Infrastructure companies continue to be plagued by concerns of poor liquidity, tough market conditions and delays in implementing projects as they report fourth quarter numbers.
There is a good chance that most of the companies will more or less mirror their performance of the third quarter ended December 2012.
Interaction with some of the industry players shows there is not much likelihood of change in the performance of most infrastructure companies as the macro-economic environment continues to be worrisome.
The numbers will be stretched further when it comes to infrastructure companies such as Lanco, GVK and GMR, which have gas-based power plants running on natural gas supplied from KG-D6 fields.
High interest rates
M. Gautham Reddy, Executive Director of Ramky Infrastructure, told Business Line that the quarter will continue to be pressured, and marked by a high interest rate regime and poor cash-flows, with funds hard to come by.
“Liquidity is something most companies are having problems with. Having committed funds for the equity component, most companies had a tough time steering through the current environment,” he said.
R. Balarami Reddy, Executive Director of Finance, IVRCL, said: “There is unlikely to be any marked difference in terms of performance of infrastructure companies during the fourth quarter. But the changes indicated might augur well as we have entered the new financial year.”
“Interestingly, the changes announced by Prime Minister Manmohan Singh and the RBI seem to be gradually being implemented. State Bank of India has brought down interest rates by about 2.5 per cent and we hope other banks will follow suit.
With inflation seeming to moderate, we hope the RBI will have greater flexibility in handling the interest rate regime,” he said. T. Adi Babu, Chief Operating Officer, Finance of Lanco Infratech, said: “The results for most companies are likely to be similar to what they recorded during the third quarter as the market conditions have not changed for the better.”
Slow effect
“Even if certain changes are brought about at the macro level by the Centre, it will take at least a couple of quarters to yield results. While some companies have begun to divest stake in companies, the market condition from a global investors’ perspective is still some way away from being ideal for investment, he said.
Referring to power projects that are dependent on gas supply Krishna Godavari Basin D6, Adibabu said most plants are working at below threshold level. If in the third quarter, they managed to break-even, during the fourth, their performance will impact overall financials.
The stock market seems to have battered infra stocks, with the majority of them quoting at low prices lately.