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We expect to be cash positive by year end, says Reliance Infrastructure

We expect to be cash positive by year-end, says Reliance Infrastructure

We expect to be cash positive by year-end, says Reliance Infrastructure
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By CNBC-TV18 May 7, 2018 7:07:52 PM IST (Updated)

"With the Adani transaction and Delhi Metro Rail Corporation (DMRC) award, we expect to move to cash positive by the end of the year," said Lalit Jalan, Chief Executive Officer, Reliance Infrastructure Ltd.

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Speaking on infrastructure business, he said that with the current order, our order book moves up to Rs 27,000 crore and added that company has a debt of Rs 12,000 crore.
Edited excerpts:
What is your stake in the joint venture? what is the timeline, when will construction begin and what will be the revenue contribution and so on?
This is the Bandra-Versova sea-link. It is one of the largest urban infrastructure projects in India. It is 17.2 km sea-link with four outlets connecting to the mainland between Bandra and Versovoa.
The timeline for the project is 60 months from letter of award, which is Saturday.
We have already started the pre-work and immediately after monsoon, we will start work on construction and we expect to finish the project ahead of the schedule.
The total revenue of the project over the next 4-4.5 years would be Rs 7,000 crore, which would be straight engineering, procurement and construction
(EPC) revenues for us.
What is your stake in the joint venture?
It is a 50:50 joint venture with Astaldi of Italy. It is one of the largest EPC contractor, largest bridge contractor with revenues in excess of three billion euros.
With regards to infrastructure business, your order books is burgeoning at around Rs 20,000 crore. You are getting orders right from the power business, the roads, railways – where do you see the strongest outlook coming from and how is demand looking like?
With the current order, our order book moves up to Rs 27,000 crore. Over the last year and half, we have taken orders in the power sector, including the nuclear power sector.
We have got award from Nuclear Power Corporation of India Limited (NPCIL), we have also got an award from National Thermal Power Corporation (NTPC) for flue gas desulphurisation (FGD).
In the transportation sector, we have won awards from metros, railways, roads and in heavy civil, we have won awards in tunnels and mega infra projects likes this Bandra-Versova sealink.
Given the current situation of private sector in the infrastructure space, we see huge demand for EPC orders. In fact, between mainly government of India projects and big state projects, we see almost Rs 300,000 crore worth of contracts been given out year after year and these will be across these spaces.
The other thing that I wanted to check with you was regarding the deal that you had signed with Adani Group for the Mumbai power distribution business. Now, there was some concerns that the deal might not go through given there was some red flags raised regarding the power tariff hikes. Can you tell us if you have got the approvals from MERC or the Mumbai Electric board and have you received any cash consideration for the transaction?
I am saying let us just focus on the EPC business for this call. Since you have asked the question, the deal is totally on track and we expect to close it in the first quarter by June.
Other think I wanted to check regrading infrastructure business was that there was a plan to bring in the InvIT, it was filed last year as well. Has that plan been shelved because we haven’t heard any update regarding that?
On the InvIT, what has happened is the market has not appreciated the product. So if you see the existing InvIT, which are listed are selling substantially discount, to the value at which they had giving out. So, we have shelved the idea of the InvIT.
What are you doing now, are you looking to sell these assets on a piecemeal basis? What are you doing to bring down your debt because you have been talking about getting to zero level when it comes to net debt?
Even without doing anything, our debts have come down substantially last year and with this Adani transaction and DMRC award, we expect to move to cash positive by the end of the year. We are separately working to monetise our road assets and getting discussion with some strategic players.
What exactly is the total debt on your books as we speak?
The debt is to the tune of Rs 12,000 crore.
Are you going to focus on the hybrid annuity mode (HAM) projects as well that have been flaunted by NHAI and what is the equity requirement for the order book that you have in right now? Is funding in place for the order book that you have right now?
EPC business by the very nature is a negative working capital business. The equity requirement is not there. Whatever equity that we needed for having equipment etc. is all already in place. The only thing that is needed is some initial non-fund limits, which we have in place so which is performance bank guarantees and advanced bank guarantees. It will be a self-funding business, so no separate equity requirement is there. We have all the approvals in place.
The reason I ask that because you had recently taken an approval for qualified institutional placement (QIP) of around Rs 2,000 crore. So is that something that might happen given the requirement or if you are saying there is not requirement they might be no QIP in the near future then?
QIP is an enabling resolution and we do it for strengthening our balance sheet.
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