Atria Convergence’s FY18 net profit jumps 10.2% to Rs 201.2 cr

MUMBAI: Fibre broadband player Atria Convergence Technologies (ACT), which provides broadband service under ACT Fibernet brand, has achieved a 10.2% increase in its net profit for FY18 at Rs 201.2 crore as against Rs 182.57 crore in FY17.

Profit before interest, lease, depreciation, and tax (PBILDT) increased 5.32% to Rs 531.9 crore compared to Rs 503.6 crore. The company’s revenue increased 12.93% to Rs 1298 crore from Rs 1149.3 crore in the previous fiscal.

ACT is a leading broadband service provider in South India. It currently provides broadband services in 16 Indian cities with services in Warangal, Madurai, Lucknow, Jaipur and Ahmedabad being recent additions.

While entry into Tier II and Tier III cities has supported the growth in the subscriber base from 1.15 million in FY17 to around 1.39 million as on date. Average revenue per user (APRU) levels have declined from Rs. 891 per month to Rs. 760 per month over the same period.

While declining APRU levels have had a negative impact on the company’s operating profitability, the same has been supported to an extent by cost advantages arising from economies of scale thus, resulting in only a marginal decline in PBILDT margins from 43.82% in FY17 to 42.13% in 9M FY19.

Care Ratings had recently reaffirmed the long-term bank facilities of ACT worth Rs 309.9 crore with Care A+; Stable rating.

The rating agency noted that the reaffirmation of rating assigned to the long-term bank loan facilities of ACT factors in strong management backed by established private equity funds, comfortable financial risk profile characterised by comfortable capital structure and robust operational performance in FY18 translating into improved profitability and debt coverage indicators.

However, the agency stated that the above rating strengths are tempered by increasing competition and capital intensive nature of broadband internet industry. The company’s strength continues to be exposed to technology risk typically associated with broadband internet business.

The ability of the company to withstand the increasingly competitive business environment in broadband internet business and maintain low leverage profile despite higher capex plans remains the key rating monitorable.

ACT is currently led by CS Sundar Raju and Bala Malladi who have rich experience in the broadband business. Further, the presence of reputed private equity investors, who have supported the business operations of the company in the past through continuous equity infusions provides support to the ratings.

As on 31st March, 2018, Argan (Mauritius) Limited and TA FCI Investors Limited held 57.05% and 37.71% stake in the company respectively.

Care also noted that the capital intensive nature of broadband business coupled with increasing foray of the company into new cities has led to overall debt increasing to Rs. 394.66 crore in FY18 from from Rs. 281.93 crore in FY17.

However, healthy accretion to reserves has kept the overall gearing of the company at a comfortable level of 0.54x as on March 31, 2018. The financial risk profile is further supported by unencumbered cash and bank balance of Rs 199.6 crore as of March 2018.

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