Piling up bitumen

With IRB InvIT at a 52-week low, chairman Virendra Mhaiskar buys 7.5 million units worth ₹570 million

Ever since listing, IRB InvIT has only slid south. Q4FY18 was particularly bad. Post the intense selling, chairman and managing director of IRB Infra Virendra Mhaiskar bought 125,000 units for around Rs 9.8 million. When this market purchase was brought up by an analyst during the Q4FY18 concall, Mhaiskar said, “I personally believe that the price is in deep value and whatever little liquidity I had I have used it to buy units... IRB has also bought units worth Rs 500 million in last two months.”

But the attempt to arrest the slide failed as the price of IRB InvIT has continued to plunge. After listing at Rs.102 in May last year, the InvIT dropped to Rs 75 on September 11. With the price continuing to dip, Mhaiskar has once again stepped in. In a bulk deal, he bought 7.5 million units worth Rs 570 million on September 14. Post the transaction, his personal stake in the InvIT has moved up from 0.02% to 1.31%.

Despite a drop in traffic and adverse regulatory change, IRB InvIT has continued to deliver on its promise of Rs.12 distribution per unit. Even in the first quarter of FY19, IRB InvIT declared a distribution of Rs.1, 770 million to the unitholders, at 92% of Net Distributable Cash Flow (NDCF) for the quarter. This translates into a payout of Rs.3.05 per unit, keeping in line with guidance of Rs 12.3 per unit total distribution for FY19.

In Q1FY19, IRB InvIT’s revenue and Ebitda rose to Rs.3.05 billion and Rs.2.5 billion respectively from Rs.2.99 billion and Rs.2.45 billion in Q4FY18. While IRB InvIT has promised 12% yield, concerns over whether it can continue to deliver on the promise still persists. Analysts say that NDCF is a factor of traffic growth and the Wholesale Price Index and there is no guarantee that assets incorporated in the InvIT would continue to grow at 10%.

Adding to IRB’s woes, Pathankot-Amritsar and Jaipur-Deoli are witnessing weak traffic revenue after National Green Tribunal imposed a sand-mining ban near the highway. IRB InvIT had acquired Pathankot-Amritsar by paying Rs 15.50 billion, which is equivalent to one-third of the amount it had received from unitholders. Analysts now fear that the distributable surplus is likely to fall. As the unit price continues to plunge, sponsors have increased their stake from 15% in June 2017 to 16.04% in June 2018. Mutual funds continue to keep their faith, having raised their stake from 9.06% to 11.12%. Foreign portfolio investors though have reduced their stake from 39.22% in Q1FY18 to 36.88% in Q1FY19.