Current orderbook at Rs 3200 cr, executable over next 3 yrs: MEP

Below is the verbatim transcript of Jayant Mhaiskar’s interview with Nigel D’Souza on CNBC-TV18. Q: Just looking at your numbers, there was no growth on the topline so could you give us a couple of details, what was the traffic growth for the past quarter and going ahead as well how do you see the traffic growth shaping up? A: Basically, MEP Infrastructure has clocked, I would say steady numbers of Rs 2,000 crore as we had done in the last year. This is predominantly on two counts, MEP Infrastructure predominantly works into three buckets, one is hybrid annuity, operation, maintenance and transfer (OMT) and tolling business. In the tolling business which is a one year concept, the company operates NHAI as well as various multiple authorities where the toll is collected and the projects are handed over back to the authority after the completion. The company handed over five such projects in Q3 of this financial year and also bagged another five in Q4. So, apparently the entire revenue for those five projects which were awarded in the last quarter would be coming up in this current financial year i.e. FY16-17 where we will definitely see some growth. Apart from which in terms of the traffic growth if you ask, the growth has been steady around 5.5-6 percent on multiple projects which are being operated over the long term. Q: You were talking about a couple of orders coming in there, you said traffic growth has been around 5-6 percent, going ahead do you look at upping this traffic growth from that 5-6 percent and also what is your total order book as of now? A: As far as the total order book of the company is concerned, we are very happy to say that company has now ventured also now into the hybrid annuity model which is predominantly the construction of roads on EPC basis which are in the hybrid annuity format in which the government gives you 40 percent grant and the balance has to be brought in by the developer by way of debt or equity. The current order book of the company on hybrid annuity is around Rs 3,232 crore to be executed over the next three years. This is over and above the tolling and OMT business what the company is already doing. Q: The total order book you said Rs 3,000 crore for the hybrid annuity and business and for the tolling business what is the total order book? A: The current long-term order book what the company has is in the tune of Rs 1,200-1,300 crore. The balance Rs 600-700 crore is a floating number which comes out of the one year tolling which the company continuously builds. However, having said that, what we understand, the government is also exploring or going forward on the TOT concept which is the toll, operate, transfer where the short-term tolling contracts would gradually be shifted into a longer duration contracts where the upfront money would be paid so the likelihood of short-term tolling going down and adding on the long-term business is more likely. Q: Let us talk about your margins then. It used to be at around 30-31 percent. Now in the last quarter at least it has come down to around 25-26 percent. What exactly caused this and going ahead do you see an uptick from these margins of around 25-26 percent? A: I am happy to say that EBITDA margins if you see on a standalone basis, have gone up by 6 percent. On the PAT level, we are almost 3.8 percent on the standalone basis. As far as the consolidated basis is concerned, we are again on the 6 percent number on the EBITDA margin and the PAT positive what we have turned into last three quarters has continued and we have clocked a PAT positive almost 2.5 percent this year. Q: We are looking at the consolidated margins and that is at around 25 percent so that has seen a decline from around 30 percent, I am saying about the consolidated margin. Could you throw some color on that? A: The company has registered a PAT positive number of Rs 25.33 crore in this financial year as of the entire year per se. If you see quarter-on-quarter (QoQ), in fact the consolidated number has gone up from Rs 5.28 crore in the last quarter to Rs 10 crore this quarter. Q: Could you tell us what is the total outstanding claims that you have with NHAI, is that level high or what is that number? A: In terms of the percentages concerned, the claims would be roughly around 7-8 percent of the total revenues what the company is clocking. Most of the claims are on order of force majeure accounts which are predominantly I would say there is a specific project in Chennai which has been handed over back to the authority. The claims should be settled over a period of time. Q: 7-8 percent would amount to how much and the final question from us, you have bagged an order couple of days ago, what exactly is the return on equity (RoE) that you are expecting from there, could you give us some details? A: In terms of the claims I would say roughly between Rs 80-90 crore on account of the force majeure account which has been already claimed with the authority. The Chennai claim would be in excess of Rs 300 crore but as per the understanding with the authority, neither the authority would be paying us anything, we would not be liable to pay anything with authority. So, excluding that, claims would be roughly around Rs 70-75 crore. As far as the order book is concerned, in terms of the new order what the company has bagged is on the Talaja-Mahuva which is in the state of Gujarat which is a hybrid annuity project where the company has to execute this order of Rs 600 crore plus in the next two and half years. The estimated annuity in terms of realisation would be in excess of around Rs 800 crore in the next I would say three to four years post construction.