Scripscan:Ramky Infrastructure Ltd
cmp:280
Code:533262
Story:Ramky provides construction services in verticals such as water and waste water, irrigation, transportation, power, and building & industrial construction. The company started off as a construction service provider and in 2003 it has turned a developer of infrastructure projects. The construction business is the domain of Ramky Infrastructure and the development business is carried out through various subsidiaries or special purpose vehicles.About 30-40% of the total order book is from Andhra Pradesh.Recently, construction players executing irrigation projects in AP have been slowing on execution due to delay in payments.With the environment still fluid in AP the execution of the order backlog from AP might go off schedule affecting the revenue and profit.Considering streamlining its activities and concentrating on core business of construction and infrastructure development. If the company were to pursue this strategy, it may transfer some or all of its non-core businesses to appropriate entities within the promoter group.The non-core businesses that could be transferred include, among others, certain waste management projects that have been awarded to the company either alone or jointly with other entities within the promoter group, but which have been established, financed, solely operated and managed by such other entities within the promoter group.Promoter group companies such as Ramky Enviro Engineers and Ramky Estate & Farms have presence in the waste management business and real estate development activities, respectively. Even though Ramky Estates and Farms has executed a non-compete undertaking dated December 10, 2007, in favour of Ramky Infra, of late they have come together to execute realty projects where the former having greater share than Ramky Infra.Therefore, conflict of interest cannot be ruled out.The company is a relatively new entrant in the BOT road project business, having completed only one project with other one being delayed on account of want of possession of land.Hence, its execution capability has to be seen.The company is highly leveraged which can strain the financials of the company. Assistant Registrar of Companies, Hyderabad, sent a showcause notice in June 2010 to Ramky Pharma City alleging that it has provided financial assistance to its shareholders to fund the purchase its equity shares. The company has contended that it has erroneously quoted Ramky Pharma City instead of Ramky Infrastructure in the declaration of beneficial interest (i.e., Form 22B).Registered negative cash flow from operating activities for consecutive last three fiscals. The negative cash flow from operation stood at Rs 111.02 crore in FY 2010, Rs 191.12 crore in FY 2009, and Rs 201.38 crore in FY 2008.Valuation wise its at single digit PE which is comparable to its peers like patel and nagarjuna construction.At best a hold at present prices.
Friday, August 12, 2011
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