Ashoka Buildcon did well in trade today after the finance ministry gave nod for the premium rescheduling of road projects. The stock was up more than 3 percent to Rs 63.50 at 15:00 hrs. Satish Parakh, MD, Ashoka Buildcon spoke to CNBC-TV18’s Reema Tendulkar and Sumaira Abidi regarding the premium on the projects and the expectations going ahead.
Also Read: Most road projects awarded may see re-bidding: Gammon Infra
Below are excerpts from the interview:
Sumaira: Which projects of yours would benefit from this?
A: We have two projects which will benefit. One is Dankuni Kharagpur and other is Belgaum Dharwad. These are two projects which attract premium.
Reema: Could you tell us for these two projects, what will be the project cost and also what is the premium?
A: In Dankuni Kharagpur, the project cost is Rs 2,200 crore and the premium that we are paying every year is Rs 126 crore which rises by 5 percent every year. However, for Belgaum Dharwad, this is a project around Rs 700 crore and here we are paying a premium of around Rs 40 crore every year.
Sumaira: Would any of these be either four or six lane projects because yesterday when we spoke with the NHAI chairman, RP Singh, he had suggested that four-six lane projects would not benefit from here?
A: These are four-six lane projects and the policies are yet not out from NHAI but we feel we should be benefiting since they are premium based projects.
Reema: According to the norms the developers will also have to pay interest which is equal to the bank rate plus 2 percent rate on the premium that is going to be deferred. A few people that we spoke to yesterday said that could act as a bit of a dampener, your thoughts on the same?
A: NHAI has not come out with the definition of bank rate. We are not very sure whether this will be less than our borrowing cost or more than our borrowing cost. It will all depend upon the clarity we receive from NHAI.
Sumaira: In the absence of this complete information by the NHAI, are there any grey areas that you foresee some areas which could prove to be problematic?
A: They have not yet come out with escalation policy for the projects that are delayed and have not yet started and they have to clarify what bank rate will be applied for rescheduling the premiums. These two will determine whether the concession route opt for this policy or not.
Reema: You also have two more projects that are on premium basis, so Cuttack-Angul as well as Sambalpur-Baragarh. Why does these two projects do not qualify for this premium rescheduling?
A: Sambalpur is very much in advance stage and we have a very small premium in Sambalpur, so it will not benefit from this scheme. Cuttack-Angul is a project which was awarded to us two-and-a-half years back. This has delayed substantially, so the policy has come out very late and there is no clarity on escalation and so, we may not opt for this. This is already in dispute with NHAI and we have given a termination notice for this.
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