Lanco Infratech

In Sep 2011 quarter, Lanco Infratech reported net loss of Rs 259.48 crore against net profit of Rs 70.46 crore in Sep 2010 quarter - a way below market expectation performance. The prime reasons for the fall were spike in profits on transactions with subsidiaries which were eliminated, higher tax provision and incurring high forex loss (against gain in Sep 2010 quarter). At the operating level, it earned operating profit margin (OPM) of 23.8%, up by 330 bps on fall in power costs. Thus the operating profit grew by 8% to Rs 450.90 crore.

The company acquired the Griffin Coal Mining Pty (GCMC) and Carpenter Mine Management Pty (CMM) through its subsidiary Lanco Resources International Pte (LRIPL) and step down subsidiary Lanco Resources Australia Pty (LRAPL) on February 28, 2011. Thus the consolidated results for the quarter and half year ended Sep 2011 are not comparable with its corresponding previous periods.

• Order Book of EPC as on 30^th September 2011 stands at Rs 292 billion.

• Under power business, Kondapalli II and Amarkantak I generated total 1,221 MU and realized Rs. 436 crore i.e. average realization of Rs. 3.6 per unit in Sep 2011 quarter.

• The appeal filed by Lanco's Power Project near Korba in Chhattisgarh before.

• Appellate Tribunal for Electricity (APTEL) challenging the jurisdiction of Haryana Electricity Regulatory Commission (HERC) over the Power Purchase Agreement (PPA) signed between Lanco and PTC India Limited (PTC) has been dismissed and the case has been referred back to HERC for adjudication.

• Synchronisation of Unit II (1 x 600 MW) of Anrapa 'C' happened on September 30' 2011.

Quarter Performance

The consolidated net operating income fell by 7% to Rs 1896.60 crore in Sep 2011 quarter solely on account of eliminating higher intersegment operating income. The gross sales grew by 28% to Rs 3270.72 crore primarily on account of impressive sales in EPC & construction business (EPC) and resources though constrained by fall in sales of power & property development businesses. The EPC sales grew by impressive 79% to Rs 2184.73 crore while resources reported sales of Rs 131.78 crore (against none in Sep 2010 quarter). On the other hand, power sales fell by 26% to Rs 994.68 crore on lower power trading while the sales of property & development crashed by 45% to Rs 17.50 crore.

The company's OPM grew by 330 bps to 23.8% on fall in power costs. Thus the operating profit grew by 8% to Rs 450.90 crore. Segmentwise, the EPC business reported impressive PBIT margin growth of 730 bps to 19% thus boosting up its PBIT by whopping 186% to Rs 422.76 crore. Also the power businesses' PBIT margin grew by 170 bps to 16% limiting fall in its PBIT to 17% to Rs 163.90 crore. It includes notional forex loss of Rs 46.4 crore, which otherwise could have been capitalized and Rs 48.9 crore of exceptional income on account of conversion of Vidarbha from subsidiary to associate.

The company's PBT before forex gain/loss grew by whopping 185% to Rs 347.88 crore on favorable non operating performance as well as spike in eliminated profits on transactions with subsidiaries. The other income grew by impressive 94% to Rs 27.23 crore while the interest cost grew by limited 43% to Rs 250.84 crore. The depreciation cost fell by 27% to Rs 124.32 crore. The eliminated profits on transactions with subsidiaries spurted by outstanding 605% to Rs 244.91 crore. However on incurring forex loss of Rs 287.82 crore (against forex gain of Rs 56.22 crore in Sep 2010 quarter), the PBT after forex gain/loss fell by notable 66% to Rs 60.06 crore. Fortunately, on earning EO income of Rs 48.92 crore on conversion of subsidiary into associate (against none in Sep 2010 quarter), the fall in PBT was constrained to 39% to Rs 108.98 crore. Unfortunately, high tax provision, 10% increase in minority interest and incurring loss in associates (against profit in Sep 2010 quarter), the net profit plus eliminations crashed by whopping 88% to Rs 14.10 crore. On excluding the eliminations, it incurred net loss of Rs 259.48 crore against net profit of Rs 70.46 crore in Sep 2010 quarter.

Profit after Tax, before adjustment for profit on transaction with Subsidiaries and Associates and Forex, grew by 417% up from Rs 58.4 crore to Rs 301.9 crore in Q2FY12.

