The company is considering raising money from investors including sovereign and infrastructure funds by March for unit L&T Infrastructure Development Projects Ltd., Chief Financial Officer R. Shankar Raman said in an interview in Mumbai, declining to elaborate. Larsen said last month it’s considering the sale of some of L&T IDPL’s assets, including an initial public offering and listing in Singapore of some road projects.

Larsen wants to find additional sources for funding projects, reduce its own financial burden and raise its profile overseas with the listing of a unit. The step comes as Larsen’s interest costs almost doubled in the year ended in March and its operating profit margin was the lowest in four years.

“L&T is not selling distress assets, it is for discovering growth capital,” Raman said. “It has to monetize its assets so that L&T doesn’t have to put anything more from its balance sheet to complete existing projects and add on new ones.”

Shares of Larsen have risen 2.7 percent this year, compared with the 5.4 percent fall in the S&P BSE India Capital goods index.

Larsen will be competing with other companies that also have assets for sale, according to Viral Shah, an analyst at Angel Broking Ltd. in Mumbai.

‘A Lot of Sellers’

“There are a lot of sellers in the market and a limited number of buyers,” said Shah. “It would be difficult to command a premium on an asset in such a market unless it’s really very lucrative.”

Larsen has said it’s considering a listing in Singapore of some road assets of the unit L&T IDPL through a business trust.

A listing for its toll-road projects could raise about $700 million, two people with knowledge of the process said in September. The road portfolio of the company is valued at 220 billion rupees ($3.6 billion), according to the company’s website, with 12 operational projects.

Private equity fund Old Lane LP owns 2 percent in L&T IDPL. Larsen is trying to cut its stake in the unit to 80 percent from 98 percent, Raman had said in May.

The Indian government has been trying to encourage investment from abroad, including by sovereign funds in infrastructure projects. In September last year, the government said IDFC Ltd. and Malaysia’s sovereign fund would form a special entity for road projects in India.

GMR, IVRCL

GMR Infrastructure Ltd. (GMRI), an Indian builder of roads, utilities and airports, said in September it sold 74 percent stake in unit GMR Ulundurpet Expressways to Indian Infrastructure Fund of IDFC for 2.22 billion rupees. In April, IVRCL Ltd. agreed to sell its stake in three toll-roads and had also said it planned to sell stakes in some more projects.

Larsen has committed to invest 100 billion rupees in equity in L&T IDPL, Raman said. More than half that amount has been invested. The unit has developed and constructed the projects and now wants “secondary investors to move in to take on only revenue risk,” Raman said.

“And when they look into India, they can’t possibly see a healthier set of assets,” said Raman. “Others are selling to redeem debt.”

Larsen, which was founded by two Danish engineers in 1938, started with the import of machinery from Europe and then expanded to provide engineering and construction assignments. In 2011, the company split into different business units and subsidiaries as part of a reorganization to boost growth.

Portfolio Review

The company reviews its portfolio every five years to evaluate what is core for the business, Raman said. Engineering and construction is core and not dependent on other businesses such as electrical products, machinery, financial services, build-and-operate business and information technology, he said.

In 2011, it listed L&T Finance Holdings Ltd. after an initial public offering.

The company’s financial services, information technology and the business of building and operating toll-roads, ports and other infrastructure for specified concession periods under L&T IDPL are in separate subsidiaries, said Raman.

“They keep throwing annuity cash in good times and bad, neutralizing the risk of an erratic construction business,” said Raman. “As of now our call is to keep these assets as supports, but this is not cast in stone.”

Funding Opportunities

Assets that are not key to its main business can be monetized if there is a large opportunity elsewhere that needs to be funded, Raman said. Among the businesses that it could consider for sale to help raise funds includes L&T Infotech, he said.

“Our idea for now is to keep it and grow,” said Raman. “If we get a large acquisition opportunity that Infotech sale can finance, we’ll look at it. But it won’t be a mindless deal.”

The company had 110.3 billion rupees in cash and short-term investments as of March 31, according to data compiled by Bloomberg.

Larsen’s revenue will probably increase at the slowest annual pace in four years. Sales will rise 11 percent to 826 billion rupees in the year ending March, according to the median of 24 analysts’ estimates compiled by Bloomberg. Net income will decline for the first time in three years, according to the analysts’ estimates.

While India’s economic growth quickened last quarter from a four-year low on higher factory output, a revival is threatened by looming interest-rate increases to fight rising prices. After expanding at an average 8 percent in the five years through March 2012, the economy grew at 5 percent in the latest fiscal 12-month period.

“International investors have a difficult time assessing value of infrastructure projects in India,” said Raman. “Because the growth picked up very fast and then slipped very suddenly.”

Source-http://www.businessweek.com

Rural roads in the State are set to get further strengthened with the Union Ministry of Rural Development on Monday according conditional clearance for upgrading 2,245 km of rural roads at a cost of Rs. 1,071 crore under the Pradhan Mantri Gram Sadak Yojana (PMGSY) II.

Union Rural Development Minister Jairam Ramesh on Monday wrote to Chief Minister Siddaramaiah conveying the decision of the empowered committee to accept the State’s proposal. He said, “I would request you to direct the department concerned to expeditiously send the compliance report on the observations of the committee to the Ministry to enable us to issue the formal clearance for the proposal soon.”

