No financial loss to co after cancellation of J&K order: IRB

The government on Tuesday cancelled the bid process and letter of award for a project in Jammu and Kashmir, which was earlier given to IRB Infra.

The contract was worth Rs 10500 crore and formed 60 percent of the company’s orderbook.

Speaking to CNBC-TV18, VD Mhaiskar, CMD of IRB said that the government has cancelled orders in the same fashion in the past as well without stating any reason.

However, the company will suffer no financial loss as no investments were made in the project, Mhaiskar added.Below is the verbatim transcript of VD Mhaiskar's interview with Sonia Shenoy & Anuj Singhal on CNBC-TV18. Sonia: Do you have any idea why the government went ahead and suddenly cancelled the bid process and Letter of Award for J&K project? A: We have no ideas as to why the government has decided to cancel this bid process. We will try to find out more on this as we interact with them but at this point in time they say that they want to analyse the process. So we will also look out for more clarification from them on this. Sonia: Will you at some point look to bid for it again and will there be any fresh bidding process, any timeline, any indications there? A: We will watch out for rebidding because we are not sure whether there is any kind of scope change that is happening to the bid process now whether they want to modify certain scope of construction or whether it is change of model itself or what they exactly intent to do with it. However, we will certainly watch out for the new bid process as it comes through and we will take a call accordingly. Anuj: This is a large order; it forms 60 percent of your order book, so you must be wondering what happen. Will you be looking at any kind of legal option as well? A: There is no legal option because government always has a simple clause in every single bid whether it is road or anything else that they have an absolute right to cancel any bid without assigning any reason whatsoever. So there is no point getting into any litigation or anything of kind. So we will watch what they decide to do next and we will decide accordingly. Sonia: Give us a number. This will be a blow to your order book. How much does this shave off from your order visibility for the next one-one-and-a-half year? A: The order book had swelled from Rs 10,500 crore to Rs 16,000 crore. So the order book will now come back to around Rs 10,000 crore which is still a three years good visibility. As far as investment is concerned, it was only a Letter of Award that we had received. We have not incurred any investments into the project. So I do not see any financial loss as such but order book loss for sure. Anuj: No revenue impact for the next financial year? A: I don't think so. Sonia: Has this happened in the past when the government has gone ahead and cancelled randomly a huge order like this? A: Many times.