Agra-Etawah project to begin post 80% land buy: Ramky

In an interview to CNBC-TV18, Goutham Reddy, managing director of Ramky Group gives the details of the Agra-Etawah road project. The project has secured finances worth Rs 1,225 crore for its Agra-Etawah road project in Uttar Pradesh. "The project cost is about Rs 1684 crore of which the engineering, procurement and construction (EPC) cost is about Rs 1207 crore. There will be an equity of Rs 460 crore and debt of Rs 1225 crore. We have just concluded with debt syndication of Rs 1225 crore," Reddy says.

Also read: Ramky Infra ties up funds for Agra-Etawah road project
Reddy says that the project will begin only after 80% of the land is acquired. "In the past there used to be situations where both, developers and NHAI used to move ahead and then give a concurrence that land is available. In the current situation unless 80 percent land is actually in possession, commencement of work will not happen. So that's a positive sign, however, land acquisition as an issue is not eliminated," he adds.

Below is the edited transcript of Reddy’s interview to CNBC-TV18. Q: Take us through the financial tie-up for the Agra Etawah Road Project. You are in-line for completely finalising the tie-up. Is this a Public Private Partnership (PPP), do you have to bring in your money? Or are you just the contractor and National Highway Authority of India (NHAI) does everything else?
A: This is a PPP project on toll basis and we will be financing the whole project ourselves. The project cost is about Rs 1684 crore of which the engineering, procurement and construction (EPC)cost is about Rs 1207 crore. There will be an equity of Rs 460 crore and debt of Rs 1225 crore. We have just concluded with debt syndication of Rs 1225 crore. Q: There have been a lot of reports about companies facing trouble in achieving financial closure and that banks have been vary of lending because of the aggressiveness. Did you face any of these pressures? Are there any new projects on the horizon, NHAI activity is really very subdued at the moment?
A: Generally, there has been a significant resistance from the banks in terms of financing the road projects. We had two projects and have achieved financial closure for both of them. One was the Chitradurga Project which we announced about a month back and now it’s the Agra Etawah Road Project. There is resistance, but given our past credentials and given the good projects that we have been able to achieve financial closure. This project is also a very good project for us. Q: However, past credentials are not making it any easier to acquire land is it? How much of land have you to acquire for this project? What is the reasonable assurance on that front?
A: Land acquisition, fundamentally is an NHAI responsibility. In the past, there used to be situations where both developers and NHAI used to usually move ahead and give a concurrence of land being available. In the current situation, unless 80 percent land is actually in possession, commencement of work is not happening. So that’s a positive sign. However, land acquisition as an issue is not eliminated. Q: So you have already acquired 80 percent of the land for this project?
A: No, as of today there is about 77 percent land. Balance is to be acquired in the next few days and the project will commence only after 80 percent of the land is in hand. Q: When does the project start giving you the money?
A: It is a four to six lane project, so it will start tolling from the day appointed. The date is announced and we can expect that towards mid-February. Q: There have been reports about the waste management system at Jawaharnagar. Your comment on the controversial report?
A: Jawaharnagar is a different company that is in Ramky and Ramky Enviro Engineers Ltd. It is different from Ramky Infrastructure. There is no report of negativity on the Jawaharnagar project per se. It is basically a Build–operate–transfer (BOT) project for managing the municipal solid waste in Hyderabad and it is actually doing very well. Q: What kind of revenues are you expecting in the current year and in FY14? How many BOT projects have just come in?  Has any project got into the toll stage? An idea of the revenue flow for this year and the next?
A: We have in total eight roads that we are doing. Four of them are nationalised roads and four of them are with state corporations or development authorities. One of them is operational, the remaining ones are under construction and our BOT revenue once fully operational, which could be around the year 2015, will be in the order of about Rs 1100 crore from the BOT projects.
 
Other than the BOT business, we have ongoing industrial parks, roads and buildings and we also have EPC business. Our last year revenue itself was about Rs 4000 crore and we’ll probably maintain that. Q: What is your debt on your group and your own company’s balance sheet? Are you doing anything in terms of selling stake in any of your projects to raise equity?
A: At this point in time, we are not looking at selling or raising any equity but the debt from the consolidated balance sheet of Ramky infrastructure is about Rs 1100 crore and it is probably at about 1:1 debt to net worth. It is a fairly good composition in terms of cash flows and capability. Q: So, nothing immediately on the annual in terms of trying to sell stake in projects?
A: Yes.