Lanco Infra may log out of Andhra property business

The sluggishness in real estate prices in Hyderabad is forcing a rethink on the part of Lanco Infratech, a listed engineering company. The firm may consider exiting the property development space altogether.

J Suresh Kumar, CFO, Lanco Infratech, said real estate prices are not moving anywhere in Hyderabad due to the political scenario in Andhra Pradesh and the company is keeping a close watch.

Lanco’s property business logged an operating revenue of Rs 167 crore with a loss of Rs 2 crore. The company announced a net profit of Rs 1,179 crore on the consolidated component of Rs 9,341 crore for the year ended March 2011. It derives a bulk of its revenue from power and construction projects.

[caption id=“attachment_17919” align=“alignleft” width=“380” caption=“The sluggishness in real estate prices in Hyderabad is forcing a rethink on the part of Lanco Infratech, a listed engineering company.Image Reuters. “]  [/caption]

More from Business

Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors How Indian fintech startups are driving Malaysia’s UPI-like digital payments revolution

The company is also looking to strengthen the resources division by buying coal mines. Suresh Kumar said the company has trained its sights on coal mines in Australia, Indonesia and Africa. “The preference is the coal in Australia,” he added. He did confirm that the company is keen on Australia’s Premier Coal, a mine valued at $400 million, according to a Reuters report .

In December, Lanco had acquired Australia’s Griffin Coal mines for A$750 million ($760 million), the Reuters report stated. For the year ended March 2011, the resources division, represented by Griffin Coal mine, generated a revenue of Rs 133 crore and an operating profit of Rs 35 crore. The mine in Australia has an estimated reserve of 1.2 billion tonnes and the company can extract up to 600 million tonnes for captive consumption. “It is better to have your own reserves than rely on frequently changing coal policy,” he said.

Impact Shorts

More Shorts

Tata Harrier EV vs Mahindra XEV 9e: Design and road presence compared

As Trump weaponises tariff, Fed sees a bigger worry: Not jobs, but rising prices in America

If you are a shareholder, better look out for these signs:

• Lanco is generating a cash flow of Rs 1,400 crore from its various operations. The company does not need external capital to fund growth.

• Lanco’s current order book of power and engineering projects stands at Rs 30,000 crore and all projects have achieved financial closure.

• The company is concerned about the financial closure for new projects, going forward.

• The average cost of borrowing on a consolidated basis is around 10.5%, and the company is not concerned about increasing interest rates, for now.

Banks/lawyers/consultants/private equity players need to watch out for:

• Lanco is primarily interested in coal mines in Australia and Indonesia. While Africa is not on the radar for now, the firm is not averse to looking for mines in that region.

• It could consider disposing of the property division.

• Lanco also services road development and water and irrigation projects on a build, operate and transfer basis. These are not Lanco’s core competency, but the company does not want to sell them off as of now. There is no plan to take any strategic action on this front. The two divisions have contributed Rs 367 crore to the order book. Suresh Kumar said the company is at an experimental stage with these projects.