HIGHLIGHTS OF THE QUARTER

Robust execution continues, marginal miss on EBITDA/APAT: JKIL 3QFY20 revenue at Rs 8.01 bn was in
line with our estimates with EBIDTA at Rs 3.18bn. EBITDA margins contracted at 0.4 bn YoY to 16 % with
32.29 %/29.72 % YoY/QoQ decrease in employee expenses due to recruitment at higher managerial
positions. However, EBIDTA margins are expected to normalize at 14-15% range for FY21E/FY22E as
recently awarded projects, in preparatory stage, start contributing to revenue as well as margins. APAT
for the quarter came in at Rs 218.79 mn.

Healthy order book

Order inflows in-line with FY21E guidance:

The order inflow target of JKIL during FY20E was Rs 45bn and the Company has already won orders
worth Rs 43bn, with ordering activity to pick up largely this quarter onwards. The order backlog is robust
at Rs 140 bn (3.9x FY21E Rev Estimate). While JKIL envisages muted Q1FY21 bidding, it may surpass
FY22E order inflow guidance upon award of L1 Rs 10bn it bid in Q3FY20. The order inflow target of JKIL
during FY21E was Rs 15 bn and the Company has already won orders worth Rs 4 bn.

Improvement in leverage:

The D/E as of 4QFY20 stands at 0.36x vs 0.41x as of 3QFY20. The gross debt for the company is Rs 6.23
bn, marginally down from Rs 7 bn at the end of 3QFY20. With no significant capex planned during the
FY21E/FY22E, we expect the D/E ratio to be maintained in 0.39-0.42x range. Fund-based/Non-fund
based limits utilization remains moderate at 70%. On the flip side, it has ₹4.95b in cash leading to net
debt of about ₹1.28b.

Order book exposed to geographic concentration risk:

Maharashtra accounts for over 70% of JKIL’s order book which exposes it political risks since it deals
with a lot of government projects. However, we derive comfort from continuing payments from the new
government in charge, and ongoing progress on all projects with no impending cancellations. We expect
a slower growth of government projects due to the current pandemic situation.

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Looking at its net debt to EBITDA of 0.27 and interest cover of 5.9 times, it seems to us that J. Kumar
Infraprojects is probably using debt in a pretty reasonable way. But the interest payments are certainly
sufficient to have us thinking about how affordable its debt is. J. Kumar Infraprojects grew its EBIT by
4.6% in the last year. Whilst that hardly knocks our socks off it is a positive when it comes to debt.
There’s no doubt that we learn most about debt from the balance sheet.