BSEL Ajmam exposure unaffected by Dubai debt crises

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In an interview with CNBC-TV18, Dharmendra Raichuria, Managing Director of BSEL Infrastructure , spoke about the company's projects.

Here is a verbatim transcript of an exclusive interview with Dharmendra Raichuria on CNBC-TV18. Also watch the accompanying video.

Q: Could you shed some light on any exposure you had in Dubai or other similar markets in the Emirates?
A: We have exposure in UAE rather than in Dubai. We have exposure in Ajmam and it is hardly affected because of this Dubai's downtrend and default. In terms of percentage, hardly 10% of the market has been affected because of this.

Q: A lot of LCs, bank guarantees things like this originate out of Dubai, which means people doing business in two different places South Africa and India, run through Dubai. Have you seen any impact there like banks saying I don't want Dubai Banks guarantee or a letter of credit? Have you started to see that?
A: No, in fact, we don't seek any financing because all the projects have been financed are on funds. So we don't seek any baking facility in Dubai as such.

Q: What is your order book looking like now? Where are you seeing traction coming in? At what rate are you borrowing and is it making any sense to take these projects, even though a lot are available?

A: We are into real estate rather than infrastructure projects. We normally acquire the land and give it to the tanki contractor on a fixed price basis. So variation in the input cost or in infrastructure cost will not affect us because all fixed price contract is handed to the contractors and the land has been acquired. We are developing residential complex in Ajman. 

Q: You have 50% of your revenues coming from Ajman projects. Is there any delay in the payments that are coming from those projects? How much of your money is invested there and when do you expect all that to be returned?

A: We have 50% of exposure to Ajman. It is an 8 million sq ft development and long-term project of around five years time from the start of the project. Total investment in the project is around USD 65-70 million till date for possession of land and development.

Q: Has there been defaults over there? Are you expecting more such defaults?
A: As such, there are no defaults. Defaults that customers have started late payments, this default in Dubai has happened two days back. However, there was nervousness in the market which we were facing since last 12 months. It is not overnight for UAE. So since last 12 months, we are facing 10-12% delay of payments from the customers.

Q: Are these Ajman projects in a special purpose vehicle (SPV)? Are they straight in BSEL infrastructure? How much debt is pending if any on these projects and if there is delay in payments then what happens? What kind of money have you risked there or is sitting there?
A: Firstly, there is not debt on the project. It is all financed through our own. It is in name of BSEL Infrastructure. Our wholly owned subsidiary company is our 100% child and there is no financing from any of the bank. The defaults coming from the customer is hardly 10%. With 90% of regular payment from the customers, we are running the projects. There maybe a delay of three-four months but not much.