Have completed BOT project in MP before time: Valecha Engg

December 26, 2011

Warning: Undefined variable $thumb in /var/www/web/indiantollways.com/wp-content/plugins/digg-digg/include/dd-class.php on line 887

Valecha Engineering has been in the red. The company’s recently commissioned build-operate-transfer (BOT) project is facing execution pressure. However, managing director Jagdish K Valecha indicated that the company has been able to commission its first BOT road project in Madhya Pradesh and Indore 11 months ahead of time.

The company also plans to complete the second BOT project before time instead of 24 months. “This will get us the extra revenue stream by way of toll and tax free revenue stream in the SPV,” he added.

Q: How much are you bidding for in terms of future orders? What will be the breakup of the geographical division?

A: We have got projects in North Delhi, Madhya Pradesh, Gujarat and Arunachal. These are the four-five larger areas where we are concentrating. We have got projects down south in Bangalore and Chennai as well.

Q: Is there any reason to concentrate more on the north or has it always been like that? Where is execution the easiest?

A: In the North, before the Commonwealth Games, we were one of the few companies who delivered most of our flyovers before the Commonwealth Games. We have built up a brand equity towards the North for the infra projects and a lot of projects are happening.

The company has also qualified itself and made bid for the underground metro, which is a high tech fish area in Delhi for Delhi Metro Corporation, along with international joint venture partner.

Q: Could you give us an update on the debt on the books? Will you all be pairing down anything in FY12?

A: The debt on the book is comfortable. It’s around 1:1 ratio. We are not over feared as yet. We are taking selective projects, where most of the projects are going at prices that are like premiums.

We have bagged projects with good IRRs. We are keeping an eye on the EBITDA and then bagging the projects, instead of just going behind the project.

Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying videos.

Q: Could you take us through a couple of these exactions concerns that lots of infrastructure companies are facing at this point in time? How is the situation on the ground looking for you all?

A: There are execution challenges with the other infrastructure companies, who have over bagged the orders and this is the reason they are not able to execute.

The good news in the case of Valecha Engineering is that we have been able to commission our first BOT road project in Madhya Pradesh and Indore 11 months ahead of time. This is a record in the road building exercise that the country has embarked upon.

Q: Coming to the other two BOT projects that you bagged about six to seven months back; you were looking to get financial closure, particularly for the third one. Are there any kinds of delays or stress on that account?

A: All the BOT projects have got the financial closure. The recent one in Gujarat (Bhuj to Bhachau) of nearly Rs 500 crore has also received its financial closure last week. This project will also now kick-start in a faster anvil as such.

Q: Concentrate a bit on your Q2 numbers, your net sales were down 19% for the quarter on a year-on-year basis, but you improved in the margins to 11% versus 7% on a year-on-year basis. What sort of operational efficiencies are you undergoing or implementing at this point in time? What is the outlook for the remaining part of the fiscal in terms of margins?

A: We developed a strategy a year back to have 25% sales out of BOT projects and 25% sales out of budgeted projects. In the budgeted projects, we have a mixed client base and mixed geographical base so that the risk is divided.

The current stress of the management with the team at the project side is to implement the projects ahead of time for the recent projects and concentrate on improving the efficiency by quick delivery and turnaround.

Q: Even for BOT project two and three, will you execute it at a faster clip? When are they likely to get commissioned?

A: The project’s shelf life is 24 months. We are targeting the second BOT project instead of 24 months again like the first BOT project, which will obviously get us the extra revenue stream by way of toll and tax free revenue stream in the SPV. The concentration will be to complete the project ahead of time.

Q: How much are you bidding for in terms of future orders? What will be the breakup of the geographical division?

Q: Is there any reason to concentrate more on the north or has it always been like that? Where is execution the easiest?

The company has also qualified itself and made bid for the underground metro, which is a high tech fish area in Delhi for Delhi Metro Corporation, along with international joint venture partner.

Q: Could you give us an update on the debt on the books? Will you all be pairing down anything in FY12?

We have bagged projects with good IRRs. We are keeping an eye on the EBITDA and then bagging the projects, instead of just going behind the project.

Source: moneycontrol.com