MEP Infra, San Jose India declared L1 for road project in Maha

MEP Infrastructure Developers along with San Jose India Infrastructure Private Limited have been declared the L1 (lowest bidders) for a project involving the 4-laning of NH66 in Maharashtra, said Jayant Mhaiskar, Vice-chairman and Managing Director, MEP Infrastructure Developers. MEP will hold 76 percent and San Jose the remaining 24 percent in the JV, he added. The annuity payment of the project will be in an ascending oder, paid every six months. In the first year the annuity will be 4.6 percent, according to the formula mentioned in the bid document, which would amount to Rs 100 crore, said Mhaiskar. As per the holding, out of this Rs 100 crore, MEP will get Rs 76 crore. The total cost of the project is Rs 557 crore. The JV being a hybrid annuity model will receive 40 percent as equity contribution by the government and balance 60 percent will be borne by the bidder via debt and equity, he added. The orderbook of the company at L1 position following this deal stands at around Rs 1,760 crore, said Mhaiskar. Below is the verbatim transcript of Jayant Mhaiskar’s interview with Nigel D’Souza and Reema Tendulkar on CNBC-TV18. Nigel: We are aware that the company’s joint venture (JV) has been declared L1. Could you tell us what is your share in this particular JV? A: MEP Infrastructure developers along with San Jose India Infrastructure have participated or have been declared as L1 for the construction of 4-laning of the Arawal-Kante section on the NH66. The percentage of JV is, MEP will be holding 76 percent and San Jose would be holding 24 percent. Reema: What will be the amount that you will get as an annuity payment even if it is twice a year post the construction? A: It would be an ascending kind of annuity which is by annual annuity paid every six months. In the initial year, it would be 4.6 percent ascending as pert the formula given in the bid document. NIgel: That would amount to? A: Close to Rs 100 crore. Reema: What about year two, when you say it is ascending, how much does it go up to? A: The way it works is there is a formula given in the bid document. So, every year there is a percentage of the equity or the annuity which is paid to the bidder as per the schedule given. Reema: Unfortunately we don’t have the bid document so if you could help us with those details. A: There is a chart out; it goes from 4 percent, then 4.5 percent, 5 percent, 5.5 percent and so on. Nigel: Talking about Rs 100 crore, that is around 4.5 percent approximately, that Rs 100 crore is only for MEP Infrastructure or is it for the entire JV, so, you will get 76 percent of that? A: It is the total annuity for the project. Nigel: So how much will MEP Infrastructure get out of this? A: As per the share, 76 percent. Nigel: I wanted to ask you, the total project cost is around Rs 557 crore. Normally we have seen that in a hybrid annuity model, some part of this cost is borne by the government. Could you tell us what exactly is that percentage if they are going to be bearing some cost and how much will MEP Infrastructure bear out of this Rs 557 crore? A: As per the bidding document or the hybrid annuity model, what has been finalised as per the ministry, 40 percent of the total project cost is given as a support to the bidder in terms of equity contribution by the government. Balance 60 percent has to be brought in by the bidder in terms of debt equity as per the bidding document. Reema: What would the order book now stand at and your L1 position? A: As of now, the L1 position for what we have bided, we have bagged this order yesterday close to around Rs 560 crore. Over and above that, the order book for MEP is robust in terms of close to Rs 1,200 crore of order book year-on-year (YoY) for the next seven years alongside one year bidding what we do which is a regular phenomena which is close to around Rs 600 crore. So, with addition of this it would be in I would say R 1,400 for the next seven years YoY. Nigel: Talking about that Rs 557 crore, 40 percent will be borne by the government of India, so that will be around Rs 220 crore roughly. How exactly will you start receiving this money, what will be the phases that will start receiving that and also the remainder, the Rs 330 crore, you said that will be a mix of debt as well as equity. How much does MEP have to raise out of that, I think as per 76 percent it will be close to around Rs 250 crore and what is the break up as well? A: As you rightly said, around Rs 200 crore would be brought in by government in terms of the support for this hybrid annuity model. The balance Rs 300 crore would be brought in as a debt equity ratio which will be finalised as and when we have the financial closure. As a part of this the equity contribution ideally would be say 2:3. Based on that the equity contribution would be raised ranging anywhere between Rs 80 crore to around Rs 120 crore of which 76 percent will be brought n by the company. Nigel: You will be raising some debt for this well, what does this take your total debt to and I missed that part about how you will be receiving that Rs 220 crore from the government, what is the periodic break up? A: There is a mobilisation advance which is paid at the signing of the agreement which is recovered over the construction period. The balance is paid in eight equal installments of 5 percent each which are paid over the construction period based on certain milestones.(Interview transcribed by Priyanka Deshpande)