharge of Rs 750 crore annually from the change over customers to Tata Power. It has also said that the Mumbai Metro trial runs have been conducted successfully. In the Mumbai region, it has filed for the multi-year tariff which may get an approval shortly.

In the cement business, it is developing 2 plants with a capacity of 5 MTPA in India and expects it to be commissioned in 2013.

The shares of Reliance Infra have seen volatility in the year. The infra pack as a whole is under pressure and we would therefore advise investors not to enter the stock at the moment.