The Hyderabad-based infrastructure company, IVRCL, is putting six of its 10 road projects on the block, to retire at least a fifth of the Rs 5,000-crore consolidated debt by the end of the current financial year. The company has also decided not to bid for new build, operate and transfer (BOT) projects for at least six months.
The company's BOT projects, which include 10 road projects, comprise Rs 6,800 crore of the Rs 27,000-crore order book that has to be executed in the next three-and-a-half years.
IVRCL Chairman and Managing Director E Sudhir Reddy said clearances and land acquisition, along with reluctance of the authorities in accepting cost variations, were posing problems in executing the public-private partnership projects, such as National Highways. "This is the reason why we have declared holiday with regard to bidding for new projects at least for the next six months," he told reporters here on Monday.
There has been an impact of Rs 600 crore in terms of receivables, which got stuck due to these problems, according to him. The company's revenues for the last financial year declined 12 per cent to Rs 6,178 crore and net profit was down by almost 90 per cent to Rs 18.08 crore.
While the company had already sold its equity in a Maharashtra road project for Rs 231 crore with a net profit of Rs 117 crore coming from the sale, it has proposed to sell three road projects soon and three more by March 2013. The three road projects to be sold in the first round are in Tamil Nadu — Salem-Komarapalayam, Komarapalayam-Chengapalli (already collecting toll) and Chengapalli-Walayar, which is expected to start shortly.
The cost of these three projects is about Rs 2,200 crore, according to the company officials. IVRCL expects to receive Rs 1,000-1,100 crore from the sale of the six road projects, the proceeds of which would be used to retire the debt, according to R Balarami Reddy, executive director and group chief financial officer.
Currently, the company's interest outgo is about Rs 30 crore, while the cost of overheads is around Rs 25 crore. A top line of about Rs 4,500 crore is sufficient to break even in a given year, while anything that comes on top of it will only add to the profit, according to him.
As the execution of BOT projects and the top line growth are getting difficult in the current downturn, the company is looking at ways to cut down cost, Sudhir Reddy said. It has already reduced its personnel by 15 per cent.
| TAKING ROAD TO RECOVERY Six projects will go for sale; STL, KTL and ICTL have been put on the block | |||
| Name | Stretch | Status |
Cost (Rs cr)
|
| STL | Salem-Kumarapalayam | Under operation | 646.58 |
| KTL | Kumarapalayam-Chengapalli | Under operation | 446.78 |
| JATL | Jalandhar-Amritsar | Under operation | 410.62 |
| IIGTL | Indore-Jabhuva | Under construction | 1,523.71 |
| ICTL | Chengapalli-Valayar | Under construction | 1,123.00 |
| SPB | Baramati-Phaltan | Under construction | 382.12 |
| Chandrapur | Karanji-Wani-Ghuggus-Chandrapur | Under construction | 735.99 |
| Riipur Bilaspur | Raipur-Bilaspur | Under development | 1,286.00 |
| Jundugolanu | Rajahmundry-Gundugolanu | Under development | 1,646.55 |
| Patiala | Patiala Sangrur-Barnala Bhatinda | Under Development | 1,657.00 |
| Source : IVRCL | |||
International focus
Sudhir Reddy said they were now focusing on increasing the overseas business with an objective to raise the contribution from such projects to half of the company's top line in future. Its overseas order book now stands at Rs 2,700 crore, coming from Kenya, Kuwait, Nepal and Sri Lanka. These are irrigation and water projects, including a hydroelectric power project in Nepal.