On standalone basis, the topline grew by impressive 60% to Rs 1759.99 crore while the net profit crashed by 64% to Rs 16.51 crore in Sep 2011 quarter.

In half year ended Sep 2011, the consolidated gross operating income grew by 24% to Rs 6284.06 crore on impressive growth in EPC sales though limited by fall in power sales. However on eliminating intersegment operating income, the net operating income fell by 10% to Rs 3763.77 crore. High raw material costs pulled down the OPM by 150 bps to 22.8%. Thus the operating profit fell by 15% to Rs 859.96 crore. Healthy other income, spike in eliminated profit on transactions with subsidiaries and fall in depreciation cost lifted the PBT before forex gain/loss by robust 37% to Rs 654.16 crore. However incurring forex loss (against forex gain in H1 FY 11) though offset to some extent by EO income, the PBT flattened out to Rs 497.24 crore against Rs 498.57 crore in H1 FY 11. High tax provision, increase in minority interest and incurring loss in associates (against profit in H1 FY 11), the net profit plus eliminations fell by 33% to Rs 249.12 crore. On removing significant profit from transactions with subsidiaries and associates (up by 363%), the company reported net loss of Rs 245.69 crore against net profit of Rs 265.14 crore.

On standalone basis, the net profit fell by 15% to Rs 99.21 crore on 61% hike in topline to Rs 3490.01 crore. The fall in bottomline is primarily on incurring forex loss of Rs 93.86 crore against gain of Rs 44.37 crore in H1 FY 11.

Current order book stands at Rs 292 billion and details of order book are as follows:

As of 30^th September 2011 capital expenditure incurred in power and Road projects and

debt utilized for the same are as follows:

• During the previous financial year the Company acquired the Griffin Coal Mining Pty Limited (GCMC) and Carpenter Mine Management Pty Limited (CMM) through its subsidiary Lanco Resources International Pte Limited (LRIPL) and step down subsidiary Lanco Resources Australia Pty Limited (LRAPL) on February 28, 2011. Since GCMC and CMM had been
  Under Administration, the audit of the financial statements of these companies has not been undertaken for the period subsequent to June 30, 2008. The process of completion of audits of these financial statements is presently under progress. Accordingly Total Assets of Rs. 580964 Lakh as on September 30, 2011, Total Liabilities of Rs. 483665 Lakh as on September 30, 2011, Income from Operations of Rs. 13178 Lakh for the quarter and Rs. 32340 Lakh for the half year ended September 30, 2011, Foreign Exchange Loss of Rs. 16755 Lakh for the quarter and Rs. 9656 Lakh for the half year ended September 30, 2011 and Net Loss of Rs. 23876 Lakh for the quarter and Rs. 22553 Lakh for the half year ended September 30, 2011, have been taken from consolidated accounts prepared by the management in relation to GCMC, CMM, LRAPL and LRIPL along with its immediate subsidiaries. With respect to another Subsidiary Lanco Hills Technology Park Private Limited, total Assets of Rs. 212134 Lakh, Total Liabilities of Rs.162974 Lakh as on September 30, 2011 and Income from operations of Rs.5220 Lakh and Net Profit of Rs. 101 Lakh for the quarter ended Sep 30, 2011 has been considered in the consolidation based on the management accounts. The above are a subject matter of the qualification in the limited review report of the Statutory Auditors.

• During the previous year in respect of power generating units of two subsidiaries of the company, depreciation accounting policy changed from written down value method to straight line method with retrospective effect at the rates specified in Schedule XIV of the Companies Act, 1956 on the basis of experts technical inputs and to align the depreciation method with other power companies within the group and industry. Hence the depreciation for the quarter
  / half year ended September 30, 2011 is not comparable with the quarter / half year ended September 30, 2010.

• Remuneration of Rs. 223 lakh till year ended March 31, 2011 have been paid to the director of a subsidiary company in excess of the permissible remuneration under Companies Act, 1956. The subsidiary company has applied to the Central Government for the approval of such remuneration, pending the above; no adjustments have been made to these finalized results. This is a subject matter of qualification in the limited review report of the Statutory Auditors.

• The promoter's shareholding stands at 69.21% as on 30^th Sep 2011. The promoters' have pledged 37.53% shares of the company.

The scrip is trading at Rs 14.90 on BSE.

Lanco Infratech: Consolidated Results

Lanco Infratech: Consolidated Segment Results