Infrastructure India (IIP) has announced its final results for the year 31 March 2020, during which its NAV has taken another hit. As at 31 March 2020, the IIP’s total net assets were £124.1 million in total and 18.2p per share, from £149.1 million in total and 21.9p per share as at 30 September 2019. IIP says that the primary drivers of the movement in NAV were tax reforms, including cuts to corporate tax, and a lower risk-free rate, but that these positive effects were offset by a weakening of the Indian Rupee against Sterling and revisions to business assumptions and completion schedules to reflect the impact of COVID-19 on both construction and operations at Distribution Logistics Infrastructure Limited (DLI). IIP has provided the following key highlights:
- Value of the Company’s investments was £262.0 million as at 31 March 2020 (£259.2 million 30 September 2019; £179.4 million 31 March 2019).
- Net Asset Value decreased to £124.1 million as at 31 March 2020 (£149.1 million 30 September 2019; £106.0 million 31 March 2019).
- NAV per share was 18.2p as at 31 March 2020 (21.9p September 2019; 15.6p March 2019).
- Movement in the value of the Company’s investments as at 31 March 2020 was driven by favourable changes in the Indian tax regime and a decrease in the yield of benchmark Indian government 10-year bonds, which serves as the risk-free rate in asset valuations. These positive impacts were offset by a weakening of the Indian Rupee against Sterling towards the end of the period and by revisions, as a result of the impact of COVID-19, to business assumptions and completion schedules on both construction and operations at IIP’s largest asset, Distribution Logistics Infrastructure Limited (DLI). Net asset value as at 31 March 2020 also reflects the accrual of interest on the Company’s debt facilities.
Comments from Sonny Lulla, CEO of IIP
“The Covid-19 pandemic in India resulted in a national lockdown followed by localised restrictions which has had a material impact on all industrial activity in the country. It is likely that there will be ongoing volatility in all markets as demand, which is currently depressed, improves and container bottlenecks unwind. This has understandably had a negative impact on trading for IIP’s investee companies. However, for IIP’s assets, in particular DLI, the lower corporation tax and monetary initiatives announced by the Government of India will be beneficial for future cash flows which have helped underpin valuations. Despite the extraordinary upheaval, we remain confident that the longer term fundamentals and prospects of the logistics market in India remain strong.”
[QD comment: For IIP, these results seem to be just another case of death by a thousand cuts. While there is no doubt that India has suffered from the covid-19 pandemic, and this has depressed the value of the rupee, it is difficult to see how the virus would have had a significant impact on DLI’s construction and operations at this early stage. It will be interesting to see if management decides to extend another loan to the company. Either way, it seems to be edging slowly closer to insolvency.]