Happy to be part of MTHL project, plan to complete by 2021: L&T

There are three parts to the bridge, one from the Sewri side, the largest package of about Rs 6,400 crore. Other part is from the mainland side. “Total for us it is about Rs 8,637 crore,” said Subrahmanyan. There is one more part of roughly about Rs 4,900-5,000 crore, which makes the total bridge.

Speaking about IHI Corporation he said, “IHI is one of the best steel and bridge builders from Japan and it is good to have them as our partners.”

Work on the project begins immediately, designing and planning will take 4-5 months and the project needs to be completed over 4.5 years that is by 2021, he further mentioned.

According to him, the project will give a fillip to cement, to steel, a lot of local employment and to all around economic development around Mumbai.

Land has already been acquired by MMRDA towards the construction of the bridge, he added.

On infrastructure segment Subrahmanyan said, “We are cautiously optimistic.”

Below is the verbatim transcript of the interview.

Latha: When you all guided for the order book as a flat order book, you didn’t know about this order so now you can upwardly revise your order book?

A: Yes, it is a great feeling to have got the major portion of this bridge. It is a historic bridge. If you go into the history, this has been planned right from the 1970s. It went through various committees, three four times bids have been called. If I remember right, once even the letter of intent (LoI) had been placed on a public-private partnership (PPP) basis then finally it has seen the light of the day.

I think one has to, in this context, congratulate the Government of Maharashtra, the Chief Minister and MMRDA for having taken this bold decision because this was a very long awaited infrastructure project which connects the island of Mumbai to the mainland.

I think this is transformational as the traffic from Mumbai would see another way out across the sea. It is probably the largest single infrastructure project and probably the longest bridge in this part of the world and therefore it is a good feeling to have it.

You also asked about order guidance. Let us be circumspect in it, we have just had a quarter, if things go as planned, we would see brighter faces.

Surabhi: Back to the order book guidance picture, at the end of Q2, you had revised it downward to absolutely flattish. Now with this big order coming in, do you still retain that, flattish or is there a small number that you could put to it?

A: As I said we just finished Q2 results, we have given the guidance there and we did not say it would be flat, we said, it will be more or less same as last year with a small growth and we continue to maintain that. Let us see how the next four-five months go and if there are big things, big announcements to be made and if we are lucky, we will continue to do that.

Leave me on that particular question right now.

Latha: What I wanted to know is how much is yours because there is IHI Corp as well but on the Navi Mumbai leg, it is all yours, so what is your kitty?

A: There are three parts to the bridge, one from the Sewri side which is the largest package and that is about Rs 6,400 crore roughly and then the other part is from the mainland side. So total for us is about Rs 8,637 crore and there is an in-between part which is being done by Daewoo and that will be roughly about Rs 4,900-5,000 crore. So that makes the total bridge.

IHI is a partner for what is called as orthotropic steel decking which is nothing but a steel deck with longitudinal and traverse strengthening therefore the load can be directly taken on top of the bridge. So this part of the steel would be fabricated by IHI in their base workshops at Thailand and then brought to site and we will erect it on top of the piers. Therefore IHI has been a partner with us for a long time. They will continue to be partners out here and we will see how to take the same forward.

Also don’t forget, this project was Japan International Cooperation Agency (JICA) funding and therefore it is important to had a Japanese company working along with us. IHI is one of the best steel and bridge builders from Japan and it is good to have them as our partners.

Latha: Can you tell us as much as you can about the financials. If Japan International Cooperation Agency (JICA) is funding it, what is the equity portion if any, and how cheap are the funds therefore for you and how will that therefore impact your margins?

A: This fund is directly taken by the government of Maharashtra. We would not be in possession of the details or the nuances of the agreement, but JICA funds are long term with very low interest rate and it is meant towards developmental aids of developing countries. Therefore I suggest it would have been a good negotiation done by the government of Maharashtra.

Surabhi: When does the work start and when will revenues start getting booked? Also you mentioned that this Rs 8,637 crore, this is entirely L&T or will some of this have to be shared with your partner?

A: There is a portion of steel which has to be shared with the partner. However, it is minimal, about 15 percent odd. Therefore, that is fair enough because that to do it in India it is always a possibility. But as we have seen it now, we hope to fabricate it in Thailand and get it inside. However, local works, if any, will be done by us in India.

Surabhi: When does work begin, when does revenue recognition start and on such a large project, typically what is the kind of margin that you are likely to work on?

A: Work begins immediately. We have got the letter of acceptance and therefore we have to start thinking about mobilising and putting the design team, etc. This is a design and build job and therefore there is a process of design and the design getting verified, accepted by the consultants and the authorities in MMRDA. Give it four to five months towards that, but before that we would start putting up all the site facilities on either side, both on the island as well as on the mainland, and over a period of time, maybe by March I think the serious billing would start. A lot of temporary structure is required, we need to get barges, we need to get barge mounted concrete making equipment’s, and barge mounted cranes. All that takes a bit of time, but all planning has been done and we are ready to start.

Latha: I hope there are no other permissions needed, there are mudflats, there are flamingos over there, is all that taken care of?

A: Bulk of the permits and clearances towards putting up such a large infrastructure project is already in place. We are conscious of the fact that environment is a key factor while doing it on a virgin side of both island as well as mainland side. Flamingos are an inherent bird species which is available in that part, and therefore there are certain time zones put in the contract where we have to go slow or not do any work at that point of time to be a little careful about the birds. Most of the clearances as I said have been obtained. There are some construction clearances we need to get like labour licence and so on and so forth. However, that is part of any infrastructure construction project and that we will do so as we go forward.

Latha: You just said that it will mean putting in orders for a lot of barges and concrete, should we assume that this would give a fillip to cement?

A: There is a lot of cement used in the project, it will give a fillip to cement, it will give a fillip to steel, it will give fillip to a lot of local employment, it is a huge infrastructure project and to be done in 4.5 years and that is not a very long period of time considering the size and complexity of the project. It will be an engineering marvel at the end of the day. It will be a beautiful project and therefore I feel it will give fillip to all round economic development around Mumbai and in the mainland that side too.

Most countries of the world, if you have seen some of the top developing countries, they have all developed due to increase of power demand, and also due to connectivity. Now this is connectivity part and once you have connectivity, the economic development naturally takes place. I am very gung-ho about economic prospects as far as we see once the bridge is developed. I am very positive about it.

Latha: I was going to ask you about the timeline, you just said 4.5 years, so it has to be up and ready in 2021 or 2022?

A: You are right, 4.5 years is 2021.

Latha: The clearances question I was asking you more in terms of land as well. Of course the Bombay Natural History Society has been involved from the start in the environment discussions, so I guess the environment clearances would be in place, but land?

A: Land has already been acquired by MMRDA towards the construction of the bridge. There could be some local, small right of ways in such sort of matters, but as you know, organisation like L&T and especially L&T, we would be very considerate, careful, and take the stakeholders and people along with that. We are known for that, we will continue to do that. We are quite organised from that point of view and therefore we will consult all the stakeholders and I am sure the government of Maharashtra and MMRDA would do all it can to also put in place mechanism to take everybody along and we would do that.

For full interview, watch video...