IRB Infrastructure shares: While addressing the ET NOW Global Business Summit 2024, Nitin Gadkari, Minister of Road Transport and Highways of India, outlined a vision for revolutionizing India’s infrastructure landscape. He revealed ambitious plans to expand the National Highway road network. In his speech, he stated, “At the end of 2024, our National Highway Road network will be equivalent to the road network of the USA.” (The Economic Times)
This expansion presents a significant opportunity for the infrastructure sector in India. Many companies, like H.G. Infra, PNC Infratech Ltd, and KNR Constructions Ltd, will aim to capitalize on this opportunity. IRB Infrastructure shares may also see a spike. However, the question arises with leading companies with sound order books and healthy fundamentals: Can IRB Infrastructure shares be a profitable addition to our portfolios?
Let’s delve into an IRB Infrastructure shares analysis to learn about the company and make informed decisions.
About the Company – IRB Infrastructure Shares
IRB Infrastructure projects. Source: irbinfratrust.co.in
IRB Infrastructure Developers Ltd. is India’s leading and largest integrated transport infrastructure developer. They specialize in the roads and highways sector with a strong presence in the Build-Operate-Transfer (BOT) space. IRB takes pride in contributing to India’s transformation.
The company has achieved several firsts in India’s infrastructure sector. They delivered the first BOT project, operated the first expressway, and launched the first Infrastructure Investment Trust (InvIT). They were also the first Indian company to issue offshore bonds.
Incorporated on July 27, 1998, as a private company, IRB aimed to fund infrastructure projects and handle BOT projects. They develop roads, highways, bridges, and tunnels. Recently, they diversified into real estate development. (Source: IRB Infrastructure Official Website)
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Order Book Status
1. Order book of Rs 34,800 crore as of March 2024
-EPC contribution: 16.3% (Rs 5,700 crore)
-O&M contribution: 83.7% (Rs 29,100 crore)
2. Management expects Rs 2 trillion worth of projects to be bid out on a BOT basis over the next two years. (Source: Business Standard)
Business Portfolio
-3 strategic business verticals, including 1 private InvIT and 1 public InvIT
-Portfolio of 27 projects, including 26 highway projects and 1 airport project
-18 BOT projects, 4 TOT projects, and 4 HAM projects on roads and highways
-Presence in 12 Indian states
-20% involvement in the Golden Quadrilateral Project
-13 completed BOT concessions spanning 3,600 lane kilometres, with a cost outlay of Rs. 6,000 crores. (Source: IRB Infrastructure Official Website)
Operational Portfolio
-26 highway projects across 12 Indian states
-Asset base of approximately INR 80,000 crores
-15,500 lane kilometres under operation
-38% share in India’s TOT space
-72 toll plazas with 820 FASTag-compliant lanes
-Catering to around 1.3 million vehicles daily. (Source: IRB Infrastructure Official Website)
Stock Overview And SWOT Analysis
IRB Infrastructure Strategic Expansion Plans: Upcoming Projects
IRB Infrastructure projects. Source: irbinfratrust.co.in
1. Palsit Dankuni Six Laning Project on NH 19
Palsit Dankuni Tollway Private Ltd. is an SPV handling the BOT asset from Palsit to Dankuni on NH-19 in West Bengal. This project marks IRB’s entry into the Eastern Region of India. The concession period is 17 years.
The project includes a 63.830 km six-lane carriageway and a 120.316 km service road. It features 2 major bridges, 18 minor bridges, 9 flyovers, and 86 culverts. Additionally, there are 2 Rail Over Bridges and more. (IRB Infrastructure Trust)
2. Contract from NHAI for TOT-13
IRB Infrastructure Trust, a private InvIT of IRB Infrastructure Developers Ltd, secured a ₹1,683 crore contract from the National Highways Authority of India (NHAI). This contract covers the TOT-13 project, including the Gwalior-Jhansi section on NH-44 and the Kota Bypass on NH-76. (The Hindu Business Line)
3. Hyderabad Outer Ring Road Project
IRB Infrastructure Developers won the Hyderabad Outer Ring Road (ORR) project bid under the Toll-Operate-Transfer (TOT) model. The project spans 1,264 lane kilometres with a revenue-linked concession period of 30 years. The upfront consideration is ₹7,380 crore. (The Hindu Business Line)
4. Samakhiyali Santalpur BOT Project
IRB Infra’s SPV received the Appointed Date from NHAI for the Samakhiyali Santalpur BOT Project in Gujarat. This project involves six-laning a 90.90 km of NH-27, totalling 545 lane kms. The concession period is 20 years with a total cost outlay of ₹2,092 crore. (irb.co.in)
5. Lalitpur-Sagar-Lakhnadon Project
This project involves tolling, operation, maintenance, and transferring the four-lane Lalitpur-Sagar-Lakhnadon section of NH-44 in Madhya Pradesh. This section covers 316 kilometres. The concession fee is ₹4,428 crore, to be paid upfront to NHAI for a revenue-linked concession period of 20 years. (irb.co.in)
Essentials & Financials- IRB Infrastructure shares
Market Capitalisation: IRB Infrastructure is a large-cap company with a market capitalization of ₹39,211 crores. This places it among the larger players in the infrastructure sector.
