IRCON INTERNATIONAL

Gaining from Railway’s infra plans

Incorporated in 1976 by the Ministry of Railways as Indian Railway Construction International Ltd and now known as Ircon International, this public sector enterprise is an integrated engineering and construction company specializing in major infrastructure projects. Originally, the primary charter of the company was the construction of railway projects in India and abroad. Now, it has diversified into other transport and infrastructure segments and has expanded its scope of operations globally. By now, Ircon has completed 1,650 major infrastructure projects in India and over 900 major projects in more than 31 countries globally.

The company has been faring well on the financial front. During the last five years, its sales turnover has grown at a CAGR of 19 per cent and its compounded profit growth at a rate of 12 per cent. The company has made two bonus issues in the ratio of 1:1 – in 2004 and 2021 — and has been paying handsome dividends, the rate for the last year (fiscal 2023) being 90 per cent. What is more, prospects for the company going ahead are all the more encouraging. Consider:

• Overall, more than 95 per cent of the company’s business is from construction, which includes railways, highways and roads, while the remainder is from infrastructure development. The increasing government thrust on infrastructure – particularly in the railways sector — has opened up significant opportunities for Ircon to secure more business. The Union budget of 2023 has maintained the thrust on capex spending with Rs 2.4 lakh crore on the railways and Rs 2.7 lakh crore on road infrastructure. This is highly positive for Ircon as the four-decade-old company is involved in infrastructure construction projects of roads, bridges, highways and railways, in addition to other related works, and that is why it gets all the railway projects on a nomination basis. As per its vision, Indian Railway has planned to construct an average of 2,500 km of new lines per year. Investments in key segments such as new lines, gauge conversion, doubling, track renewals and electrification are estimated to account for over Rs 3 trillion and Ircon will be the major beneficiary. Rs 10,000-Cr AIM
• The company has made rapid strides on the financial front. During the last 12 years, its sales turnover has expanded over two and a half times – from Rs 3,147 crore in fiscal 2011 to Rs 7,380 crore in fiscal 2022, with operating profit moving up from Rs 365 crore to Rs 587 crore and the profit at net level shooting up more than two and a half times – from Rs 237 crore to Rs 592 crore. During fiscal 2023, the sales turnover is expected to reach the Rs 10,000-crore mark with a corresponding improvement in earnings. The company’s financial position is very strong, with reserves at the end of March 2022 standing at Rs 4,428 crore – almost 24 times its equity capital of Rs 188 crore — that too after two liberal bonus issues in the ratio of 1:1, both in 2004 and 2021. The pace of growth is expected to continue unabated in view of the robust volume growth ahead and a weighty order book.

In line with all railway stocks which have turned distinctly buoyant, Ircon International has also shot up over 107 per cent in 2022 and a further 43 per cent in 2023 so far. From its 52-week low of Rs 34 (face value Rs 2) the scrip has skyrocketed to Rs 90 before settling at around Rs 78/ 79. In terms of technicals, the relative strength index (RSI) of Ircon stands at 91, signaling that it is strongly overbought. Technically, its shares are trading higher than the 5-day, 20-day, 50-day, 100-day and 200-day moving average. Discerning investors should add this stock in their portfolio as its future prospects are highly promising.

PERFORMANCE INDICATORS (Rs. in crore)

CAPACITE INFRA PROJECTS

Specialist in high-rise buildings

Incorporated in 2012, Capacite Infra Projects is a building construction company having a presence in MMR, NCR, Goa, Gandhinagar, Hyderabad, Chennai, Kochi and Pune, with a specialization in construction of super highrise buildings. It is a focused engineering, procurement and construction (EPC) company that provides end-to-end construction services for buildings and factories across sectors, including design and business services. It focuses on residential, commercial and institutional buildings.

The company provides EPC turnkey solutions for residential, high-rise, super-tall, speciality buildings and urban infrastructure. Recently, it has ventured into the development of public sector projects.

The company has gone from strength to strength on the financial front. Its sales turnover during the last 10 years has expanded from Rs 18 crore in fiscal 2013 to Rs 1,335 crore in fiscal 2022, with the profit shooting up from minus Rs 3 crore (a loss of Rs 3 crore) to a profit of Rs 213 crore and a net profit of Rs 44 crore in striking contrast to a loss of Rs 4 crore. Its financial position is very strong, with reserves at the end of March 2022 standing at Rs 961 crore, over 14 times its equity capital of Rs 68 crore. What is more, prospects for the company going ahead are quite promising. Consider:

• The company has won a prestigious large order worth Rs 224 crore in residential projects for the Raymond real estate unit.
• Subsequently, in April this year, the company received an order worth Rs 478 crore from Godrej Residency Pvt. Ltd. to construct residential buildings in Mahalaxmi, Mumbai.
• These large, prestigious orders have given a big boost to the market sentiment. The declining trend in the share price of Capacite was on account of the downgrading of CIL by rating agency India Ratings and Research (Ind-Ra) from IND BBB+ to IND BB+ for the period September 13, 2022 to March 28, 2023, which led to a sharp fall in the stock price of over 40 per cent. However, the two large contracts – from Raymond and Godrej – have helped in changing the market sentiment from negative to positive. Not only has the negative trend in the market price been arrested but there has been a distinct recovery also.

ROBUST ORDERS

• At the end of last year, the company was sitting on a robust order book worth Rs 9,760 crore, providing a strong revenue visibility of 7.4 times the fiscal 2022 revenue. According to India Ratings and Research, public sector orders accounted for 67 per cent of the order book, with the balance coming from the private sector. The management remains confident in delivering projects within the stipulated timeframe and satisfying customers.

Realising the brighter prospects for the company, Mukul Prasad Agrawal, an ace investor, accumulated 13 lakh equity shares of the company, or a 1.91 per cent stake in the company’s equity capital as on March 31, 2023. His investment in the company works out to Rs 17.1 crore.

The company entered the capital market in September 2017 with an IPO to raise Rs 400 crore at a price of Rs 250 per piece. However, thanks to the pandemic and the Ind-Ra negative rating, the share price tumbled to Rs 98. However, the strengthening order book has revived investor sentiment and the price has recovered to Rs 166. Of course, it is still lower than the issue price and hence is quite an attractive price level. Discerning investors can accumulate these stocks with a long- term perspective.

PERFORMANCE INDICATORS (Rs. in crore)