Sadbhav Engineering expects to complete its mega projects, worth nearly Rs 2,000 crore each, in Maharashtra and Karnataka in about thirty months. Nitin Patel, ED, talking to CNBC-TV 18, says that the Rajasthan project will get clearance by the second or third week of March, and the Maharashtra project by the end of April.
Sadbhav Engineering expects to complete its projects in Maharashtra and Rajasthan, worth nearly Rs 2,000 crore each, in next thirty months. Both these projects were affected due to environmental clearances. Nitin Patel, ED, talking to CNBC-TV 18, says that the Rajasthan project will get clearance by the second or third week of March, and the Maharashtra project by the end of April. He expects revenue to start rolling in after 30 months, which will roughly be in fiscal year 2016.
The company has also bagged a third project from Rajsamand-Bhilwara. Patel says clearance for the company's Karnataka project is expected by the end of April.
Here is the verbatim transcript of the interview
Q: A couple of environmental clearances that has been pending for sometime now. Can you give us a status on the Rajasthan project?
A: We have already got environmental clearance for Shreenathji-Udaipur, and we expect that National Highway Authority of India (NHAI) will issue the appointed date by the second or third week of this month. But Solapur-Bijapuris is yet to get clearance, the scheduled date for which was November 28. We expect that it should get clearance by end of April.
Q: There are no forest clearances issues with the Rajasthan project?
A: The clearance is through for the Rajasthan project. We have got clearance from the environmental ministry also. The environmental ministry will give clearance only after forest clearance is procured.
Q: From what you are saying, by April end, both Rajathan as well as Maharashtra will get a requisite clearance. How soon will these projects come on stream?
A: The Rajasthan project will get clearance by the second or third week of March, and the Maharashtra project by the end of April. We will get the benefit of that project in FY14.
Q: What would be the benefit?
A: I mean we will see execution. As both projects are worth nearly Rs 2,000 crore each, so execution will definitely improve the company’s top-line.
Q: If you start construction now, when do you expect it to get over? Is it a build, operate, transfer (BOT) project? Will you start earning money when operations commence, or are you only a contractor?
A: We have to do the engineering, procurement and construction (EPC) work as of now. Thirty months is the period for completing construction of both projects. Only then will we be able to start earning revenues in the same.
Q: Will you earn revenues or only contracting fee?
A: We will get the revenue post construction, because Sadbhav Infrastructure Project Ltd is the 100 percent owner of both the projects. We are the developers as well as EPC contractor for both.
Q: Is it on a BOT term?
A: Yes, it is on BOT basis.
Q: What are you expecting the revenue rate at all to be after thirty months, which will largely be FY15?
A: In FY16-FY17, we should start getting revenues from both the projects. We are quite hopeful that both projects will generate good revenues because of the high commercial traffic carrying terrain.
Q: What are the margins you are making on these projects from a contracting-construction point of view? Will the margins suffer because you took some time to get clearance?
A: We make 12 to 13 percent at the EBITDA level in the construction phase, and normally around 16 to 18 percent during the operation phase from an investment angle.
Q: Which other projects are you bidding for?
A: We have won our third project, which is from Rajsamand-Bhilwara. That is also a NHAI project with a 30-year concession. We expect that financial closure will happen by the end of this month, and construction will start by the end of April. The fourth is a Karnataka state government annuity project. We are already the lowest bidder of the same, and are awaiting the letter of intent (LoI) for the project. Both projects cost around Rs 720 to Rs 730 crore each.
Q: When are you expecting the LOI on the Karnataka project?
A: The clearance has not yet happened, but we expect it by the end of April.