Profitability Ratios: The company maintains modest profitability ratios. ROCE stands at 9.00%, and the ROE is 4.47%. These figures are relatively low. Higher ROCE and ROE percentages are desirable because they indicate a more efficient use of capital and equity to generate profits.
P/E Ratio: The Price-to-earnings (P/E) Ratio of IRB Infrastructure is 64.6, which is higher than its sector P/E ratio of 41.6. A higher P/E ratio suggests that the stock might be overvalued. In comparison to the sector average, investors are paying more for each unit of earnings.
Earnings per Share: IRB Infrastructure has an EPS of ₹1.00. While this is a positive number, it is relatively low. EPS indicates the company’s earning potential. A higher EPS generally reflects better financial health and profitability.
Debt-to-Equity Ratio: The debt-equity ratio of IRB Infrastructure is 1.36. This ratio is higher than 1, implying that the company’s assets are primarily financed through debt. A lower Debt to Equity Ratio (less than 1) is usually preferred as it indicates better financial stability and lower risk.
Dividend: IRB Infrastructure announced a dividend yield of 0.46% for the current year, at ₹0.20 per share. The dividend yield is relatively low, indicating that the company returns a small portion of its earnings to shareholders in the form of dividends.
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In summary, while IRB Infrastructure shows solid market presence and operational efficiency, its high debt levels and overvalued stock indicate areas for caution.
Inventory Turnover Ratio
Inventory Turnover Ratio: The Inventory Turnover Ratio for IRB Infrastructure is 20.77. This high ratio shows that the company efficiently manages its inventory and working capital.
A higher Inventory Turnover Ratio indicates that the company sells and replaces its inventory quickly, which is a positive sign of operational efficiency.
Shareholding Pattern (March 2024)
| Shareholders | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | Mar 2023 | Jun 2023 | Sep 2023 | Dec 2023 | Mar 2024 |
| Promoters + | 57.54% | 57.69% | 58.61% | 34.02% | 34.20% | 34.21% | 34.39% | 34.39% | 34.39% |
| FIIs + | 22.76% | 16.76% | 15.16% | 48.79% | 48.52% | 48.37% | 47.29% | 47.16% | 47.21% |
| DIIs + | 12.02% | 12.23% | 11.37% | 6.14% | 6.98% | 6.98% | 7.38% | 7.85% | 7.78% |
| Government + | 0.00% | 0.00% | 0.00% | 0.00% | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% |
| Public + | 7.68% | 13.32% | 14.86% | 11.05% | 10.28% | 10.43% | 10.94% | 10.59% | 10.59% |
| No. of Shareholders | 90,499 | 1,00,502 | 1,10,192 | 1,36,572 | 2,03,654 | 2,40,258 | 3,31,140 | 4,65,282 | 8,68,966 |
Promoter Holdings– Promoters’ holding remains unchanged at 34.39% in the March 2024 quarter.
This stability in promoter holdings indicates consistent confidence in the company’s future prospects and financial stability.
Promoter Pledges– Promoters’ pledges remained unchanged at 48.85% of their holdings in the March 2024 quarter. A high level of promoter pledging can be concerning as it implies that a significant portion of their shares is used as collateral for loans.
This can be risky if the company faces financial difficulties, as it may lead to a forced sale of shares, potentially affecting the stock price negatively.
FII/FPI Holdings– Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI) have increased their holdings from 47.16% to 47.21% in the March 2024 quarter. This represents a rise of 0.05%.
An increase in FII/FPI holdings generally suggests that foreign investors see growth potential in the company and have confidence in its performance.
Mutual Funds Holdings– Mutual funds have decreased their holdings from 3.92% to 3.72% in the March 2024 quarter. This is a reduction of 0.20%.
