Infrastructure India has announced its interim results for the six months ended 30 September 2015. The announcement says that the value of the Company’s investments decreased 10% to £331.6m during the period (£368.6m as at 31 March 2015), whilst its NAV decreased by 12% to £329.3m (£373.6m as at 31 March 2015). Reflecting this, the company’s NAV per share was £0.48 as at 30 September 2015 (£0.55 at 31 March 2015). The company say that the fall has been driven principally by the depreciation of the Indian Rupee against the Pound Sterling at the end of the reporting period and by softening of market conditions in the logistics industry. In terms of the currency movement, the Indian Rupee depreciated against Sterling by 7.5% during the period (from 92.8 Rupees to the Pound to 100.3).
In terms of developments, the company says that Distribution Logistics Infrastructure Limited has commenced initial domestic and export-import operations at its Bangalore terminal facility in April 2015 and commenced construction both at Palwal, in the National Capital Region, as well as at at Chennai. The company says that a weak monsoon in 2015 impacted production at its operational wind and hydro projects although both performed largely in-line with expectations. However, the company says that rail haulage charges levied by the Indian Railways were increased last year by more than 24% for different slabs of tonnage. In addition, a Port Congestion Surcharge of 10% was imposed in March 2015. They say that container train operators have by and large been passing on much of this increase to customers, but the rise in rail transportation costs resulted in a reduction in the movement of containers to the hinterland and some margin erosion. This was coupled with major weather-related disruptions in rail movement along key routes to western Indian ports. As a result, the company has planned alternative Exim and domestic routes connecting southern and western ports as well as forming strategic industry alliances.
As previously announced, the company entered into an Incentive Agreement, in April 2015, with Vikram Viswanath. The terms of the plan are such that, if actual net income of Distribution Logistics Infrastructure Limited exceeds targeted net income as set out in the DLI business plan, an incentive payment shall be payable, in cash, to Vikram Viswanath and calculated as 30% of the amount by which actual net income exceeds targeted net income in any financial year up to and including the financial year ending 31 March 2025. The payments are not subject to a cap.
In terms of its hydroelectric operations, the company says that India Hydropower Development Company’s overall production was higher than the same period last year. This is primarily a result of the Darna plant being operational for the full period following repairs and re-commissioning of both turbines after extensive damage from heavy monsoon rainfall in August 2014. The company says that it has recovered insurance payments for the majority of the claim and are confident that the remaining amounts will be settled by the end of the calendar year. However, the company expects that overall annual production in the current fiscal year to be lower due to a weaker monsoon attributed to the extended El Nino weather phenomenon.
In terms of the company’s winds farms, Indian Energy Limited’s overall production from two operating wind farms was somewhat lower than the same period last year as a result of weaker monsoonal winds. The company says that, at Theni, in Tamil Nadu, grid availability continues to be an issue despite some infrastructure upgrades. Grid curtailment has been a persistent frustration for the company’s management. While the state government continues to make improvements to grid infrastructure, availability assumptions for Theni remain cautious and unchanged for the fiscal year. Following a reduction in base rates by the Reserve Bank of India, interest rates on senior debt for Gadag and Theni reduced by 25 and 40 basis points each respectively. The company says that it has retained its investment grade credit ratings for both projects.
Toll collection at Western MP Infrastructure & Toll Roads Private Limited (“WMP”) during the period was significantly higher, with total toll revenue growth of 22.5% over the previous period. However, the company says that, with some macroeconomic headwinds they continue to maintain a conservative view of future traffic growth.
The company say that there was no definitive progress for completion of Shree Maheshwar Hydel during the period. However, they say that the project’s promoter provided a detailed proposal to the lenders from a potential equity investor, indicating their willingness to provide financing to complete the project as well as to ultimately refinance the principal value of the outstanding debt. They say that the lenders are currently evaluating the proposal. Other options, including a Government takeover of the project, are being assessed by the lenders and there remains little clarity on outcome or timing of either route to completion. The company says that it continues to engage with SMH stakeholders on reaching a fair outcome. In October 2015, the National Green Tribunal reiterated its ruling that closure of the dam gates for production can only occur on completion of rehabilitation and resettlement.
Since 30 September, there have been a number of developments within Distribution Logistics Infrastructure Limited. The company commissioned a Liquid Tank Farm and Auto Logistics Park at its Nagpur terminal with freight movement commencing in October 2015. They say that commercial operations are continuing to step up at its Bangalore terminal for domestic and Exim containers. Furthermore, it has commenced domestic handling and transportation of refrigerated containers at Palwal and the company say that remaining terminal infrastructure remains on-track for completion this fiscal year. The company also says that it has acquired some important new customers, including international shipping lines, national manufacturing firms and a state owned multinational. On the downside, although there have been some delays in construction of the Chennai terminal, the company says this has been caused by heavy rain and local flooding, it is on track to commission its container freight station and its Free Trade Warehousing Zone in the months ahead.
In terms of outlook, the company says that, whilst there are perceptible macroeconomic headwinds, there is still a critical need for logistics infrastructure in India and they are confident that our largest asset, Distribution Logistics Infrastructure Limited, is strategically well positioned in the sector.
Infrastructure India suffers from weak currency and soft logistics market : IIP