Big-ticket orders gush into SPML Infra
SPML Infra is a leading infrastructure development company. It has executed over 600 projects. The company is a leader in urban infrastructure development on EPC, PPP and BOOT basis.
It is one of the beneficiaries of the great infra boom happening in the Country.
Rs. 642 crore orders gush in
The Company announced a few days ago that it has been awarded orders worth Rs 642 crore for irrigation projects, water supply scheme and power infrastructure development in various states.
An order of Rs 500.14 crore has come from UND Irrigation Division, Jamnagar, Gujarat for water irrigation project, SAUNI Yojana.
An order for Rs 53.58 crore has been received from Jharkhand Urban Infrastructure Development Corporation for augmentation and strengthening of Giridih Water Supply Scheme.
The balance is made up of an order for Rs 45.64 crore order received from Narmada, Water Resources, Water Supply & Kalpsar Department, Gujarat for lift irrigation pipeline project.
There is also an order for Rs 28.80-crore order from West Bengal State Electricity Transmission Company for construction of 132/33 kV GIS sub-station at Burdwan.
An order of Rs 13.50 crore was also received from Narmada Valley Development Authority, Madhya Pradesh for construction of right bank piped canal of Upper Beda Dam.
More orders expected to gush in
Subhash Sethi, the Chairman of SPML Infra, confirmed that more such orders are expected:
“We expect more such orders… Our power transmission and distribution division is getting projects on a regular basis form different states including West Bengal. With the strong execution capabilities, we are confident to deliver these projects on time to the complete satisfaction of our esteemed clients,” he said.
Bidding only for quality projects with high profit margin
In an interview with ET Now, Subhash Sethi revealed that the Company will bid only for quality projects where the profit margins are high.
He also stated that the EBITDA margin for new projects is about 14%.
He added that the order book stands at a hefty Rs. 6,000 crore.
He also stated that the Company is focusing on water and power projects and is not interested in diversifying into other infra projects.
| SPML INFRA LTD – KEY FUNDAMENTALS | |||
| PARAMETER | VALUES | ||
| MARKET CAP | (Rs CR) | 463 | |
| EPS – TTM | (Rs) | [*S] | 3.92 |
| P/E RATIO | (X) | [*S] | 32.26 |
| FACE VALUE | (Rs) | 2 | |
| LATEST DIVIDEND | (%) | 25.00 | |
| LATEST DIVIDEND DATE | 26 SEP 2011 | ||
| DIVIDEND YIELD | (%) | 0.00 | |
| BOOK VALUE / SHARE | (Rs) | [*S] | 134.08 |
| P/B RATIO | (Rs) | [*S] | 0.94 |
[*C] Consolidated [*S] Standalone
| SPML INFRA LTD – FINANCIAL RESULTS | |||
| PARTICULARS (Rs CR) | MAR 2017 | MAR 2016 | % CHG |
| NET SALES | 474.92 | 552.24 | -14 |
| OTHER INCOME | 38.9 | 12.56 | 209.71 |
| TOTAL INCOME | 513.82 | 564.8 | -9.03 |
| TOTAL EXPENSES | 431.44 | 504.72 | -14.52 |
| OPERATING PROFIT | 82.38 | 60.08 | 37.12 |
| NET PROFIT | 11.44 | 3.38 | 238.46 |
| EQUITY CAPITAL | 7.33 | 7.33 | – |
(Source: Business Standard)
S4A law will be ‘game changer’ for the entire infra sector
Mudar Patherya has claimed that the newly introduced ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’ will address the “nerve of the problem” faced by infra companies relating to disputed deliveries and delayed payments.
He has opined as follows:
“The government addressed the nerve of the problem: Accelerated arbitration. It introduced the landmark S4A law, expected to create a win-win proposition for customer, lender, community and country. The six ways in which S4A will transform sectoral realities comprise: Establish the integrity of contractors passing the stringent S4A test; directive to disburse 75 per cent of the awarded amount without contest against a bank guarantee (though this is yet to be accepted by state governments), inclusion of disputed receivables by banks in estimating the strength of the contractor, which could reduce borrowing costs; segregation of debt helping identify the quantum that was mobilised following arbitration delay; the decision to get banks to buy the company’s equity at market price (turning lender into investor, with a vested interest in closing the arbitration) and enunciation of defined time-lines to conclude the arbitration.”
He has also stated that the “big implication” of this is that there will be a strengthening of credit rating and moderate funding costs.
“Best of all, this could strengthen the pre-qualification credentials of construction companies, resulting in larger contracts,” he says.
SPML Infra is at “inflection point”
Of all the infra stocks in the market, Mudar has selected SPML Infra. His reasons for doing so are backed by the solid fundamentals of the Company.
“The one company I would put my money on is SPML Infra. It is principally a water infrastructure solutions provider (in addition to a presence in other infra segments). The company is among the top two in India’s water infra space. Its interest cover was nominal in 2016-17; order book was ~6,800 crore by mid June 2017, with a 14 per cent Ebitda (earnings before interest, tax, depreciation and amortisation) hurdle rate margin.”
Mudar also stated that SPML Infra will enjoy “virtual reincarnation” if it clears the S4A law.
“The big story is if the company clears the stringent S4A, this could be its virtual reincarnation, where knowledge and competence finally begin to reflect in its profit and loss account, lower debt and market capitalisation. That is the inflection point I am willing to put my money on,”.
Conclusion
It is obvious that the implications of the S4A law is beyond the comprehension of novice investors. However, even we are aware that there is a great boom in the infrastructure sector happening and that select companies will ride into prosperity. SPML Infra appears to be the ideal candidate to bank on given the competence of its management and the big-ticket orders that are effortlessly gushing into its coffers!
what you have not mentioned is that a ~400cr company has ~600 cr+ as debt. So 6800 Cr order book at 14% margin will be used only to clear debt and interest obligations.
The market participants are not fools to notice such a company with an annual revenue of 1500Cr, trading at a Mkt. Cap of 400 Cr. The main issue with this company is its corporate governance and unscrupulous owner driven values.
Read between the lines of its P&L statement(especially other income), and the methodology on how it arrived at achieving a positive bottom-line. All details are available in its Annual report. Do some scuttle-but, try talking to some of its suppliers, vendors or its own employees. It could be an eye-opener and a classic example of why its important for a company to have an owner with his heart in the business..!!
I keep myself away in participation from online debates. But I couldn’t stop myself in this case, when there is a potential case of loss to the Investor’s capital.
I like it,means your post
Yes, very shady future in terms of clearing the debt..
Best stock for the next 4-5 years is epc industrie (epc irrigation) They are a potential 10 bagger with the backing of mahindra and mahindra
thanks Navin for your valuable comments.
Hats off to Mudar Patreya. it cleared S4A. Company is expected to do 6000 crore worth projects in next next 2-3 years.
I am expecting 10% growth but 20% in next 2-3 years. But, beauty is in bottomline. 70 crore may add to bottomline due to S4a.