To focus on BOT projects: maintain 10% mkt share: IRB

With the infrastructure space taking a beating in the last one year the question is are things improving for the sector.VD Mhaiskar, chairman & MD of IRB Infrastructure is quite upbeat on the sector's future. According to him there is likelihood of additional bids being announced for build, operate and transfer (BOT) projects of around 2000-3000 kms. So the company aims to focus on BOT projects and not look aggressively at engineering, procurement and construction (EPC) projects, said Mhaiskar.NHAI has announced to award around 8000 kms projects out of which 5000 kms would be bid for EPC and rest would be BOT projects.The compnay has a very good  order book visibility for the next four years, said Mhaiskar. However, for the completion of the ongoing projects the company would require equity to the tune of Rs 3500 crore said Mhaiskar.

IRB Infra plans to maintain the debt-equity ratio at 3.3:1 or try to maintain it at 3:1, he added.WIth regards to fund raising, he said as of now the company hasn’t decided on how they would raise funds but would look at appropriate options when the time comes.The company aims to maintain its current market share of 10%Below is the verbatim transcript of VD Mhaiskar’s interview on CNBC-TV18 with Latha Venkatesh and Sonia Shenoy.Q:  What are you seeing in terms of the pipeline of projects that NHAI has awarded?A: NHAI has been on record saying that they want to award almost 8000 kms plus in the present financial year. And to our understanding around 5000 kms would get bid out on EPC while the rest would be bid out on BOT basis. As regards the IRB is concerned we have already backed 450 kms of projects in this financial year. So in terms of our market share we would be doing more than 10% this year, and going forward we would like to maintain our market share.Q: You will require roughly Rs 3,500 crores of equity in the next 3 to 4 years, would it be through Q-I-P or some capital raising plans be likely?A:  You are right the projects in hand would require an investment of around Rs 3,500 crores of equity going forward and although we have a strong balance sheet, good cash accruals, we would take an appropriate decision at an appropriate time with regard to ensuring that the debt equity ratio doesn't go beyond 3.3:1 or maybe more comfortably at 3:1. So we would look at options going forward at an appropriate time.Q:  By when can we expect any fund raising announcement?A: We have not crystallised anything as yet, but with the Bombay-Pune order coming in yesterday, certainly we would look at this requirement more closely now. And we'll come out with more clarity soon.

Q: Out of the NHAI projects that are going to come up for bidding.. is there a number to quantify how many projects you will be interested in bidding for?A: See as I said we expect 2-3000 kms getting bid-out on BOT basis. That would be the focus area for IRB. And 200-300 kms is more that something more that we would like to look at.Q: Is the EPC option completely ruled out or will you look at EPC projects also?A: So long as we have visibility on the BOT space and we are able to get prjojects on BOT we would certainly liked to remain focussed on BOT projects. In case if there is no BOT project and if there is no orderbook remaining intact then certainly we can look at EPC. But at the moment we don't see that situation arising because we have a very good visibility on the orderbook for next 4 years.Q: Could you give us a word on the premium rescheduling of 2 road projects that you have asked the NHAI, what is the amount of benefit to you?A: These both projects have long concessions and because of the long concessions agreement you have a cash flow mismatch in the early stage of the project. As a result of that the cash shortage would have been required to be funded by way of sub-debt during that period. Now with NHAI allowing to defer those premiums whereby they are removing this mismatch. No doubt we will have to pay a higher amount in later years including the interest costs for the differed amount. But that would remove the mismatches in the cash flow which would have otherwise occurred in the first few years. And that mismatch amount which we would have been forced to fund by way of a sub-debt into the project can now be used to fund equity for a new project. As a result the appetite and the capacity of the company to grow bag more projects certainly goes up.Q: Also if you could talk about the traffic growth as the NHAI is currently very strict when it comes to ensuring checks and balances on the tolls. H ave you'll received any guidelines from NHAI to keep more checks and balances in place?A: Wherever NHAI has a revenue share, it is very much necessary for them and its quite understandable that they would be keen to see that there is no under reporting and the revenue number that they are getting is upto the mark. So if they want to do any kind of checks they are most welcome. Today we have one of the most sophisticated equipments in place wherein we are able to check the revenue sitting in our offices itself. So we are already in the process of ensuring real time revenue reporting to them and with that coming in place I don’t think this issue will remain a pain point going forward. As regard your specific question, no we have not received any such intimation from them for any of our projects.