See 19 projects operational by FY17: ILandFS Transportation

ILandFS Transportation will raise Rs 750 crore via rights issue. Speaking to CNBC-TV18, Mukund Sapre, ED, ILandFS, says the company finds rights issue to be a better option to mobilize equity because of the stock prices. With Rs 37,000 crore of assets on the ground, the company is looking for one or two annuity asset selling to address the debt issue, he says.The company will have around 19 projects, which will be operational by FY16-17.Below is the transcript of Mukund Sapre's interview with Reema Tendulkar & Mangalam Maloo on CNBC-TV18.Mangalam: The board has approved the right issue. What is that rights issue for and are the promoters allowed to participate in that or will their stake holding go down post this rights issue?A: There is so much of activity now seen in port sector and things are falling in place and revival is taking place. So, this issue is going to help us to add on and move forward from here. The way things are going to come for bidding and also it will be ready with utilising the proceeds for meeting our equity requirements on the existing stuff and also for the newer projects to come and I believe the promoters can subscribe to the rights issue. IL&FS holds around 70 percent and they will be subscribing because the way stock prices are today, rights is the better option for us to mobilise the equity.Reema: So, promoters to participate in the rights issue and the money used will be used to meet the equity requirements for the existing and new projects. So, no part of this money will be used to pare down your debt?A: Actually, once you have this requirement of equity is always an incremental thing. So, we will definitely see to it that we pay something at the holding company (holdco) level and then maybe come back again and see and remainder of those debt-equity levels for holdco and borrow from that.So, whatever immediate needs there are, will be part of this and then subsequently as you would see, it is almost one and half years of cycle where you need to plough on equity because after putting about 50 percent of equity, you can always draw down debt and then put on keeping incremental part of it. So, yes, there will be some deep repayment of the debt, but subsequently will be used for this purpose. Mangalam: What is your current debt on the books right now because we see your finance costs which have jumped by nearly 24 percent in this quarter itself.A: Actually, our consolidated debt is lying at around Rs 24,000 and holdco is at around Rs 8,400 and the way things are going and whatever we are planning for this, we believe that March, 2016 at holdco level, we will be closing at around Rs 7,500.Actually, one important parameter needs to be taken into account that we are having around Rs 36,000-37,000 crore of assets on ground out of which Rs 12,000 crore are operating assets and balance Rs 12,000 is work in progress and Rs 10,000 to be completed. So, that is why the ratio of this operating asset versus assets under construction is something which is going to change in 2016-2017 wherein we will be commissioning all the projects. So, we will have Rs 36,000 crore of yielding assets versus the balance whatever Rs 8,000-10,000 our works to be done. So, the debt levels, I would say, that are definitely going to look down from 2016-2017 onwards.And finally, we are also looking for some asset selling to address this issue, but that is dependant we cannot plan it out but definitely we are planning one or two annuity assets to be done this year for asset divestment. And that is how this is going to span out in totality. But the size of the asset on the ground also needs to be seen in that context. It is almost like Rs 37,000 crore of assets on the ground.Reema: About this asset churn, will you do any asset churns in FY’16, if yes, which projects and what will be the rough size?A: We will be targeting around 2-3 of annuity assets which are commissioned and our NHAI and state-level projects. So, that should throw us at least Rs 400-500 crore of return to us after divesting those. Mangalam: The last time you spoke to us you indicated that there would be an inflow of about Rs 5,000 crore worth orders in this financial year itself and also you said that there was some big tunnel project that you were looking to bid in mid-June. So, what is the update on that right now?A: Actually if I add on these four new wins, I have signed one concession for about Rs 580 crore in Jharkhand, we have signed one Rs 325 crore concession in ROBs in Gujarat and we were L1 for two of the projects, so practically we are there at Rs 5,000 crore, we will be signing those two concessions very soon in 10-15 days which are Amravati- Chikhli and Fagne-Gujarat border, these are the National Highways Authority of India (NHAI) mandates.Coming back on the tunnel, actually the bidding did happen but it was our sole bid and being a large project, the bid was not opened and returned to us unopened. I believe in the new schedule they have come out with single state bidding and by November you have to put a technical and a financial envelope and November will be the which is Zojila tunnel, it is definitely a 13-14 km long tunnel and a big project but that comes back on the bidding again and will be in November. Reema: In your conference call I remember you had indicated that you were awaiting a final approval on two projects, Jorabat Shillong and Baleshwar –Kharagpur and at that time you had said that you expect these to get commissioned very soon. Any update?A: We already have applied for Commercial Operation Date (COD) of both the projects and we are awaiting-it should be any day, COD should be in our hand in coming week’s time and for this year we are going to have Sikar-Bikaner, Baleshwar –Kharagpur and our Jorabat Shillong getting added to the COD commission projects. All those safety audits are on and we believe in coming 15-20 days we should have COD of these two projects in hand and subsequently we will add up with third one in this year itself. Reema: So how many projects will get commissioned in FY16, how many in FY17 and also how many projects will be operational by the end of this year?A: In terms of numbers, we will have around 19 to be operational and excluding one in FY16-17 which is a tunnel which started just two months back which is Srinagar Sonmarg Tunnel, rest all gets completed. So, we have around 28 mandates out of which 27 will be through - I am not talking of the new ones which are still to be financially closed and move on ground but balance whatever the 28 mandates, 27 will be over on the Smart and Secure Trade Lanes (SSTL), one will be remaining, that will go beyond this because that is around five years of construction on SSTL.