In an economy where high borrowing costs and hurdles in acquiring land are impacting infrastructure projects, companies like Ramky Infra are looking forward to announcement of policy reforms by the government
In an economy where high borrowing costs and hurdles in acquiring land are impacting infrastructure projects, companies like Ramky Infra are looking forward to announcement of policy reforms by the government. "If the government is keen on growth in the economy, it is crucial that problems affecting the sector are effectively addressed. The need of the hour is to fast-track implementation of delayed infrastructue projects," explains M Goutham Reddy, executive director, Ramky Infra.
Speaking exclusively to Moneycontrol.com, Reddy highlights that the increase in interest rates from 8 percent to 12 percent had begun to dent profits. Acquiring land in time was another stumbling block evinced by the numerous NHAI projects across the country that have have been put on the back-burner or shelved due to delays in having land at hand. In two seperate instances private-sector realty giants GMR and GVK recently exited out of mega highway projects citing regulatory hurdles.
"As the domestic economic condition continues to remain tough in the short-term, realty companies have no choice but to diversify their portfolios and looking at newer geographies to help maintain margins," reveals Reddy.
Below is an edited excerpt of Reddy's interview to Moneycontrol.com
Q: Now that you have achieved financial closure for the Agra-Etawah road project, when do you intend to start work? Considering land acquisition to be a fundamental problem, does FY13-end seem a plausible date for commencement ?
A: We will begin work on the project only after acquiring 80 percent of the land. Though the problems of acquring land remain, our progress in acquiring land for our Agra project has made us hopeful of commencing work in early-FY14. In the past, there have been occassions when developers along the with NHAI commenced work on a given project only to know later that the required amount of land would not be available. As many as 58 projects were put on hold in 2012 due to either hurdles in acquiring land or delay in being granted environmental clearances.
Q. In your announcement of earnings for Q2, you declared an order size of Rs 13,225 crore. Have you added more to the existing order book? At what level do you plan to close FY13?
A: We will close our order book, which includes road and other ancillary projects, at over Rs 13,000 crore. In a period when the sector is not performing in line with expectations, we are proud to have an order-book of this size. The year has been tough in terms of access to funds and high interest costs. Despite a discouraging global environment and delayed receivables, we have managed to remain profitable and a diversified portfolio helped mitigate risks.
Q: Your debt-levels have gone up in the past and have impacted operational cash flows. Do you still maintain a positive outlook and expect the situation to improve by end of the fiscal?
A: While our debt-levels have gone up, our fixed assets and investments have also increased substantially. We have already created fixed assets in FY12 and FY11 which have been used optimally and will be re-used for new projects
Q: After the sector’s poor performance in the year gone by, the government has assured launching debt-market reforms to help companies raise loans at reasonable rates Do you expect a policy decision to be announced anytime soon?
A: We are looking forward to the announcement of reforms in key problem-areas that affect the sector such as access to funds and faster grant of approvals. Currently, land acquisition remains the single largest hurdle for any infrastructure project. Also a robust dispute resolution framework needs to be put in place for the purpose. If problems pertaining to infrastructure development are addressed, the NHAI's target of constructing roads at a speed of 20 kms a day can be achieved.
Q: What geographies do you plan to look at apart from Africa where you have taken up a project to develop a special economic zone?
A: Predominantly, our focus remains on Africa and the Middle-East. We want to reach out to other overseas markets where competitive pressures are low.
Q: Do you plan to diversify further to mitigate risk?
A: No. We have already diversified our portfolio wide enough to beat the overall slowdown. We may not look to expand further.
Q: What is the company's roadmap for FY14?
A: The next fiscal is likely to be more promising on positive indications from the finance ministry to bring down interest rates. The NHAI has also turned proactive in sorting out land-related hassles.