3i to hold 49% in 4-road project portfolio: Supreme Infra
Mar 07 2012, 12:26 | By CNBC-TV18
Image: Supreme Infra
3i India Infrastructure Fund has entered into an agreement for an investment of around USD 61 million for a minority stake in a portfolio of road BOT companies of Supreme Infrastructure India.
In an interview with CNBC-TV18, Vikram Sharma, managing director of Supreme Infrastructure says, 3i India will hold about 49% at the holding company level that has four BOT projects.
Below is the edited transcript of his interview with CNBC-TV18's Reema Tendulkar and Ekta Batra. Also watch the accompanying video.
Q: Can you just take us through the details of this entire project of this entire investment? How much would 3i India hold on the company level?
A: They will hold about 49% at the holding company level, step below Supreme Infra, a holding company that holds four BOT projects.
Q: Could you tell us how many other road projects do you all have? Are you planning to get in investments for the other ones as well? Do you need the funding?
A: We have total as a portfolio of about eight projects right now. Seven of them are out and out road projects. One is suppose to be a funicular ropeway project. These are the BOT portfolios that we have as a company. Out of these four projects is one holding company where 3i has invested.
In the other four projects, there is no immediate requirement as of infusion of funds because they are all spaced out amongst each other. One of them has already started tolling. One would go to tolling in another five to six months. The balance three basically will take about two years to get completed. So, itís evenly spaced out. In terms of liquidity requirement, we will have our internal accruals. After this 3i coming in and we complete the other four projects, I donít see much of an immediate requirement there.
Q: With regards to these four projects where they are investing USD 61 million, can you just take us through what the stake would be on these four projects? How exactly would these funds be used?
A: These funds are primarily going to be used for basically the equity funding part and the completion of the project that is the construction and project cost. It will go into that project cost.
These are four projects of different sizes and different magnitudes and of course at different stage of execution and implementation. I would not be able to specify which SPV where these projects are held will hold what stake, but cumulatively all the four put together will have 49% stake. They will hold 49% stake in the holding company which holds all these SPVs together.
Q: When will you all start making money from these four road projects in which 3i has invested?
A: All the completion period put together, the achievement of COD, that is the toll collecting time, is late part of December 2013 right up to 2014 October. So, it is like two and two-and-a-half years from now on. That is what the internal project targets are and that is what we are looking at.
Q: Can you just throw some more colour on the details of this deal? What sort of premium valuations you struck the deal at etc.?
A: I wouldnít be able to actually take the names of the other investors who we were keenly working on. Basically, the total equity valuation for the holding company, which holds these four projects, was around Rs 750 crore. That is what we were targeting at and that is where exactly 3i is invested, I am considering that valuation.
There were two other potential investors who are looking at this, but 3i was much more value addition in terms of strategic. They are very much focused in only infrastructure as investment portfolio of theirs; long-term benefit as strategic partnership also getting into different kind of various infrastructure projects here. The deal is as far as 3i is concerned, they have taken 49%. Four-and-a-half to five years down the line we have a buyback option or IPO of the company or move it forward.
Q: Could you tell us a little more about the possible exit option for them with respect to the buyback or an IPO? What are the details that you have struck out with 3i?
A: As of now, whatever we have decided is either of the two. These are all BOT projects. So, they have their cash flow incomes starting from next two-and-a-half to three years. So thatís the daily tolling part which gets started once they are all into toll. The period that we have decided as a buyback is one-and-a-half year, much later to the achievement of COD on the last one also. So, it is like cash flow discounting, it is like buyback option or it is the IPO part. These are the three options that we have decided as of now.
Q: How are you doing in terms of debt levels at this point in time? What are you servicing and what is the plan on possibly scaling it down etc.? I am talking about Supreme Infra, the parent company?
A: We are at 1:2.2. That is what the debt level is. After this equity coming in, there will be a huge change in that because major amount of that was during last year, when we started doing these BOT projects. So this is something which will come down quite drastically.
As Supreme Infra, parent company, is concerned, much work that we are doing there. We have a good order book of about Rs 4,500 crore odd. Some of that has already started, some of that is on the LOI stage and we are there to get them started. That is all EPC basically.
We donít see huge amount of capex or huge amount of debt requirement because that is how we plan our projects to try and replicate the kind of capex that we have. Our growth plans are quite aggressive. We are trying to get into different verticals of infrastructure. But I donít see much of huge requirement there.
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