High debt, working capital continue to keep HCC financial performance subdued

MUMBAI: Hindustan Construction Company, one of the major infrastructure companies, has seen a subdued performance over the last few quarters due to high debt and working capital. On standalone operations, in the September 2012 quarter, however, the company has been able to contain its losses. The company s losses came down to Rs17 crore from Rs40 crore in the last year s September quarter.

The company has been able to contain its losses is due to growth in its other income , which includes interest earned. For the quarter under review, the company s net sales showed growth of 4.1% to Rs864 crore on a year on year basis.

After grappling with operational challenges for many quarters, one of the breathers for the company has been its going for corporate debt restructuring. The corporate debt restructuring has helped the company to reduce its interest expense by 4.1% to Rs130 crore in the September 2012 quarter on a year on year basis.

At present, the company has an order book of Rs15084 crore, which is 3.77 times its standalone revenues in FY12. Although this present good revenue visibility, its profits would be subdued due to high debt and working capital. For investors, however, there is not much upside in the company s stock, which is quoting at a discount of 35% to the last one year s price, due to low earnings visibility.