Mar 20, 2013, 04.29 PM IST
Nitin Patel, ED, Sadbhav Engineering, says that recently the company as emerged as a successful bidder for the two lane project in Tamil Nadu. The project is based on annuity basis. The company has also submitted another bid for Rohtak-Hissar project for Rs 1300 crore, the results for which is expected today evening.
Out of the 12 projects, 8 projects are now operational and the company expects the ninth project to be operational by June. Going forward, depending on the equity and investment commitment the company may go for asset securitization.
Below is the edited transcript of his interview to CNBC-TV18.
Q: It is understood that your company has emerged as a successful bidder in NHAI's two lane Tamil Nadu project. By when do you plan to start construction on the project? What will be the total cost and your profit margins?
A: This is a two lane road project based on annuity. The existing highway has width of seven meter which needs to be extended to 10 meter and the length of the project is 80 kilometers. We estimate the total project cost to be around Rs 400 crore and it will take around two years to complete the job. We have received a concession period of 15 years. So, for the remaining 13 years we will receive annuity amount from NHAI as per the terms of concession.
Q: How much margins do you make upfront?
A: In normal course, we expect to make around 12-13 percent at EBITDA level at EPC value and around 16-18 percent as returns on investment. This is the normal bidding criteria for us.
Q: What has been the activity from NHAI side on both build-operate-transfer (BOT) and EPC. How does the order pipeline looks? Are they looking aggressive in awarding orders?
A: On cash contract front, NHAI invited around 8-9 tenders during last month. The response was quite good and NHAI received bidders at almost 20-22 percent lower then their estimate cost on the cash contract front. On BOT front, only one tender went to IL&FS Transportation Networks (India) Limited (ITNL) which is of Barwa Adda to Panghat.
We have received annuity for the second project. Today, we have submitted a bid for Rohtak-Hissar project for Rs 1300 crore, the results is expected to be out by today evening. Five entities have submitted their bid including us. Another 2-3 bids will be submitted before March 31, the central government and the Planning Commission will give approval for rates for the projects. Later, based on that, NHAI will come for the bidding and particularly in BOT and annuity front.
Q: Do you have any plans to reduce debt, are you securitizing any project, your debt stands at over Rs 3000 crore?
A: Out of the 12 projects that the company has, 8 are now operational and we expect the ninth project to be operational by June. So, in terms of the operational projects the number of projects is high and also the revenue parameter seems reasonable.
So, based on our requirement of the equity and investment commitment we will plan to securitise one or two assets. We have started that process but we require equity investment over the period four years from now so the planning will be done as and when needed.
Sadbhav Engg stock price
On December 06, 2013, Sadbhav Engineering closed at Rs 87.45, up Rs 0.05, or 0.06 percent. The 52-week high of the share was Rs 140.90 and the 52-week low was Rs 52.00.
The company's trailing 12-month (TTM) EPS was at Rs 3.93 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 22.25. The latest book value of the company is Rs 54.98 per share. At current value, the price-to-book value of the company is 1.59.
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