Infrastructure India has announced its annual results for the twelve months ended 31 March 2016. During the period, the value of the Company’s investments increased marginally to £334.5m as at 31 March 2016 (30 September 2015: £331.6m; 31 March 2015: £368.6m) whilst total net assets fell to £325.8m (30 September 2015: £329.3 million; 31 March 2015: £373.6m). NAV per share remained unchanged over the six-months at £0.48.
The company says that, broadly speaking, a strengthening of the Indian Rupee against Sterling at the end of the fiscal year and a decrease in the yield of the Indian 10 year bond, which serves as the risk-free rate in asset valuations, were offset by softening market conditions for Distribution Logistics Infrastructure Limited and a revision of the value of the Company’s interest in Western MP Infrastructure & Toll Roads Private Limited to its realised sale value.
The company says that macro-economic pressures, with a continuous drop in Indian exports over an unprecedented 14-month period by the end of the fiscal year, had an impact on IIP’s largest asset, DLI, and the wider logistics industry. During the fiscal year, DLI commenced initial domestic and export-import (Exim) operations at its Bangalore terminal facility and commenced construction at Chennai and Palwal in the National Capital Region. A Liquid Tank Farm and Auto Logistics Park were also commissioned at Nagpur and the company says that DLI acquired some important new customers during the year, including international shipping lines, national manufacturing firms and a state owned multinational. In November 2015, torrential rainfall and local flooding disrupted construction at DLI’s Chennai terminal and as the floodwaters took several months to recede, DLI management believed it prudent to revise the layout of the site. As a result, the commissioning of the facility will now occur late this calendar year. They say that DLI is also in negotiations for contracts with other key national and international customers but that DLI’s operating performance however was impacted by lower exports nationally, increased rail haulage charges for containers and the removal of an abatement in service tax available for container transportation by rail.
According to the company, its wind and small hydro assets performed largely in-line with expectations but that, for the large hydro, Shree Maheshwar Hydel Power Corporation Limited (SMH), a lack of unity amongst stakeholders continues to mire the project in uncertainty.
In terms of the company’s energy assets, it says that India Hydropower Development Company’s (IHDC’s) overall production was higher than the same period last year despite a poor monsoon. They say that this was the result of higher production at Bhandardara I in Maharashtra, the resumption of full generation at Darna and increased production at Panwi due to fewer plant shutdowns from silting. IHDC received formal approval from the Government of Himachal Pradesh to enhance the capacity of the Raura project from 8 MW to 12 MW and has correspondingly received approval for an additional loan to cover the costs associated with enhanced capacity. The company says that the project remains on-track for commercial operations to commence in 2017.
However, overall production at Indian Energy Limited (IEL) was lower which the company attributes to weaker monsoonal winds as well as continued grid related issues at the Theni project. IEL has two operating wind farms, Theni, in Tamil Nadu, and Gadag, in Karnataka. The company says that Theni has continued to suffer grid availability issues that impact generation. Availability was around 76% during the year against 84% in the prior year. The managers say that the state government is strengthening grid infrastructure but the progress of the upgrades has been slow and grid curtailment has been a persistent frustration. They say that, despite these issues, Theni signed agreements with nine new industrial customers whilst slightly lowering its tariff reflecting lower thermal tariffs. They balso say that, 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 but that IEL has retained its investment grade credit ratings for both projects.
The company says that there was no tangible progress at SMH. During the first half of the fiscal year, the promoter provided a detailed proposal to the lenders from a potential equity investor, which indicated their willingness to provide financing to complete the project as well as to ultimately refinance the principal value of the outstanding debt. The company says that the project’s largest lenders, Power Finance Corporation Ltd (PFC), were unwilling to entertain the proposal and instead issued a notice of conversion of a portion of the sub-debt to equity and notified their intention to invoke the pledge of the promoter’s shares, without the support of all stakeholders. The company says that a meeting held in March was inconclusive but that PFC’s successful invocation of pledged shares, as well as the conversion of debt to equity, would have the effect of reducing IIP’s direct and indirect interest in SMH to 31.7% from 35.4%.
Infrastructure India sees NAV unchanged during half year : IIP