Moneycontrol
Jun 09, 2015 03:58 PM IST | Source: CNBC-TV18

Expect NHAI orders to go up by 5K cr in FY16: IL&FS Trans

In the current year, IL&FS Transportation Ltd is expecting order inflows of Rs 5,000 crore. The company will complete its existing projects in the next two years.


Toll shortfall of around Rs 2-2.5 lakh from the Warora Chandrapur Ballarpur Toll Road Limited (WCBTRL) will be compensated by the government on quarterly basis, Mukund Sapre, ED, IL&FS Transportation said.


Maharashtra government will exempt the light motor vehicles and MSRTC from paying toll on WCBTRL in which IL&FS Transportation holds a 35 percent stake. Sapre told CNBC-TV18 the company collects nearly Rs 16 lakh toll per day and the above decision will not impact its consolidated numbers.


Discussing performance of the company, Sapre said last year it had got contracts from National Highway Authority of India (NHAI) and Ministry of Road Transport and Highways (MoRTH). In FY16, the company is expecting an increase in order inflows by Rs 5,000 crore. “Last year, we covered 7,000 kms. Going forward, we are expecting the same or even better,” Sapre said.


The company is expecting a building, operating and transfer (BOT) order from Nepal in the next two months for which it will submit a revised proposal on June 13th. Besides this, it is hoping for another tunnel project, the Zojila project for which it will submit  the bid on June 15th.


Sapre said the existing projects are expected to be completed by 2017.


Below is the transcript of Mukund Sapre’s interview with Reema Tendulkar and Sumaira Abidi on CNBC-TV18.


Reema: This news has just been announced to the exchanges, while we do understand that you have only a 35 percent equity stake in this associate company. In the immediate term, what will be the revenue short fall because of the inability of the company to collect toll and when do you expect the Maharashtra government to compensate you? Will it happen immediately or do you expect a lag?


A: What is happening that we collect around Rs 16 lakh per day out of which the exempt category if I out as per the notification what has come, should be around Rs 2-2.5 lakh per day. So, we hold only 35 percent of the company. And what is happening that these exemptions are ultimately going to be reimbursed by the government which is already aptly covered in the notification.


Logistics still to be closed on and that is the talk going on between all the developers and the government that you should do at least quarterly in terms of to be reimbursed. We believe that there is not going to be any impact as far as the consolidated figures of the company is concerned because of this. And other two projects are there, which do not have impact because those are two National Highways Authority of India (NHAI) projects with us.


Reema: So, if I assume Rs 2.5 lakh per day, then the impact would be around Rs 9 crore for the entire year and government compensation will be quarterly, right?


A: Yes. Whatever, the impact for the quarter and then need to reimburse in the quarter that is what we are saying should come in. And there is no ambiguity in the circular which has come. So, it is obviously going to be paid.


Reema: So, if I assume Rs 2.5 lakh per day, then the impact would be around Rs 9 crore for the entire year and government compensation will be quarterly, right?


A: Yes. Whatever, the impact for the quarter and then need to reimburse in the quarter that is what we are saying should come in. And there is no ambiguity in the circular which has come. So, it is obviously going to be paid.


Sumaira: So, as of now, what we can say is that the impact will be negligible. Also, one of the bigger brokerages, CLSA has initiated coverage on your stock. They have an outperform rating. One of the reasons they mentioned for their bullishness is they say your company will be one of the bigger beneficiaries of new awards by National Highways Authority of India (NHAI) as well as state. So can you give us a sense of how much is up for award this year and what is the quantum that you are likely to bid for?


A: If you take the last year’s performance, ultimately if you include NHAI and Ministry of Road Transport and Highways (MoRTH), they could clock around 7,000 kilometers and it had a larger chunk of EPC contracts also. The pattern is going to continue in the same fashion where one-third of things are going to come on build-operate-transfer (BOT) toll and EPC will come and the newer model which the government is talking about which is the hybrid model.


We believe is that the competition or the window which is open to us to have more wins with better returns is something which is there available because most of our competitors are trying to mend their balance sheets and things are not gone well for many of the toll projects.


Our estimate is that at least last year they did around 7,000 kilometers so they should be doing it almost the same number or a little bit better than this and if you take around 30 percent or 35 percent of that coming on BOT toll and subsequently in the last quarter of this year, the hybrid being tried then we are very sure that we should expect a good share of what we have been maintaining in the market share as far as all these bids are coming.


The hybrid model is something we definitely believe is a good solution because this is going to bring all the lenders back into the business because the risk management and the risk sharing and those sort of things which relooked into the hybrid model is going to boost the confidence of lenders also and that is one very positive step so we are very sure that we are looking for some better period, last year was a struggle but now again we are saying that things are back on track.


Reema: Give us a few numbers. What could be the potential order inflows that you could enjoy in FY16 because I was reading somewhere that you pre-qualified for a tunnel project; you were working with the Nepal government as well. Overall what are the company estimates in terms of order inflows for FY16 and give us some detail about your order pipeline?


A: Currently, the capital expenditure of what we have to do on the ground is around Rs 11,900 crore. This whole work is going to get completed by 2017 -- around 27 assets, 26 will be complete on ground which almost translates to around Rs 40,000 crore of asset on ground.


We should have at least Rs 5,000 crore per annum for coming two years to try to achieve the growth rate that we are looking for. In terms of Nepal, their BOT law allows them to negotiate the numbers which have come. In that process, the bidding was done on feasibility studies. we have an intermediate stuff with them where they are asking us to do a detailed project report (DPR) and see to it that whether cost can be moderated and optimized that is what we are doing, on June 12 or June 13 we are submitting the DPR so we are hopeful that Nepal thing will move forward from that DPR submission and should translate into an order maybe two months down the line or three months down the line.


We are very keen on one of the very large tunnel which is going to come for bidding on June 15, which is Zojila tunnel and is the large project and a limited competition but with our expertise now doing one tunnel, attending the second one, starting one, we believe that we stand a fair chance of this. So what targets we are trying to put for us, we shall be able to meet in coming one-two years in terms of the overall turnover getting added or new projects getting added.


Reema: You expect Rs 5,000 crore of order inflows roughly in FY16 and this large tunnel project – what do you expect on June 15, will you be submitting the bid or you expect perhaps the likelihood of winning the order on June 15?

A: June 15, we are submitting the bid and then let us see how do we fair in that bid.

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