Stock Review: IVRCL

The FY11 results of IVRCL on a standalone basis see a dip in the PAT margin to about 3%. However, except for that there is no concern because they have a top-line of Rs 5,600 crore. The balance sheet is in place, the networth is of Rs 2000 crore, debt of Rs 2000 crore, fix assets of Rs 2000 crore, debt equity ration of 1:1 and EPS of Rs 6. However, on a consolidated basis IVRCL Assets and Holding is the company which is causing a big problem, this 80% subsidiary had a top-line of Rs 900 crore for FY11 on a standalone basis while they posted a loss of Rs 155 crore, largely from interest liability of Rs 170 crore.

The company has indicated in the past, IVRCL Limited is holding 80% in IVRCL assets and 55% in Hindustan Dorr Oliver. The management in the past had indicated they want to sell their 55% stake in Hindustan Dorr Oliver, the marketcap of the 55% stake is about Rs 250 crore and if they sell this stake they should be able to easily fetch about Rs 500-600 crore.

It is a matter of time and once the debt liquidation or the debt repayment starts everything can come in place. Even the IVRCL assets are sitting on a huge kind of assets which they have acquired in PP or BoT projects like Chennai Desalination plants. Therefore, they will take steps to liquidate debts which are on a consolidated basis to the extent of about Rs 4200-4300 crore.

The standalone balance sheet is of no concern. Any debt repayment initiative by the management can put back this company on the track. The company has order book of about Rs 20,000 crore. Taking all into consideration, the downside is very limited. In maybe 6 months one can expect the share to breach 3-digit mark.