IL&FS hopeful of InvIT listing by year-end

IL&FS Transport Networks on Wednesday announced that it received Rs 110 crore from  the divestment of 15 percent stake in Gujarat and Infrastructure Company. The stake in the special purpose vehicle has been picked up by MAIF Investments India.

Last year, the company divested 41 percent in Gujarat and Infrastructure Company as part of strategic exercise and there are no divestment plans in near future, Dilip Bhatia, Chief Financial Officer, IL&FS Transport told CNBC-TV18.

The proceeds of the latest stake sale will go towards day-to-day operations, business initiatives and to service debt. IL&FS Transport is sitting on a debt of Rs 9,000 crore at holding company level, he said.

Going ahead, the company is planning to come up with an infrastructure investment trust (InvIT) and an application with the Securities and Exchange Board of India has been made, he said. The company is hopeful of coming out with an InvIT listing by the year-end, he said.Below is the transcript of Dilip Bhatia’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18.Sonia: Can you tell us more about the amount of stake that you have divested in your Gujarat road project and the quantum that you have received for it? A: The company which is ITNL has divested around 15 percent stake in one of our subsidy, Gujarat Roads and Infrastructure Company (GRICL) in Gujarat. The total calculation we see for this sale is around Rs 110 crore.Sonia: Looking to divest any more in the due course of time?A: In this company, no. If you recollect, we had last year, divested around 41.8 percent in this company, Macquarie. This divestment is in continuation of that, another 15 percent. So, we are not looking at anymore divestment in this company in the near future.Sonia: What will you be doing with the funds?A: This funds will be utilised for our day-to-day operations, corporate purposes as well also reducing the debt at the holding company (holdco) level.Sonia: What is the debt currently?A: The debt at the holdco level is around Rs 9,000 crore.Sonia: So, this money is a very small sum for the, if you compare it to the overall debt. Any other plans to reduce the debt? Rs 9,000 crore is a lot at this point.A: This Rs 9,000 crore has to be looked at in the overall context of the operations of the company and also the day-to-day capital network which is standing at Rs 4,500 crore. So, as we have said earlier, in our various communications with investors and analysts that company is constantly looking at opportunities to monetise some of it s matured assets and this is one of that initiatives. We are working on a couple of more and in the due course of time, we will come back to you guys in terms of the announcements.Sonia: In this calendar year, do you have anything apart from this road project that you just did?A: Yes, we are looking at a couple of projects as far as the direct debit investments is concerned. We also actively considering Infrastructure Investment Trust (InvIT) investment trust regulator by SEBI. We had filed an application and it is under active consideration by SEBI. We are looking at around 3-4 projects also to go to InvIT and we are hopeful that by the end of this year, we will be able to come with a offering of InvIT.Latha: That actually was going to be my question. I heard about your InvIT. How much will it reduce costs of money do you think?A: InvIT, the indications we are getting is in terms of the internal rate of return (IRR) probably between 11 and 13 percent which is a decent number. Also, because the overall structure is very tax efficient, we think this is doable.Latha: Doable right, but what is the benefit for the company itself? Will your cost of money go down from 11 percent to 10 percent or from 10 percent to 9.5 percent?A: InvIT, you have to look at as more of a vehicle for us to constantly look at monetising and our matured assets. What will probably InvIT give us is the, once I divest my asset it helps me to deleverage my consolidated balance sheet.Sonia: So, what about the international business? Can you give us details on that or what is the order book like currently. What kind of growth are you seeing there?A: International business, apart from Elsamex which is our 100 percent subsidiary focused on output and performance based road contract (OPRC) and maintenance related work. Recently, we have been awarded first of private public partnership (PPP) project in Dubai which is USD 80 million. It is a project which we are working for Supreme Court of Dubai, building a car park and a Supreme Court building for them. This is the recent one. Otherwise, in international business, we are more focused on doing long-term maintenance contracts so, recently we had two contracts in Ethiopia, one in Botswana which are largely 3-5 year OPRC based contracts without holding much of a capital in those sites.Latha: I have a bunch of questions on your income structure. How much of your money comes from toll? How much comes from annuity and what is the rate at which your toll incomes are rising?A: The ratio is 40:60 between toll and annuity.Latha: And are the toll incomes rising? Is traffic improving?A: We have seen a decent rise of around 4-5 percent in toll incomes in the last year.Latha: And do any projects come into operation this year?A: FY17 will be a very important year for the company. Three large projects come into operations. One of them being the Chenani Nashri Tunnelway Limited (CNTL), which is our tunnel project in Jammu and Kashmir. That projects comes live by September which is a very large project giving us annuity of Rs 630 crore per year.