A decrease in mutual fund holdings might indicate a more cautious or bearish outlook from domestic institutional investors regarding the company’s short-term prospects.
Institutional Investors Holdings– Institutional investors have slightly decreased their holdings from 55.03% to 55.01% in the March 2024 quarter. This is a decrease of 0.02%.
While the change is minimal, it reflects a slight reduction in confidence or a reallocation of assets by institutional investors.
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In summary, IRB Infrastructure’s stable promoter holdings and increased FII/FPI investment are positives, but high promoter pledging and decreased mutual fund and institutional holdings warrant caution.
Evaluating Financial Statements
The fundamentals of IRB Infrastructure shares do not meet expectations. Let’s evaluate the company’s financials to analyze its profit and loss records over the years and assess whether it has been successful in increasing its revenue and profits.
Profit & Loss | Income Statements
Revenue from Sales:
-In the last 5 years (March 2020- March 2024): Revenue Increased from ₹ 6,852 crores to ₹ 7,409 crores (a rise of approximately 8.13 % over the last 5 years).
Operating Profit:
-In the last 5 years (March 2020- March 2024): Operating profits increased from ₹ 2,965 crores to ₹ 3,017 crores (a rise of approximately 1.75 % over the last 5 years).
The modest 1.75% increase in operating profit over the last five years suggests that IRB Infrastructure has faced challenges in significantly improving its operational efficiency or profitability.
Net Profit:
-In the last 5 years (March 2020 – March 2024): Net profit has been fluctuating. It declined from ₹721 crores to ₹606 crores, showing a percentage decrease of approximately 15.95%.
The significant decline in net profit indicates that IRB Infrastructure has experienced financial challenges, affecting its bottom line.
EPS:
-In the last 5 years (March 2020- March 2024): EPS decreased from ₹ 2.05 per share to ₹ 1.00 per share (a decrease of approximately 51.22% over the last 5 years).
The substantial decrease in EPS over the past five years highlights significant challenges in IRB Infrastructure’s earnings performance, reflecting reduced profitability per share.
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Cash Flows Statements
Cash flow statements are crucial for understanding how well a company manages its money. They show where cash comes from and where it goes. This helps us see if the company can pay its bills on time, grow its business, and handle risks. By breaking down cash flows into operations, investments, and financing, these statements help analysts decide if a company is financially strong. This information is key for making smart investment choices that match our financial goals and how much risk we’re comfortable with.
Cash flows from operating activities: From March 2020 to March 2024, the company’s cash flows from operating activities grew from ₹ 3,709 crores to ₹ 4,054 crores, reflecting an increase of approximately 9.31%.
The increase in cash flows from operating activities signifies improved cash generation from core business operations, which is positive news as it indicates better financial health and potentially higher returns.
Net cash flow: Net cash flow has shown fluctuation over the past 5 years. It declined from ₹ 165 crores in March 2020 to ₹ -601 crores in March 2022. However, it improved to ₹ 253 crores by March 2023 to again decline to -68 crores in March 2024.
The net cash flow has shown significant volatility over the past 5 years. Fluctuations in net cash flow over the past 5 years emphasize the importance of evaluating a company’s cash management stability. While improvements suggest better financial health, volatility underscores the need to assess the company’s ability to manage cash effectively for sustainable growth and stability.
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Important Highlights Of The Company’s Past Year Performances
Profit Growth: IRB Infrastructure Developers Ltd has recorded robust profit growth over the last three years, with a compound annual growth rate (CAGR) of 74%. However, the trailing twelve-month (TTM) profit declined to -14%, reflecting a downturn in the company’s recent performance.
Share Price Increase: IRB Infrastructure Developers Ltd’s share price has seen significant growth. Over the last three years, the share price increased by 60%. Notably, the share price surged by 141% in the past year alone.
Return on Equity: The company’s Return on Equity (ROE) for the last three years averaged a modest 5%. In the past year, ROE stood at 4%, indicating a slight decline in profitability from equity investments.
Sales Growth: IRB Infrastructure Developers Ltd has demonstrated notable sales growth over the past three years, achieving a compounded sales growth rate of 12%. This growth rate increased to 16% in the TTM period, reflecting an acceleration in recent sales expansion.
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Highlights Of Earnings And Revenue- Annual/Quarterly
Annual Performance: Annual revenue increased by 22.35% in the last year, reaching ₹8,201.76 Crores. However, annual net profit declined by 15.86% to ₹605.82 Crores.
