52 week flop: Lanco Infratech

The year 2011 so far appears to be that of woe for Lanco Infratech, a private power producer-cum-contractor.

For starters, much of the 66 per cent erosion the stock price has suffered inthe past year has happened only from January.

It's subdued financial performance did not reflect its large capacity additions, though this was partly due to change in accounting policies.

Poor performance was followed by a massive law suit, which took the market completely by surprise.

With an installed capacity of 3,287 MW, Lanco became the largest private power utility this year. Yet, it failed to impress the market due to high leverage, a factor which usually drags on financials in a rising interest rate scenario.

Added to that, uncertainty pertaining to domestic fuel for a few projects and a fall in merchant prices leading to low PLFs (Plant Load Factor) served to worsen troubles. Lanco's debt-equity ratio as of March 2011 stood at 4 times.

Then last month, Perdaman Chemicals & Fertilizers, an Australian urea manufacturing company, filed a lawsuit against Lanco.

At Rs 16,733 crore, the lawsuit is three times the market value of Lanco.

Uncertainty on the costs expected to be incurred on this further fuelled the stock's slide. The stock is currently trading at less than book value.

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