L&T Infrastructure Development Projects (L&T IDPL) has achieved financial closure for two of its road projects in Maharashtra. K Venkatesh, CEO & MD, spoke to CNBC-TV18 regarding the developments of this project.
He said that the National Highway Authority of India (NHAI) has estimated the project cost to be around Rs 2538 cr and the company is likely to start construction by the end of Q1 of 2013.
Venkatesh expects the cash flows from these projects to start coming in from second half of FY15. The order book of company's road project is estimated to be over Rs 10000 cr.
"We have projects under construction of more than Rs 10,000 crore as of today and all of them getting into commissioning between 2013-14 and 2015, these two being the last ones," he adds.
Below is an edited transcript of K Venkatesh’s interview on CNBC-TV18.
Q: Can you take us through the closure of these two projects and when exactly would it kick off in terms of development?
A: These projects are 275 and 209 Kilometers (Km) respectively, a total of 484 Km. The project cost as per National Highway Authority of India (NHAI) estimates is Rs 4500 crore. We have done that in a debt equity ratio of 75:25 with debt of approximately Rs 3400 crore and equity of about Rs 1100 crore. The financial closure has been achieved with ICICI leading the consortium and we are in the development stage right now.
Engineering is on and site investigation is commencing. We expect the appointed date to be declared in a few months depending on the land availability and NHAI is working hard on it. By then, we will complete some part of the engineering as well. So, it will all fall in place and we should be able to start construction sometime at the end of the first quarter of next calendar year or latest by the first quarter of the next financial year.
Q: When will the construction be over and the money will start flowing for you? What is your rate of growth? Is it 6-8 percent growth in traffic?
A: These are fairly detailed calculations. We expect the cash flows from this project to come in from the second half of 2015 depending on the commencement of construction. We expect to complete the project at least 30 months from the starting date.
Growth rates have been mapped to our understanding of economic fundamentals which is a slower growth rate for the next couple of years and then we expect the momentum to pick up. So giving one number will be a challenge because it is a time-series calculation done over a concession period.
Q: Will the initial period be 5-6 percent?
A: Yes, initial period would be in the range of 6-7 percent because it depends on the multiplier applicable in that particular region. It also depends on the hinterland development that will happen because this is an important east-west connector and therefore we have kept in mind the future economic development of the area as well.
Q: How much of the land has been acquired by NHAI, has the entire thing been acquired by NHAI? Or do you have to do any acquisition?
A: We don’t have to do any acquisition; the concession agreement clearly says that at least 80 percent of the land should be acquired before the appointed date is declared. In our detailed discussions with NHAI, they hope to achieve the target in the next few months.
Q: Going forward what does the project pipeline look like besides these two projects?
A: As far as road sector is concerned, project pipelines from NHAI is okay. It is moderate, not the heavy days of 2009-10 or even first half of 2011 because the future focus of NHAI is going to be mainly towards two lanes.
Q: What is your order book?
A: We have projects under construction of more than Rs 10,000 crore as of today and all of them getting into commissioning between 2013-14 and 2015, these two being the last ones.
Q: Is there a lot of cash coming in from FY14?
A:Yes, it is.