MEP Infrastructure has received toll collection rights from National Highways Authority of India (NHAI) to collect user fee on Surajbari Toll Plaza.Speaking to CNBC-TV18, Jayant Mhaiskar, Vice Chairman and Managing Director of the company says that MEP has won the bid the second time in succession and it will add Rs 81-82 crore to the company's revenues.The net contractual amount payable to NHAI is Rs 74.07 crore as a weekly installment, he says.The company's debt is likely to fall by Rs 100 crore by end of March 2016. He believes debt for Mumbai project will be amortised over a repayment period 9-10 years. On the Delhi Entry Point project, he says it is in consortium with four other players and it would generate Rs 100 crore. Below is the transcript of Jayant Mhaiskar’s interview with Sonia Shenoy and Nigel D’souza.
Sonia: Can you just tell us what this contract amounts to in terms of how much you will be getting into your books and when will the revenues start to flow in?
A: Surajbari is a project for which we are already doing tolling for National Highways Authority of India (NHAI) for the last one year. This project was rebidded which the company has won for the second time in succession. We will be paying the authority Rs 74.07 crore for a period of one year beginning from the date of commercial operations date (COD) which will be 15 days from now. The tolling will start from day one.
Nigel: This is a one-time payment, this Rs 74 crore?
A: No, basically, this is a weekly instalment which will be more of a collect and pay kind of nature.
Nigel: Could you give us some revenue projection for the next one year that you can expect from this particular project? What will add to your topline, what will add to the bottomline? Some rough estimate?
A: On the topline we expect anticipated total revenue of around Rs 81-82 crore on this project out of which Rs 74 crore would be paid towards the Authority instalment. The balance would be utilised towards the operation expenses on the project and the balance would be the profit.
Sonia: In Q1, in the quarter that went by, the toll collection from the Delhi entry point project also began, right? What kind of revenue contribution would you expect from that?
A: Delhi entry point is a project which has been bidded under consortium with four of us as a part of the consortium. We have already started the tolling from the month of May. We saw some numbers coming out from the project for Q1. In Q2, we will be able to get a total of close to around Rs 100 crore plus from the project in terms of the total revenues of which our part of the company would be around 25 percent._PAGEBREAK_
Nigel: There are a lot of news reports. I wanted to get your take on that. There is some news that is doing the rounds that you are planning an infrastructure investment trust, you are planning on unlocking value. How true is that?
A: Basically, the Infrastructure Investment Trust is a new concept which has been approved by the Sebi and the authorities in terms of companies which are getting into more capital intensive works including upfront payments. Infrastructure investment trust allows us to unlock value in terms of shifting the debt to a lower coupon; I would say equity kind of a structure wherein large number of pension funds and foreign investors will be able to directly participate. So, this is one of the options which we would be exploring to bring down the cost of borrowing down.
Sonia: Overall, what are you targeting in terms of debt reduction in the next 6-12 months because one of the reasons why your stock has been under pressure also is because your debt continues to be very high at around Rs 3,000 crore. What can we expect in terms of debt reduction?
A: In terms of the debt reduction, largely the debt comes out of one single project which is the Mumbai project which is a large debt which is spread over repayment period of next nine-and-a-half to ten years from now. So, the portion would be amortised more in a ballooning manner because the toll revenues are linked to toll tariff hike of 18 percent and the traffic growth which is one large amount of debt.
The second debt portion is largely on account of the working capital limits what we enjoy for each project, which is ideally repaid or which gets charged to the next year based on the number of projects which we win. As far as reduction in debt is concerned, we expect close to around Rs 100 crore of debts being reduced by end of March, 2016.
Nigel: Could you give us a couple of points - Rs 100 crore of debt will be reduced, what will your finance cost look like by the end of this year and also what is your borrowing cost currently? We have seen a big rate cut come in from the RBI. So, you expect that to be passed on and what could that mean in terms of your finance costs coming lower?
A: The current cost of borrowing for the large Mumbai project is in the range of 11.5-11.6. As far as the working capital limits are concerned, we are in between 12-12.5.
I give a thumbs-up to the great result by RBI in terms of giving the 50 basis points cut on the rates. However, most of our borrowings are linked to the base rate of individual banks. So, we have already started writing to the banks and trying to get what best reduction in terms of rate cut pass on which will be done to the company. We expect anywhere between 25-40 basis points on the rate reduction including the Mumbai project which is a large debt of Rs 2,500 crore.
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