IRB Infra plummets 14 per cent

The possibility of losing the contract for Mumbai-Pune Expressway exerted heavy selling pressure on the shares of IRB Infrastructure Developers, causing them to drop 14 per cent to an over 5-year low of Rs. 90 per share in Wednesday’s trading session.

The Mumbai-Pune Expressway contact was secured by the company in August 2004 for a period of 15 years. The contract was awarded by the National Highways Authority of India (NHAI) under the build-operate-transfer model for a sum of Rs. 918 crore. The amount was paid upfront by IRB to Maharashtra State Road Development Corporation (MSRDC) and Mhaiskar Infrastructure (MIPL).

With the agreement period with IRB Infrastructure nearing its end, the NHAI is on the lookout for a new investor. There are reports doing the rounds that the new bids are likely to fall in the range of Rs. 7,000 to Rs. 8,000 crore.

Although the government hasn’t initiated any formal notification on rebidding, the company is well-prepared to bid for the project again when opportunity strikes. It already has an edge over the other bidders after having managed the project for the past 15 years.

The project is crucial for IRB as it operates 12 BOT road projects across India. For the fourth quarter ended March 2019, the project earned 42 per cent of IRB’s total toll collection.

The stock underperformed since May 27, 2019 by spiralling 34 per cent. This is attributable to the 13 per cent YoY drop in net profit at Rs. 208 crore in Q4FY19. EBITDA margin also showcased a sharp decline of 865 bps YoY to 39 per cent in Q4FY19. This is on account of lower margin in the construction division.

On Thursday, the shares of IRB Infrastructure Developers opened at Rs. 91.00, and hit a high and low of Rs. 96.75 and Rs. 84.10, respectively. At 11:24 am, the stock was trading at Rs. 95.50, up 1.49 per cent.