Nagarjuna Cons to raise additional Rs 100cr for Dubai plan

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Nagarjuna Cons to raise additional Rs 100cr for Dubai plan

YD Murthy of Nagarjuna Constructions says the company would require additional Rs 100 crore for its Dubai plans.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Dubai crisis: Which Indian companies may be affected Don't see any impact from Dubai situation: BoB Dubai Jitters: Will bears overtake investor confidence now? Indian mkts rattled from Dubai default impact ALSO READ See latest News about Nagarjuna Const See previous management interviews See what other Experts & Brokerages are saying about Nagarjuna Const NCC BSE | NSE 29/05/12 Are Mutual Funds betting on NCC?

In an interview with CNBC-TV18, YD Murthy, Executive VP-Finance of Nagarjuna Constructions spoke about the ramifications of the Dubai crisis on his company.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Before we talk about your infrastructure order book, we believe that Nagarjuna was looking at property development project in Dubai and you were actually looking to raise money for that is that true. Did you raise money for real estate project in Dubai?

A: We have only one real estate project in Dubai that is called that is called NCC Harmony, where we are planning to develop about 1.45 million square feet. We are going slowly on this project due to the meltdown in the Dubai real estate market. Actually in this the tower I comprising of 440 apartments has already been pre-sold by our people there. We have collected the initial money from the investors - 15-20% of the value of the apartments. Now what we have done is that because of the market conditions, we have gone for a design modification where by we develop only tower I at this stage and tower II we will take it up at a later stage when the market improves.

So to develop Tower I upto 10 floors, at that point we will get next round of milestone payments from the investors. So to develop it upto 10 floors we require about additional funding of Rs 100 crore for which we are talking to some banks and we are likely to tie-up those funds if necessary providing a corporate guarantee from NCC India.

Q: Any chances that aside of the initial payments, which you have collected, the rest of the money doesn't come in and you actually need to take any hits on the Harmony project?

A: At this point of time I don't think there is any difficulty mainly because we have sold the apartments nearly one-and-half year's back at an attractive rate of 820 dirham per square foot when the market rate was around 900 dirham per square foot. Later on it went up to 1,100 dirham per sq ft but again it got corrected. Even now it is hovering around 850 dirham per square foot. So the investors who invested in the apartments - in the Harmony project - they have not lost anything.

What they are looking at is that the project should go forward and the apartment should be handed over to them in time and that is what exactly we are also planning to do

Q: How soon were you expecting the second milestone payment and what was the amount you were expecting?

A: The milestone payment, as I was mentioning to you once we construct 10 floors of tower I, we can ask the investors to make the next round of milestone payment. Right now only foundational basements have been done.  Now we have to do about three floors of commercial space and 10 floors of residential tower. To do all these things we require nearly Rs 100 crore. For that we are talking to some banks and with that money we will start the work and complete in a matter of 6-9 months.

Q: Aside of this real estate project what kind of infrastructure construction exposure or construction exposure would you have in Dubai and any risks of defaults or delayed payments you expect from any of them?

A: We are doing lot of projects in Muscat and Dubai. But Dubai and Abu Dhabi put together we have only two infrastructure projects. In Dubai we are doing a water pipeline project given to us by DEWA (Dubai Electricity and Water Authority) of about Rs 100 crore. The other one is in Abu Dhabi where we are doing a villa project to the Abu Dhabi Municipality. In Abu Dhabi we don't have any payment difficulties. DEWA also, till date we did not have any payment problems because it's a government agency and they got their funding allocation. They got their budgets and we were able to take our bills on time.

So in the Gulf as a whole, including Muscat and Dubai, all our construction contracts are only to government agencies. So we are not running any payment risk there.