June 3: The Indian infrastructure companies have hit a rough patch in the January-March quarter as their earnings slipped on the back of margin pressure and higher interest costs.
“Slippage on the earnings front for most companies was due to margin pressure on account of high commodity prices and spiraling interest cost. This resulted in disappointing earnings for Q4 FY2011 despite decent top-line growth,” says a report by Angel Broking.
An analysis of 10 infrastructure construction companies showed that there was an average dip of 170 basis points on quarter on quarter basis. While Sadbhav Engineering, L&T, JP Associates Ltd and Madhucon Projects Ltd posted a rise in earnings, CCCL, HCC, IRB Infra, IVRCL, NCC and Simplex Infrastructure have reported a dip in its quarterly earnings.
During the quarter, the RBI has increased the repo and reverse repo rates to tame the rising inflation. This rise has lead to higher cost of funds. The companies have also seen margins under pressure due to the increase in commodity prices – cement by 20 per cent, steel by 10 per cent and bitumen by 15 per cent – in the last three to four months. Some construction companies have also hit by the increasing share of fixed price orders that does not have an option of price escalation.