Stock Performance: IRB Infrastructure Developers Ltd’s stock price surged by 145.14% in the past year, significantly outperforming its sector by 69.02%.
Quarterly Performance: Quarterly revenue rose by 27.24% year-over-year (YoY) to ₹2,504.49 Crores. Meanwhile, quarterly net profit increased by 45.12% YoY, reaching ₹188.88 Crores.
IRB Infrastructure Developers Ltd demonstrated robust annual revenue growth and improved quarterly performance with significant increases in both revenue and net profit year-over-year.
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Notable Strengths and Weaknesses of the Company: IRB Infrastructure shares
Strengths:
-Increasing shareholding by FII/FPI or institutions.
-High momentum scores (technical scores > 50).
-The annual increase in promoters’ shareholdings.
Weaknesses:
-Promoters have pledged 48.8% of their holding.
-Declining net cash flow indicates challenges in cash generation.
-The PE ratio is higher than the industry average, suggesting potential overvaluation.
-Rising debt levels, which could impact financial stability.
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PEER Comparison – IRB Infrastructure shares
| Company Name | Price | % Chg | MCap(Cr) | TTM PE | P/B | ROE(%) | 1 Yr Perform(%) | Net Profit(Rs.) | Net Sales(Rs.) | Debt to Equity |
| IRB Infra | 66.04 | 1.93 | 39,881.56 | 66.04 | 2.90 | 4.40 | 145.05 | 920 | 7,409 | 1.36 |
| Adani Ports | 1,485.70 | 0.74 | 320,931.84 | 39.57 | 6.08 | 15.36 | 101.48 | 8,265 | 26,710 | 0.87 |
| GMR Airports | 96.16 | 0.30 | 58,041.65 | - | - | 0.00 | 119.79 | -1,052 | 8,754 | -16.30 |
| RITES | 698.35 | -0.29 | 16,781.48 | 36.85 | 6.43 | 17.45 | 87.96 | 489 | 2,452 | 0.00 |
| K&R RAIL ENGINE | 465.00 | 1.25 | 997.78 | 76.35 | 10.57 | 6.30 | -4.25 | 5 | 307 | 0.17 |
Bottom Line
Our detailed analysis of IRB Infrastructure shares reveals multiple perspectives on the company. While IRB Infrastructure holds a strong market presence with 38% of India’s TOT space and boasts a robust order book, solid operational portfolio, and strategic expansion plans, there are underlying concerns. High levels of promoters’ share pledging, coupled with elevated debt levels and negative net cash flows, pose significant risks.
On the positive side, growing profits, improving cash flows from operating activities, and increased stakes by FIIs are strengths for IRB Infrastructure. Moreover, government initiatives and policies aimed at infrastructure development could provide further opportunities for growth.
Despite these positives, our fundamental analysis suggests that IRB Infrastructure shares are risky in the short term. Long-term viability hinges on substantial financial improvements, reduction in promoters’ pledging, and debt management in upcoming quarters.
That’s all for today’s post. Hope you get some valuable insights from here.
Happy reading!
FAQs
What is the Business Model of IRB Infrastructure Developers Ltd?
IRB Infrastructure Developers Ltd. is India’s leading and largest integrated transport infrastructure developer. They specialize in the roads and highways sector with a strong presence in the Build-Operate-Transfer (BOT) space. IRB takes pride in contributing to India's transformation.
Is IRB Infrastructure Developers Ltd a large cap company?
IRB Infrastructure is a large-cap company with a market capitalization of ₹39,211 crores. This places it among the larger players in the infrastructure sector.
Is IRB Infrastructure Developers Ltd debt free?
As of June 30, 2024, the debt-equity ratio of IRB Infrastructure is 1.36. This ratio is higher than 1, implying that the company's assets are primarily financed through debt.
Is IRB Infrastructure Developers Ltd overvalued?
The Price-to-earnings (P/E) Ratio of IRB Infrastructure is 64.6, which is higher than its sector P/E ratio of 41.6. A higher P/E ratio suggests that the stock might be overvalued. In comparison to the sector average, investors are paying more for each unit of earnings.
How much share of IRB Infrastructure Developers Ltd is pledged by the promoters?
Promoters' pledges remained unchanged at 48.85% of their holdings in the March 2024 quarter. A high level of promoter pledging can be concerning as it implies that a significant portion of their shares is used as collateral for loans.
This can be risky if the company faces financial difficulties, as it may lead to a forced sale of shares, potentially affecting the stock price negatively.
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a while. The post does not consist of any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
