Altico from being a well-capitalized and low leveraged NBFC as of March 2019 has become a defaulter in just 6 months raising concerns in the credit markets on many fronts. The quality of the loan portfolios, the accounting policies and disclosures all come under scrutiny and the sudden departure of the Chairperson and the CEO this month raises further questions.
The underlying developers that consisted of Altico’s loan portfolio come under scrutiny and the overall banking and credit market exposure to such developers too will suffer. NBFCs lending to real estate developers and the real estate sector will face a liquidity freeze and drive the credit markets deep into a risk aversion zone. Clearly, this shows stress and liquidity issues still continuing in real estate sector. House sales across India witnessing steep fall due to weak demand and lower consumer spending. Due to the above mentioned reasons we would recommend our subscribers to sell Capacite Infraprojects.
Q1Fy20 Earnings Analysis:
Company has reported 3% (Y-o-Y) growth in revenue from operations to Rs. 411 million, EBITDA gained by 21% (Y-o-Y) and net profit surged by 5% (Y-o-Y) to Rs. 238 million. Net profit margin for Q1Fy20 remained flat on yearly basis.
As of September 2019, company had an order-book of Rs. 116 billion, which comprises 60% of private projects and 40% of government projects. Of the Order book, West India contributes 77%, South India contributes 15% and North India contributes 8%. Company is also planning to bid for affordable housing projects of bigger ticket sizes.
Capacit’e Infraprojects Ltd has well established processes to execute projects in an efficient and timely manner and also uses latest technology in construction planning ,which helps the project to last for longer time. Company management mentioned that company is working on growth of order-book & improvement of asset turnover ratio. Government initiatives such as Affordable housing for all by 2022, AMRUT (uban city renewal), Smart cities and RERA (Real Estate Act) will act as a catalyst for this company’s future growth. Affordable housing scheme entails an investment of USD 250- 260 billion each year till 2022 to achieve the objective.
Capacit’e Infraprojects clientele include Kalpataru, Oberoi Constructions Limited, The Wadhwa Group, Saifee Burhani Upliftment Trust, Lodha Group, Rustomjee, Godrej Properties Limited and Prestige Estates Projects Limited
Company has shown strong growth in revenues and profitability on a consistent basis. India’s rapid urbanization is an impetus to urban housing demand, which is expected to grow at 15%-18% CAGR due to shortage of houses. Nearly 35-37% of the population is expected to live in urban areas by 2021, which should drive demand for urban housing.
Rising disposable incomes and a larger share of households in higher income brackets have driven up consumers overall spending power. These trends have, in turn, altered consumption patterns, thereby driving the retail real estate segment’s growth.
Housing loan disbursements are expected to increase at 14-15% CAGR over the next two years (Source : RHP). Other factors driving disbursements include:
- Low current mortgage penetration
- Rising focus on affordable housing projects
- Faster loan sanctions
Valuations are also attractive as compared to its peers and the current order book is 4x times larger than the FY17 top-line.
10,080,000 equity shares represent 19.43% of the total outstanding equity shares before the issue. These Equity Shares have been pledged in favor of the lender JM Financial as security for a term loan of Rs. 300 million.
The company’s revenue has grown at a CAGR of 75% from FY14 to Rs. 11570 million in FY17. The EBITDA for the company has grown at a CAGR of 114% to Rs.1668 million in FY17. The Net Profit for the company has grown at a CAGR of 157% in last four years to Rs. 696 million. The company has an EBITDA margin of 14% and net profit margin of 6% as of FY17.
Debt to Equity ratio is 0.70 as of 31st March 2017.
Management of Capacit’e Infraprojects Ltd:
Mr. Deepak Mitra is the Chairman of the Company whose directorship term would be ending on 25th February 2018. Mr. Rahul Katyal is Managing Director.
Objective of the Issue:
The Fresh Issue
The net proceeds from the fresh issue will be utilized towards the following objects:
- Funding working capital requirements – Rs. 2500 million.
- Funding purchase of capital assets Rs. 520 million.
- General corporate purpose.
Capacit’e Infraprojects is a construction company focused on Residential, Commercial and Institutional buildings, which has an order book of Rs.40490 million as of 31st January 2017 comprising 56 ongoing projects.
The company predominantly operates in the Mumbai metropolitan region (MMR), the National Capital Region (NCR) and Bengaluru. Operations of the company are geographically divided into MMR and Pune (West Zone), NCR and Patna (North Zone) and Bengaluru, Chennai, Hyderabad and Kochi (South Zone). As on January 2017, projects in the West Zone, North Zone and South Zone constituted, approximately 60.78%, 15.69% and 23.53% of its total projects, respectively.
Capacit’e Infraprojects clientele include Kalpataru, Oberoi Constructions Limited, The Wadhwa Group, Saifee Burhani Upliftment Trust, Lodha Group, Rustomjee, Godrej Properties Limited and Prestige Estates Projects Limited.
India’s construction industry spending is expected to be in the range of Rs. 23-24 trillion, translating into a CAGR of 10-12%, way faster than a 2-4% rate observed between 2012-13 and 2014-15, when an economic slowdown and attendant sluggish demand had stalled India’s investment cycle. Over the next five years, infrastructure projects will provide the maximum construction opportunity.
As per CRISIL Research estimates, 10.9 billion square feet (“sq ft”) of planned (including current planned residential supply as well as expected launches in the next five years) residential real estate supply is in urban areas. Demand will be driven by growing population and rapid urbanization. India’s population increased nearly 18% during 2001 to 2011 and is expected to grow another approximate 16% during 2011 to 2021, reaching 1.4 billion. On the other hand, a rise in the share of urban population from 28% in 2001 to about 31% in 2011 has also been spurring housing demand.