IRB Infra has received provisional completion certificate for the Ahmedabad-Vadodara super express tollway. The project involved upgradation from two lane highway to a six lane super expressway. The project, which has been completed a month earlier than its scheduled date, began toll collection from December 6, VD Mhaiskar, CMD of IRB Infra told CNBC-TV18. The expected revenue from the project is Rs 1.25 – 1.35 crore per day, Mhaiskar said adding that collection will continue to grow year-after-year. Total debt of the project is Rs 3,300 crore. Mhaiskar said the company will pay the National Highway Authority of India (NHAI) a premium of Rs 106-110 crore for FY17, which is expected to go up every year. The company saw close to seven percent growth in its construction order book, which currently stands at Rs 9000 crore, he said. Below is the verbatim transcript of VD Mhaiskar’s interview with Latha Venkatesh & Reema Tendulkar on CNBC-TV18.Latha: Just tell us this certification has come through does the toll collection start today?A: The provisional completion certificate for the project has come through one month ahead of schedule. I would say that this was a really extra ordinary co-ordination between all the concerned agencies such as the Central Government, State Government, National Highways Authority of India (NHAI) and the kind of co-ordination that has gone in to complete this project ahead of schedule. Also the people of Gujarat, the way they cooperate in the land acquisition was phenomenal. That is something which has made all this possible to complete the project of this size ahead of schedule.Reema: Could you tell us what could be the expected toll collection from this particular expressway?A: This would be early days because we are just only not even 48 hours in to the tolling but I can definitely share with you that the collections are very encouraging. We are likely to be closed to our expected revenue for the full year.Reema: What is your expected revenue for the full year?A: For the next full year we have penciled in somewhere between 1.25 and 1.35 crore of revenue and that is existing four-lane road plus the new one together. We, at this moment feel fairly confident that we should be able to be somewhere in that range. Latha: I understand you will have to pay some amount to the NHAI annually for this project. How much is that?A: This is a premium project and as I said every single stakeholder of this project has helped to make this project a success and the Central Government had agreed to the premium rescheduling of this particular project and we have availed that particular facility. So, under the deferment schedule that has been agreed upon we pay closed to around Rs 106-110 crore of premium to NHAI for the next one full year that is FY17 then it gradually keeps going up._PAGEBREAK_ Latha: It keeps going up?
A: Yes.
Latha: You said you are earning only Rs 1.25 crore?
A: It is per day.
Latha: You would still be seriously in the money. You would be making some Rs 250 crore in the first year?
A: No, if you look at the total project size. This project is the large project with Rs 3,300 crore of debt and we have infused closed to Rs 1,500 crore of equity in this. So, if you look at the cash flow situation leave apart amortisation and all that so we are talking about some Rs 330 crore of interest out go and around Rs 100 crore of premium to the government and almost Rs 25-30 crore of O&M that we will be making on it so, the cash flow breakeven would be somewhere in the range of Rs 450 crore. We are fairly hopeful to cross that in the first year itself.
Latha: Any other projects that we should expect completion in FY16 itself?
A: I think the next project which will be due for completion will be the Karwar to Kundapura project next year. So, that will be in FY17. The other projects continue to progress well which are under construction.
Reema: At expected revenues of Rs 1.25 crore per day the annual revenues will be above Rs 450 crore which is your cash breakeven. So, how soon do you expect you will be able to repay the debt associated with this project?
A: The debt for the project is 17-18 years of door-to-door tenure. It is a long-term date which will be there and I don’t see we need any relook at the debt repayment at all.
Latha: What about your traffic growth in the other major projects that you have, Surat – Dahisar, Mumbai-Pune? Are you seeing a growth in revenues? Compared to FY15 how much better might FY16 be?
A: The growth model on revenue front has been quite encouraging as well because if you look at last five quarters running we have pencilled in somewhere at the end of 7 percent off volume growth. Some projects have even outdone that so I think volume growth remains fairly strong and we hope that to continue in the coming quarters as well.
Latha: What about new projects from National Highways Authority of India (NHAI), anything on the anvil where you maybe L1 or how much is your order book likely to grow in FY16?
A: Order book now is in the range of Rs 9,000 crore and we stand qualified for a good number of projects where bidding is presently on. Whenever we have any news on that we will definitely share with you.
Reema: As of now what would be your L1 or order pipeline?
A: There is no L1 kind of a situation because in NHAI we have an electronic bidding. So, the same day you get to know the results whether one has won the project or not. So, there is no L1 situation as such.
Latha: Are EBITDA margins likely to rise in only the construction area? I mean forget toll-ways, in contracting itself are margins stabilising, improving?
A: The margins fairly are stable on the construction side of the order book. The Rs 9,000 crore order book which I told you is the construction order book. The margins have remained strong and stable for last so many quarters.
Latha: I am asking you because last time your EBITDA margin went down in Q2?
A: That was a very marginal one because when you enter a project completion phase you will have a lot of completion things which don’t have much of a margin.
Latha: So you expect that this quarter Q3 you may find it stable or even improving?
A: Stable I can certainly feel will be doable.
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