Profits tumble at Gupta’s InfraBuild in September quarter

It reported a 16 per cent drop in net profit after tax of $239.6 million in the 12 months to the end of June and revenues of $5.69 billion, down 5 per cent on the previous year. But in a segment in the bond offer memorandum titled “Recent Developments”, the company said its “unaudited preliminary” financial information for the three months ended September 30 showed that profits had dropped faster.

It had been triggered by a slowdown in demand and a drop in margins which is affecting all steel companies in the region, with the company warning that steel is an industry “cyclical in nature”.

“This decrease is primarily due to a downturn in steel market demand and other macroeconomic factors which manifests as a 6 per cent reduction in steel sales volumes for Q1 FY2024 compared to Q1 FY 2023, with a reduction in steel product spreads and margins, in line with the trend in US and Asian steel and scrap indices between these periods,” the memorandum read.

Mr Gupta’s empire has been under significant financial pressure since the collapse in 2021 of his main financier, Australian banker Lex Greensill’s Greensill Capital. He has been forced to refinance up to $5 billion in funding.

Potential investors are attempting to work out just how much of a risk they might be taking. The pricing of the bonds was finalised on November 10, with an annual coupon of 14.5 per cent. In a statement, the company said this reflected “broader confidence” in the group. Interest will be paid to investors in May and November of each year, running up until 2028.

InfraBuild in the offer memorandum does outline the risky road ahead.

“The perception that we may not be able to continue as a going concern may make it more difficult to operate our business due to concerns about our ability to meet our contractual obligations and to raise financing in the future, if necessary, which may materially adversely affect our business,” it reads.