>RELIANCE INFRASTRUCTURE LIMITED (HDFC SECURITIES)

Q1FY10 Result Update August 03, 2009

RIL is present across the entire power chain – generation, transmission and distribution. Further, it also has a presence in EPC (engineering, procurement and construction) projects for the power sector and in Infrastructure projects (Metros, Roads and Real Estate). Reliance Infrastructure Ltd (RIL) came out with its Q1FY10 results. We attended the Q1FY10 conference call and given below are the key takeaways.

For Q1FY10, RIL reported net income of Rs. 2446.3 cr, 6.8% higher y-o-y, on the back of decent growth reported in the electrical energy segment and increase in EPC activity. The electrical energy segment grew by 5.2% y-o-y while the EPC segment recorded growth of 27.1% y-o-y. Operating margins have held steady at 12.24%. Other income jumped 121.5% y-o-y mainly due to higher interest income and forex gains. Rise in other income helped offset higher interest outgo, increase in depreciation charges and a higher tax rate. RIL reported a PAT of Rs. 316.6 cr, 25.4% higher y-o-y. It reported an EPS of Rs. 14.1 for the quarter on equity of Rs. 225.3 cr. On standalone basis, the net worth of the company stood at Rs. 12,172 cr and book value per share at Rs. 540 as on June 30, 2009. At the CMP of Rs. 1185.1, RIL is trading at 2.2x its standalone book value.

Key highlights of the Q1FY10
■ RIL reported net income of Rs. 2,446.3 cr in Q1FY10, 6.8% higher y-o-y and 1.5% higher q-o-q. The company has not declared separate standalone Q4FY09 results and thus the same have been derived. RIL has reported an increase in sale of electricity to Rs. 1,855.3 cr (up 5.2% y-o-y and 27.7% q-o-q) and an increase in the EPC business to Rs. 551.9 cr (up 27.1% y-o-y and down 37.8% q-o-q) in Q1FY10. The increase in electrical energy sales is due to higher quantum of power purchased during the quarter and increased generation from the Dahanu, Samalkot and Goa power plants. However, the segment classified as others, which mainly consists of other operating income, like maintenance of streetlights etc fell to Rs. 39.1 cr, down 57.6% y-o-y and 43.8% q-oq. This is due to the booking of some one time orders carried out in those respective quarters where in revenue is booked on an aggregate basis.

■ Other income increased to Rs. 244.2 cr, up 121.5% y-o-y, which in turn helped boost bottomline despite an increase in interest, depreciation and tax costs. The other income is mainly composed of interest income and forex gain. RIL has cash and cash equivalents of over Rs. 9,000 cr.

■ Operating margins remained flat on a y-o-y basis, 12.24% in Q1FY10 vs 12.48% in Q1FY09. On a q-o-q comparison, margins have expanded by 577 bps. In Q4FY09 margins had fallen sharply primarily due to an increase in other expenditure. In Q4FY09, RIL had provided for certain contingencies (Rs. 320 cr) towards regulatory matters (tax disputes, doubtful receivables in the EPC segment, electricity business and other corporate matters).

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