IRB Infrastructure Developers continued to build on its gains and was up another 11 per cent today.

The IRB Infra stock has had a strong rally in the past three weeks and was up 83 per cent since May 2 . It also hit its new 52-week high of ₹218 earlier today.

Road players rejoice

After a lengthy back and forth, the National Highways Authority of India, late last week, gave its approval to defer the premium payment for some road developers.

Premium is the amount road developers pay the government for the right to develop a stretch of road, maintain it, and collect tolls from traffic. But with the slowdown impacting commercial traffic flow, toll collections have dropped for all players.

Postponing the premium payment, therefore, is quite a relief for developers, since it frees up cash for working capital and servicing debt. These are the two areas most infrastructure companies are struggling with.

IRB Infra has two stretches which are eligible for postponement, where it was paying premiums of over Rs 300 crore.

Sadbhav Engineering and Larsen & Toubro both have two projects each, where premiums can be postponed. These two stocks were up 6 per cent and 5.8 per cent, respectively today.

Long-term effect

Players can defer payment if their toll collections are insufficient to service debt and cover the operation and maintenance costs.

But in the long run, the effect on cash flows of such postponing remains to be seen, since developers have to pay an interest of 11 per cent on the deferred payments. Developers cannot also declare dividends until the backlog is cleared, and must share all toll collection data.

Technical outlook

The stock is currently inching lower after recording a high of ₹218. However, intraday support for the stock is available at ₹209. A bounce from this support can take the stock higher in today’s sessions. In such scenario, short-term traders can go long with a stop-loss at ₹205 for the target of ₹220.

On the other hand, if the stock declines below ₹209, it can dip further during the day to test its next significant support at ₹200. This level of ₹200 is a strong support and an immediate break below this level is not likely.

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