Gammon Infra expects average toll collections from Mumbai-Nashik toll road from Rs 16.75 lakhs a day to over Rs 30 lakhs a day.
Gammon Infrastructure's current asset portfolio stands at Rs 12,000 crore. The consolidated debt currently is slightly over Rs 2,000 crore, says Parag Parikh, chief financial officer (CFO) of the company.
The company has already commissioned around 64kms of the 100kms stretch of Mumbai-Nashik toll road, which remains prominent toll revenue generator for Gammon Infra. Average toll collections from this project are expected to jump from current Rs 16.75 lakhs a day to over Rs 30 lakhs a day .
Below is the verbatim transcript of Parikh's interview with Anuj Singhal and Latha Venkatesh of CNBC-TV18. Also watch the accompanying video.
Q: Let’s start with this MP project for which you are the lowest bidder. By when do we know the result of this bet?
A: The bids have already been opened and as we have observed over the last few bids - the lowest bidder is significantly different from the other pack of bidders which is also here in the case. I am as much as hoping that rationality will soon start prevailing on all these jobs as a lot of pipeline of opportunities are coming up on the National Highways Authority of India (NHAI) front.
Q: So is this lowest bidder IRB Infra or L&T because off late we have heard that these two companies are neck to neck for some of these projects?
A: No. For this is there is an entity called Gannon Dunkerley. What we have observed over the bids for the last few months - there are as much as a dozen to maybe two dozen bidders across every project. Unusually the lowest one is at a significant distance or a gap over the pack of other bidders.
To some extent this has happened since for quite sometime there were not many opportunities coming up over the last one year and to that extent people go back into the spree of bidding.
Over this year NHAI has already announced as many as 100 projects with a single time pre-qualification all amounting to as high as Rs 74,000 crore. With this sort of an opportunity coming in with practically every month all of us vying for opportunities of Rs 7,000-8,000 crore. I expect rationality will prevail soon.
Q: What is your own order book standing at - at this point of time and have you added anything year to date?
A: The overall asset portfolio for us is over Rs 12,000 crore. This primarily constitutes over different segments of roads, ports and on the power side. We have not added anything in the first quarter but as we win these assets - the time taken for the process of pre-developmental exercise, debt tie-up and financial closure and then on to the implementation cycle, it does take us a good six to nine months depending on the sector and the project.
Q: For that rate applied for by Gannon Dunkerley - what is the IRR if you all had to apply for it?
A: I would not like to comment for that but as I just mentioned - when you have about a dozen to two dozen bidders - there is clearly a distance and a gap between some of the lowest bidders to the rest of the pack.
Q: What's your current debt and what kind of interest cost are you likely to see in FY12?
A: The overall consolidated debt as of now is at a little over - Rs 2600 crore. This constitutes both - the operating assets for which we have already started repayments as the revenues start trickling in as well as the projects which are under implementation where in line with the progress of our works we tend to drawdown the disbursals from the banks.
The average cost of funding at this juncture for us across this debt is at about 10.5%. This has been more fortunate for us as in various projects we do tend to enter into a hybrid structure where the rates get fixed for a period of a year to three years. To that extent - the interim movements on the interest rates do not necessarily hurt us or benefit us.
Q: Your Mumbai-Nasik expressway is a toll road for you. What are the other toll roads that you have? Is that the only project?
A: We have Mumbai-Nasik as one of the more prominent and significant toll roads. We have already commissioned 64 kilometers out of the entire 100 kilometers stretch. We are in advance stages of completing the balance stretch itself which would result into additional incremental toll revenue over this year.
Beyond Mumbai-Nasik expressway, we have a bridge on the river of Godavari at Rajahmundry. The Rajahmundry-Godavari Bridge which is at this juncture under implementation and it should take us about 15 months to commission the project.
Q: When you last spoke about the Mumbai-Nasik expressway you had said that it was making you about Rs 16.50 lakh per day. What is the current run rate? Have things improved since you have more of the road operational?
A: Yes. Our current run rate continues to be in that range of Rs 16,50,000 to 16,75,000 but this primarily only constitutes of the 64 kilometers. In the coming year as we are about to commission also the balance stretch - we do expect our average toll collection to jump over Rs 30 lakh along with the annual inflation on the toll rates that we tend to increase.
Q: One final question about Vizag seaport. You did 6.5 million tonne of cargo in FY11. What was the trend in Q1 and how is FY12 going to shape up?
A: We are continuing to ramp up the volumes there. We do not expect any significant change in terms of volume handling over this current year. We are gradually building over additional capacity where in we can move upwards of 7 million over the next two years.
Q: Your net interest cost was quite a burden in the last quarter. How would interest cost pan out now that rates have if anything gone up? Can you give us an estimate FY12?
A: Primarily the interest costs which are for projects under implementation tend to get capitalized. So there is not any significant burden with respect to the projects which are under implementation.
Having said that - the interest cost do sort of come into significance as these projects get commissioned. As we commission projects over this year - the interest cost will start moving into P&L and we expect corresponding revenue lines as project starts to commission.
Gammon Infra stock price
On September 04, 2015, Gammon Infrastructure Projects closed at Rs 9.73, down Rs 0.4, or 3.95 percent. The 52-week high of the share was Rs 20.85 and the 52-week low was Rs 9.05.
The company's trailing 12-month (TTM) EPS was at Rs 0.02 per share as per the quarter ended June 2015. The stock's price-to-earnings (P/E) ratio was 486.5. The latest book value of the company is Rs 8.68 per share. At current value, the price-to-book value of the company is 1.12.
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