Mid-cap mantra: Cash cushion gives Ramky Infra an edge over its peers

At a time when construction companies are grappling with paucity of funds -- both debt and equity -- Ramky Infra is placed better with healthy cash levels sufficient to fund its existing projects among small-sized companies. Ramky's successful initial public offering ( IPO), which hit the market last year, is the primary reason why the company is flush with funds.

Besides this, a healthy order book signals better revenue-visibility in the coming quarters. At present, the Hyderabad-based company has an order book amounting to 12,000 crore. This is over four times the revenues from the construction segment of its business.

This order book is well-diversified geographically, which minimises the risk of political and regulatory uncertainty of concentrated presence. Of the total order book, 35% the company's order book will be coming from the roads and bridges segment. this will ensure smooth execution as prospects of construction projects in other sectors get bogged down due to land norms and dependence on raw materials such as coal.

At present, the company has 16 BOT projects. Of these 16 projects, three are operational. These projects will boost the company's revenues in the coming quarters. The only grave concern that will continue to squeeze the company's margins is high interest rates. The company at present has an interest coverage ratio of 1.8 compared to 3.3 in the previous quarter. This means that it might face further pressure on margins due to high interest expense.

The company's working capital management is one of the best among its peers. The working capital days as of June '11 were at 120 days which were approximately the same in the previous financial year. It has consolidated debt of 1,100 crore as of June 31, 2011. In the past one year, its stock has fallen by 46%, while ET Construction has fallen by 38%.

suraj.sowkar@timesgroup.com