CRISIL lowers fair value of KNR Construction

MUMBAI: In its recent research report, CRISIL lower the fair value of KNR Construction citing lower than expected revenues and net profits in the quarter ending march 2012.

However, CRISIL maintained that due to a strong order book and efficient working capital management, the company has a healthy revenue visibility. It has set a fair value of Rs 158 as against a previous fair value of Rs 182 per share.

Hyderabad based KNR Construction is a small sized construction firm catering to roads, irrigation and urban infrastructure segment. Its performance in FY12 was not worthwhile due to cost escalation on one of the projects and provision for bad debts.

As a result, on a y-o-y basis, its net profits declined by 10% to Rs 51 crore in FY12. In FY12, the company completed Bijapur-Hungund (Karnataka) road project for Sadbhav Engineering 328 days ahead of schedule. The management expects a completion bonus of Rs 16 lakhs per day.

Going forward, looking at the previous execution track record, the FY12 earnings seems to be an aberration. The company at present has an order book of Rs 3,000 crore, which are over three times its consolidated FY12 revenues. This gives a healthy revenue visibility for nearly three years. In addition, the company's working capital days are 43 days, which is one of the best in the industry.