IL&FS Transportation has bid for most National Highways Authority of India (NHAI) tenders in the last 2-3 months. The company's arm has raised 690 million yuan or Rs 692 crore in a bond sale in March.
In an interview to CNBC-TV18, Mukund Sapre, ED of IL&FS Transportation, said the company has been awarded around 3,000 km of road orders by NHAI in FY15 and has been expecting another Rs 5,000 crore worth of add-on orders in FY16. The company has also been eyeing to bid for the 13-km Zojila tunnel project in Kargil, Sapre said.
Below is the transcript of Mukund Sapre's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: Can you start by telling us what are the tenders that have recently opened from the National Highways Authority of India (NHAI) and how is your own order book grown because of that?
A: This year they have closed at around 3000 kilometers of roads which have been awarded. The only new change what has come into place is that I think this government as they have also given a major outlay over allocation for more money they are also bringing in engineering, procurement, construction (EPC) contracts and then build, operate, transfer (BOT) contracts.
As IL&FS Transportation Networks Limited (ITNL) we are only active on the BOT scope as we outsource our construction and we don't participate in EPC. What we hear that there is going to be split of at least 65 percent coming on EPC and 35 percent on BOT. I think they are targeting fairly a large kilometer to be awarded in this year which is about 9000 kilometers. We do believe that they shall be in a position to award those things.
One good thing is that if you see that if a lot of things are EPC, the rush for the BOT bids is going to be less. So, that pattern you could see in last two or three months when there was only three or four bids. So, we personally believe that there will be six or seven serious players in the BOT space and rest all will be back to the EPC space where they will try to rectify the balance sheets. So, we look for an window of 12-18 months where this is going to be a far more limited competition in BOT space and we believe that there will be a pick and choose chance and move forward on that.
Also, there are two or three important things which this new setup is talking, you must have heard about the hybrid model. In fact the Finance Minister did talk of risk management or risk sharing to be relooked into. In that context there is talk and there have been a lot consultative process and one model they are talking is hybrid model where they are saying that 40 percent of grant will be given during construction and 60 percent will be you put in an annuity for that number. Total project cost will be the bidding parameter.
So, if you historically look that the project has suffered or the sector has suffered because of variance of total project cost. In this process the total project cost is going to be the key number where the project is going to be awarded. So, all of us are going to be on the same wavelength and that would bring the bankers also back into the foray as there has been little bit struggle on financially closing the projects. So, all of us are gearing up for this.
In terms of order we have around Rs 12,400 crore of job to be done. We added one acquisition of Rs 3200 crore; it is a tunnel - Srinagar Sonmarg Tunnel and we did one Railway Over Bridges (ROB) concessions, around Rs 3500. Ideally we would like to grow at around Rs 5000 crore of new add-ons for this year. We are very hopeful that this year definitely we will be targeting though we missed by around Rs 1500 and we did concentrate on implementation of whatever is in hand. Good thing is that whatever 27 projects, we will be completing by December 16, the whole portfolio excluding one which we acquired.
Sonia: You did say Rs 5000 crore of new add-ons in this year is what you are expecting. How many NHAI tenders have you bid for so far and what has the quantum been?
A: As far as the bid which has been put was earlier to March and there were two or three bids we have put in but with zero success rate. What we have done is only a Rs 3200 crore project acquired. This acquisition was a little bit different because we just acquired after the financial results were awarded and one ROB. So, technically we have not added on last year anything.
However, we have one interesting project which is Zojila. There are only two or three bidders for it and that project itself is around 9000 kilometers, it is a 13 kilometers tunnel in Jammu and Kashmir (J&K), almost goes up to Kargil area. So, that bid is going to come in June and we are one of the shortlisted bidders for that. It is an annuity project and we are concentrating on these two or three important projects to see that we build our book in this coming year.
ILandFS Trans stock price
On April 10, 2015, at 11:08 hrs ILandFS Transportation Networks was quoting at Rs 195.20, up Rs 0.75, or 0.39 percent. The 52-week high of the share was Rs 257.00 and the 52-week low was Rs 128.35.
The company's trailing 12-month (TTM) EPS was at Rs 15.12 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 12.91. The latest book value of the company is Rs 107.38 per share. At current value, the price-to-book value of the company is 1.82.
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