Meanwhile, the Ministry conveyed the final sanction for balance work under PMGSY I for 28 road and 39 bridge projects. The empowered committee asked the State government to correct the proposal module and upload it on Online Management, Monitoring and Accounting System (OMMAS) with regard to detailed reports of these projects.

Scaled downWhile the State had sought PMGSY funding for upgrading 2,550 km rural roads with 360 roadwork at a cost of Rs. 1,217.77 crore, the committee said that the State’s entitlement under PMGSY II was limited to 2,245 km only. It asked the State to limit the size of the proposal within the entitlement based on the utility value of the roads. It said that the balance proposals beyond the limit could be kept in the detailed project reports bank and may be taken up once a policy decision on the matter is taken by the Ministry.

ComplianceBefore issuing the final clearance, the State government should adhere to PMGSY II guidelines regarding detailed project reports, the committee said. The roads proposed for upgrade should be “through routes” and major rural link roads leading to growth centres or rural hubs. Such roads, after upgrade, should be declared as Major District Roads.

It said that proposals for carriageway width less than 3.75 m may not qualify under PMGSY II while proposals for carriageways with width more than 5.5 m may have to be funded by the State government on pro-rata basis. On fulfilling these conditions, the Ministry would accord final clearance for the proposals, the committee said.

Source-http://www.thehindu.com

KATHMANDU, DEC 10 -The government is upgrading four important trade routes to six-lane to facilitate bilateral trade with India and China.Out the four routes, upgradation work has already started on Butwal-Belhiya and Rani-Itahari routes, while the work on Surya Binayak-Dhulikhel and Birjung-Pathalaiya sections is yet to begin.

Based on the importance of the routes, the Department of Roads (DoR) had implemented “Trade Route Improvement Project” to upgrade and widen the four selected sections of trade routes to six lanes three years ago.

The four routes play a vital role in the bilateral trade with the neighbouring countries.

Narrow roads , traffic congestions and lack of parking facility have long remained as major problems on these routes, according to traders.

“The widening of the road sections is expected to help make timely delivery of goods allowing easy movement of large trucks and containers,” said Shankar Prasad Pandey, chairman of Trade Committee of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

He said despite increased traffic, the road infrastructure remained the same for years hindering cross-borders trade.

According to the Doing Business Index 2013 released last month by the World Bank, Nepal has not made any reforms when it comes to cross-border trade. The country slipped to 177th position in the trading across borders indicator in DBI 2013 from 173 earlier. Exporting a standard container requires 11 documents, takes 42 days and costs $2,295 from Nepal, according to the report.

Despite the need for an urgent upgradation, the department has not been able to carry out construction on all four sections at once due to budget constraints.

With the government failing to allocate adequate resources, the department is considering upgrade the 15.4 km Suryabinayak-Dhulikhel section of the Araniko Highway with soft loan from the Japan government. Similarly, a study is being carried out for the improvement of Birgunj-Pathlaiya (28 km) section under the build-own-operate and transfer (BOOT) modality.

“We are studying the feasibility for upgrading the road from Raxual to Pathlaiya under the BOOT system,” said Gopal Prasad Sigdel, chief of the Asset Management, Contract Management and Quality Control Project of the department, which oversees the Trade Route Improvement Project.

He said Japan International Corporation Agency (JICA) has been holding a study, expressing interest in providing soft loans to Nepal for the Suryabinayak-Dhulikhel section.

Department officials said Japan as expressed interest in providing the loan at 0.1 percent interest with a 30-year repayment period and 10-year grace period. The Tinkune-Suryabinayak section was also upgraded to six-lane under the Japanese grant assistance.

The Suryabinayak-Dhukhil section is estimated to require around Rs 3 billion, Birgunj-Pathalaiya Rs 5 billion, Butwal-Bhairahawa Rs 2.6 billion and Rani-Itahari Rs 4 billion. The government has planned to take the Rani-Itahari road to Dharan. The officials said the work is expected to complete within the next five-seven years.

The government this fiscal year provided Rs 940 million to the project (all four routes).

Currently, the department is working on a 5-km stretch of the Butwal-Belhiya (24.04 km) route and a 3-km stretch of the Rani-Itahari route.

Sigdel said that they would hire contractors for an additional 6-km stretch of the Butwal-Belhiya section and 5-km stretch of the Rani-Itahari section this year.

According to the department, the contractors will widen the road to six-lane (including a service lane) and also improve junctions by constructing bus stops, installing traffic and road safety measures, including road markings, signs and bridges.

Meanwhile, the government is also improving a 33-km section of the Narayanghat-Mugling road to the Asian Highway standard under a separate project named “Nepal-India Regional Trade and Transport Project”.

Source- http://www.ekantipur.com

DEHRADUN: Uttarakhand chief minister Vijay Bahuguna on Saturday expressed dissatisfaction over Border Road Organization’s (BRO) inability to complete reconstruction and repair work on the Uttarkashi-Gangotri, Uttarkashi-Yamnotri and Gaurikund-Kedarnath highways within the timeframe it was given.

“I am completely unhappy over the way BRO has been doing its job,” he said. This comes nearly six months after flash floods hit the state causing extensive damage to crucial highways in Rudraprayag, Chamoli and Uttarkashi districts.