VD Mhaiskar, CMD of IRB Infrastructure Developers says the industry is keenly awaiting details on the budgetary allocation to the roads sector as there is good on-ground movement on road projects.
Mhaiskar points out that while fairly good number of projects are being bid-out the deals are largely on engineering procurement construction (EPC) or hybrid models, there is not much movement on build-operate-transfer (BOT) deals as the balance sheets of many developers remains stressed.
He says there are fears that if budgetary allocation is insufficient, the National Highways Authority of India (NHAI) might have to dip into public market to raise funds by way of bonds etc, which can crowd the space and take away liquidity, required by private developers to raise money.
The government has taken steps towards simplifying processes in project set-up like faster land acquisition clearances and redressals, which hints at its seriousness towards the sector, he says.
Nitin Patel, Director at Sadbhav Infrastructure Projects says there is lot of traction in mining tenders.
In road sector, there are 19 hybrid annuity, 7 BOT and 15 EPC projects out for bid before March 2016 and we expect aggressive bidding.Below is the verbatim transcript of Nitin Patel and VD Mhaiskar’s interview with Latha Venkatesh, Ekta Batra, Anuj Singhal and Guest Editor Ridham Desai of Morgan Stanley on CNBC-TV18. Ridham: My first question to you is how are you seeing your order book and do you see a tick up in infrastructure spending? Patel: Particularly we are in highways infrastructure and also in mining and irrigation sector. However, if we first go by the highway infrastructure, if we see the NHAI website, almost around 19 hybrid annuity projects are there in the pipeline costing around Rs 17,000 crore and almost seven states are there where these projects are to be awarded and around seven BOT toll projects. So, mainly, the earlier Ahmedabad-Udaipur- Kishangarh that project which was a 555 kilometer, six-lane project, it has been broken into six packages. Four projects are coming under toll and another three projects are there. So, almost Rs 6,000 crore of toll projects and around 15 EPC projects which are there on NHAI’s website to be bided and all these to be bided before March 31. So, in road sector we are of the view that there will be hectic bidding activity but obviously in hybrid as well as BOT toll, we have to test how much people are coming forward considering this race was there in the already stuck projects as well as a lot of developers are there those who don’t have the balance sheet who is not supporting. Even in currently the lenders more or less, public sector undertaking what we are hearing from the market and considering that there are six- seven banks when they are reaching closer to the 10 percent of their NPA levels, so, this is very important thing we have to see that how the bidders are coming forward and how it is converted into financial close. So, this will be the important thing going forward for the sector itself. In mining, we are of the view that post this reallocation of the coal blocks to the state governments, now the government of India and even the coal ministry, they have very clearly identified that every state for their state run power projects which are thermal power projects, they have to manage the coal with their own resources, now when the Supreme Court is reallocated the mines. So, we have started seeing the traction that the government of Punjab has already called the tenders. The government of Karnataka is there in the pipeline. Now Maharashtra Mahagenco also we are hearing that within a short time they are coming out with large bids. Apart from that, NTPC as well as the government of Gujarat, Gujarat Electricity Company, they are already in the market now that they have also floated the tender. So, some of the traction we will see in this sector particularly. However, how fast it is getting closed and how it is coming so that is how we are seeing the scenario now.Latha: Private investment outside roads is not really picked up. Are you sensing that there is some green shoots of capex recovery?Mhaiskar: As regards green shoots I would say with regards to road projects, there is certainly a definite good movement happening on ground. We have seen good number of projects being bid out. These are more on EPC or hybrid model. Not much on BOT because at the moment the balance sheets of most developers are still quite stressed and hence we have seen government spending trying to fill up that gap. So, to that extent capex formation on a national level certainly is happening although not from private investment. However, I believe that as time passes, the private investment piece also will pickup and will contribute significantly going forward. Ridham: We are expecting or rather there is expectation that infrastructure will get a boost from the Budget. Do you have any specific expectations from the Budget?Mhaiskar: As regards Budget is concerned, we will be certainly looking at the number that gets announced in terms of the budgetary allocation for infrastructure particularly for roads because you have significant number of projects which are on the anvil, which have been already bid out and the reason why it will be critical is because if the budgetary allocation is not sufficient then we fear that NHAI will have to dip into public markets to raise the required funds by way of bonds and things like that which will crowd the space and take away liquidity which might be required by the private developers to raise money. So, if sufficient budgetary allocation does not come through, then not that the projects will not happen but then NHAI will have to dip into public markets and that can crowd the space. That is the fear what we have in mind. Ekta: Just concentrating on land acquisition, that has been another pain point for the industry. A lot of the projects have not been able to take off and due to maybe lack of clearances, etc. What is your sense in terms of whether there has been any improvement on the same? Mhaiskar: The historical reasons for which the projects have got delayed such as land acquisition or utility shifting and things like that what you mentioned they are being dealt up quite strongly. If I had to give you an example of land acquisition, no project is now being bid out at least till 80 percent of land is in place and there is good visibility about the balance 20 percent. The reason why land acquisition process has improved is because the price at which the government is buying land has moved up significantly. So, the resistance to part with the land has gone down. If you just look at some numbers, if we look at March 2013, 2014, and 2015, the government spending on land acquisition, particularly NHAI I am talking about, the numbers which I had been able to see, their declared numbers are some Rs 5,000 crore, Rs 6,000 crore and Rs 7,000 crore. As against that, this year they have been discussing about spending surplus of Rs 15,000-18,000 crore for the full year. So that itself shows that government is definitely serious on land acquisition and providing the land for the project upfront so that further delays are not anticipated. Even on the environment clearance and forest clearances, good amount of steps have been taken, procedures have been simplified to a good extent and that also has helped in avoiding delays on project execution.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
