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- Death by a thousand cuts – Infrastructure India NAV takes another hit
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:
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.]