Will look at PPP projects only when model tweaked: NCC

A: No, we are not in that category. All our projects have been already completed.

Latha: Separately we have also spoken to the road secretary and he had indicated that -- if I am not mistaken 13 projects were put on a special dispensation where the government was going to provide more of the equity element and take a little more of the risk so as to ensure that road projects get kick-started, are you a beneficiary in that category?

A: No, I don’t think we are there but overall the public private partnership (PPP) model, which has been working for the last ten years has not delivered because of variety of problems and also issues from the government agencies particularly in terms of land acquisition delays and all and there is a need to set right the PPP model and I think the government will take action in the direction.

In fact, the finance minister was also mentioning that he is going to revisit and revitalise the PPP model. One of the issues that is coming up is that the government may participate in the PPP projects on the equity side. If that happens, that will be a good thing for the industry.

It gives a lot of confidence to the private players who are already putting equity in these special purpose vehicles (SPVs) and all this gives a lot of confidence to the lenders who are lending these individual projects and also it will become a real public private partnership in the true sense of the term. I only wish it happens.

Latha: When you say they will participate on the equity side, don’t they at the moment participate at all?

A: No, they don’t participate at all. It is only a concession agreement and also they take care of land acquisition and things like that which are the client related issues but if the client is becoming a partner in the SPV with equity participation that shows their commitment to the project and that also makes our job much easier. To that extent, my equity contribution can come down.

Latha: Have they indicated how much equity they will come in with?

A: This is a newspaper item, I do not know to what extent it is true. It is about 40 percent.

Reema: Yesterday Nitin Gadkari told us that they are looking at that new model concession agreement, where 40 percent equity would come from the government and 60 percent a concessionaire. Would that model be extremely attractive then or would you require some more from the government?

A: That will be good.

Latha: Have they looked at any other kind of structures in the sense of reducing your risk when underwriting it?

A: That has not come but basically the systemic problems in terms of land acquisition, in terms of getting approvals all these are taken care of and also the improvement is there in getting the approvals. That will help us to see that the road projects are completed faster and quicker.

Latha: There is also a move to float infrastructure bonds for some of these infrastructure projects as well they are looking to start an infrastructure fund of Rs 20,000 crore, which hopefully is going to raise -- do you think that investments by such entities is going to increase the amount of infrastructure projects you will undertake, will it increase liquidity?

A: Absolutely. The main problem we are facing is funding for the projects even on the debt side. Public sector banks have got very high exposure and they are strained because of that exposure.

So naturally it is coming but some entity must be coming to the rescue of these road projects and also the government is planning some EPC contracts that is cash contracts that will also be a good thing to start with. In fact, before the public private partnership model came into being, a lot of projects were given out on EPC basis and we have successfully completed those projects.

Latha: What is your order book?

A: We have an order book of about Rs 20,000 crore.

Latha: As it has shown a tendency to increase lately say in the last 6 months?

A: At the grassroot level I can share with you the order accretion has improved quite nicely for us and also the margin are also improving mainly because the competitive intensity has come down to some extent.

Reema: The government in the Budget as also increased the out lay for the roads by Rs 14,000 crore. What will this mean in terms of ordering the tenders that we could expect in FY 16 as well as the growth for the company like yours?

A: They have a good pipeline that is what we understand but as a company we have taken decision at a board level not to go for build-operate-transfer (BOT) projects unless improvements are there in public-private partnership (PPP) model. So as of now we are looking at only cash contracts.

Latha: Can you just give us an idea of the trend. Has FY15 been better than FY 16 in terms of order flows and Do you see a distinct possibility of FY16 looking better than FY15?

A: FY15 was a good year for us as far as order flow is concerned. The current year we have so far received about Rs 6,400 crore of orders and our target is about Rs 8,000 crore. I am very confident in the fourth quarter the balance orders will also be received so it is looking good. In fact one year back FY 14 also gave us almost Rs 10,000 crore of fresh orders which has come as a pleasant surprise so that is the foundation on which we are talking about FY16. I am very confident the order accretion should be quite strong in the next financial year also.

Reema: If the government does start upping the equity that they put in this new PPP model would you then be interested in BOT projects?

A: It is a good question I can not stick my neck out at this stage I have got to go to the board of the company and seek the board approval based on the improved parameters for PPP projects.

Latha: Just a word on what you will make next year? Your 9 months standalone was Rs 6,087 crore revenues and margins 7.8 how will they look in FY16 you think?

A: They should improve further, in fact current year we already reported margins expansion 7.8 as you right said compared to 6.6 percent EBITDA last year for the year as a whole. So that is the margin expansion I am also talking about because we are getting new orders with better margins. We expect the trend to continue; on the FY16 we are confident we reach EBITDA of 8-8.5 percent.

Latha: What will your debt be?

A: Debt we have reduced, we have gone for rights issue. The debt-to-equity is currently at around 0.7. The absolute number being Rs 2,200 crore on a standalone balance sheet. We are planning to see that we will not increase the debt further and increase the topline by about 10-15 percent.