IRB Infra shares decline 2% as shrinking margin keeps investors worried

Shares of IRB Infrastructure Developers, one of India’s leading road construction companies, were down 2 percent on February 14, despite the company’s strong financial results for the quarter ended December 2022.

Shares of the company gained over 16 percent in the past three months, but investors seemed to be concerned about margin contraction.

At 11:24am, shares of the company traded 1.3 percent lower at Rs 287.30 on the BSE.

IRB Infra’s operating margin, also known as EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) margin for the quarter was at 49.2 percent, down from 57.7 percent in the same period last year, leading to the negative reaction in trade today. The company’s revenue and net profit saw strong growth in the quarter.

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Revenue was up 18 percent on-year at Rs 1,514.14 crore, with the construction segment driving the overall revenue growth. The segment saw a strong 24 percent growth on-year, reaching Rs 97,758.63 crore in the December quarter.

While the revenue growth was impressive, there were significant cost increases for the company. Road work and site expenses soared 70 percent YoY in the reporting quarter, while employee benefit expenses increased by 55 percent and depreciation costs rose 12 percent. Nonetheless, IRB Infra’s net profit jumped a substantial 95 percent to Rs 141.36 crore.

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IRB Infra’s financial results indicate that the company is well-positioned for growth in the road construction sector. While the margin contraction may have spooked investors, its strong revenue and net profit growth show that it is making the right strategic investments.