Reliance Infrastructure's Q2FY19 results (Outperformer) - Logs out of Mumbai DISCOM Business
Q2FY19 result highlights
- RInfra has sold its Mumbai distribution business (which includes generation, transmission and distribution assets) at a total value of Rs138bn, core business is valued at Rs121bn and balance is working capital of Rs3bn and regulatory assets of Rs12bn (which will be available to Adani Transmission as of end Aug 2018). Excluding regulatory debt of Rs35bn, the deal implies a value of 2.6x of the regulated equity. RInfra has utilised entire proceeds of Rs138bn to reduce the standalone debt. Post the deal, the standalone debt has reduced from ~Rs160bn to ~Rs75bn
- As a result, the accounts have been restated to exclude the impact of Mumbai DISCOM business. Standalone revenues came in at Rs2.2bn, entirely consisting of EPC business.
- Other income during the quarter was Rs8.9bn, a sharp rise. Adj. PAT (standalone) came in at Rs6.8bn, ahead of estimates of Rs3bn.
- EPC order book has shown huge traction in FY18 and H1FY19 with an order inflow of Rs157bn and Rs77bn respectively, leading to 4x jump in order book (Rs280bn) in last six quarters.
- Reliance Power (40% stake) earned a profit of Rs2.5bn in Q2FY19 while Reliance Defence (30% stake) posted a loss of Rs3.6bn in Q2FY19 (both are associates). As a result, Cons. adjusted PAT for Q2FY19 was Rs5.2bn.
Key positives: Increase in order book to Rs280bn
Key negatives: Losses at Reliance Naval ; provision of Rs42bn against financial assets
Impact on financials: Maintain our earnings estimates for FY19E/ FY20E
Valuations & view
Reliance Infra as a part of its strategic reorientation plans has sold its Mumbai DISCOM business and is looking exit its other asset heavy business in order to focus on the capital-light, high RoE defence and EPC business. With the acquisition of Pipavav Offshore and acquisition of 35 industrial licenses, company has made foray into defence business. We believe the focus on defence equipment business, along with steady cash flows from the EPC businesses can create value for shareholders especially as the stock is trading very cheaply at 0.5x FY20 P/BV. Maintain Outperformer
Reliance Energy is primarily engaged in generation, transmission and distribution electricity in India. Co. is also engaged in engaged in a portfolio of services in the power sector in Engineering, Procurement and Construction (EPC) through a network of regional offices in India. Co. operates two business segments: Sale of Electrical Energy and Engineering, Procurement and Construction (EPC) and Contracts. As of Mar 31 2006, Co. had approx. 24.5 million consumers, consisting of approx. 300,000 industrial, approx. 3,400,000 commercial and approx. 21,300,000 residential consumers across an area that spans 124,300 sq. km. in Mumbai, Delhi, Orissa and Goa.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.