• Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney Invest Now master your money
Moneycontrol

Home » News » Business

Feb 17, 2017, 08.09 AM | Source: Moneycontrol.com

Exclusive Interview: Some hybrid road projects may not get funding: Ashoka Buildcon

Finance Minister Arun Jaitley has given a big push to infrastructure in the Union Budget. In an exclusive interview with Moneycontrol's Malini Bhupta, the managing director of Ashoka Buildcon, Satish Parakh, said a lot more needs to be done to achieve the 40 km/day target set by the roads ministry.

Like this story, share it with millions of investors on M3

Exclusive Interview: Some hybrid road projects may not get funding: Ashoka Buildcon

Finance Minister Arun Jaitley has given a big push to infrastructure in the Union Budget. In an exclusive interview with Moneycontrol's Malini Bhupta, the managing director of Ashoka Buildcon, Satish Parakh, said a lot more needs to be done to achieve the 40 km/day target set by the roads ministry.

Post Your Comments

Share Cancel

Satish Parakh (more)

MD, Ashoka Buildcon |


Finance Minister Arun Jaitley has given a big push to infrastructure in the Union Budget. In an exclusive interview with Moneycontrol's Malini Bhupta, the managing director of Ashoka Buildcon, Satish Parakh, said a lot more needs to be done to achieve the 40 km/day target set by the roads ministry.  

Q) What is happening in the roads sector?

There is a lot of focus on bidding for road projects, which had come to a standstill towards the end of the previous regime. The government’s focus was on EPC (engineering, procurement and construction). In the last one year the government has come up with projects under the hybrid annuity model (HAM). Nearly 34 HAM projects have been awarded, of which 12 have seen financial closures. Overall, you see the bidding volume has gone up. Last fiscal they awarded 7500 km and this year they plan to do 15,000 km.

Q) How is the execution been?

If you see April to December, they have achieved 18 km a day, which is substantially high compared to the last government. The government has set a target of 40 km/day.

Q) Have things changed on the ground?

The government has addressed hurdles that were impacting road projects on land acquisition and compensation. The reason the government has not achieved its 30/km target is because of this reason. By the end of next year we should be able to achieve 40/km a day. Now there is a good coordination between ministries and clearances come before the projects go for bidding.

Q) Are there any hurdles still that affect the sector?

Acquiring land is still a problem for brown field projects as some of these projects run through urban areas, where there are encroachments. These require state efficiencies to reclaim land and remove encroachments. For state projects, one needs very good coordination between state and government. It is easier to work in green field projects.

Q) What about funding? Are banks willing to lend to infrastructure companies?

If you see the HAM projects – 20 percent have achieved financial closure, another 30 percent may achieve it on some structures. Financial closure may not happen for 20-30 percent and they may have to be returned to the government. Banks have been very concerned about due diligence and they are looking at the micro levels also. For us HDFC Bank has done our financial closure.

Q) Do you see players aggressively bidding for road projects?

The opportunity is huge as pace of bidding is up four times. The aggression has come down in recent times, which had picked up in 2014. A whole new breed of infrastructure companies who are also bidding for road projects. Also, the government has reduced the bid size which has qualified smaller players to bid.

Q) What about traffic growth?

Traffic growth is in single-digits and will remain so for another year. Double-digit growth is not possible till we see 8 percent GDP growth. Even if you see 5-8 percent traffic growth is good. After demonetization, double-digit traffic growth will take time.

Q) Do you expect the Budget to give the requisite fillip to infrastructure?

The Budget is a good one but we need good implementation. Like, for instance, we are doing a part of the Eastern Peripheral Project (ring road for Delhi) and we are seeing work is happening at a good pace. The government is resolving all issues rapidly as there is a taskforce to monitor the projects. If this happens to every project, then execution will improve. We are not seeing a uniform push given to all projects.

Q) Is it easy to get funding for road projects now?

Funding is available. That is not a problem. Money is waiting to come into India infrastructure but what the fund managers are looking for is execution. But for HAM projects banks wanted government to relax certain conditions. Banks had concerns about termination payments and milestone achievements etc. If a project gets stuck, the banks did not want to get stuck so they negotiated. Some have been resolved; others may still get resolved.

Q) How do you expect FY18 to be?

We are sitting on an order book of Rs 6,200 crore. And, by March end, we will open the fiscal with an order book of Rs 7000 crore plus. We should grow by 25-30 percent next fiscal. Some of the projects have started. We have won one project and is yet to start but have done financial closure.

HAM will be a good opportunity and each of these are Rs 500-1500 crore projects. There are EPC projects too. Most states are also rolling out EPC and annuity programme. Mahrashtra is awarding contracts as is Madhya Pradesh and Andhra Pradesh.

Q) What does the government need to do to improve execution?

We need a good push from the bureaucracy. Every project must get a push. There is a willingness from top authority but the entire bureaucracy has to be aligned. Sometimes decision-making process takes long. Only 2 percent projects get priority status but the remaining 98 percent are not moving at the same pace. There is a huge opportunity to create efficiency in government mechanism.
Buy, Hold, Sell ? Hear it first on M3
Exclusive Interview: Some hybrid road projects may not get funding: Ashoka Buildcon

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login