How do you look upon the Government's approach in regards to project awarding and execution for the sector?
The bidding approach needs to be calibrated by the Authorities to ensure minimum disruption caused due to an overall subdued financing ecosystem and to absorb the impact of Covid-19. Current market is still not conducive for the conventional BOT format embedded with both traffic and construction risks. Hence, I see EPC and HAM models continuing to take the centre stage in terms of awarding new projects. TOT bids and new age products including InVITS would facilitate monetising assets and efficiently churning investments and this segment is witnessing renewed interest from platforms backed by long term investors including the likes of established Sovereign Wealth and Pension funds. While last 12 months have been disappointing, however, next 12-18 months looks promising from the point of project pipeline in the roads & highways sector.
Considering the current uncertainties and ongoing pandemic situation which model will best suited in bidding and executing projects? Also considering the ROI benefits.
Currently most of the Infrastructure developers are fire fighting with high leverage on their balance sheets. EPC stands out to be the most relevant model followed by HAM which is a sophisticated version of (deferred) EPC model. Both the formats shall ensure seamless execution of greenfield projects. However both these models come with a huge overhang of upfront funding commitment from the Authorities and hence adding an element of TOT for operational projects along with leveraging the InVIT platform is recommended. Given the onslaught of the current pandemic and its long term impact on macro growth parameters it may not be a bad idea for the Government to tone down their expectations in terms of Enterprise valuation of assets being proposed to be monetised through TOT model and InVITs
Tell us about your unique executionary modes while planning, executing and maintenance of projects by your clients.
As the HAM model is evolving and the TOT model is getting further tested, it is imperative that the developers price in their bids taking into account both the Capex and Opex factors more prudently than ever before. I see a trend emerging wherein the bids are being priced in innovatively with close precision taking into account the overall life cycle of the project. These factors are also increasingly coming under diligence by stakeholders including lenders and investors who are financing such projects
Name few of your current projects being executed and in pipeline
Most of the clients we are advising are executing projects on HAM model under NHAI and the rest under the state initiatives like KSHIP, etc. We are also witnessing renewed traction for clients in the EPC space who are evaluating to raise working capital funds and non-fund based limits for the urban infrastructure sector besides roads sector.
Approach while selecting machineries for your projects.
Considering the ongoing pandemic and its impact, the approach while mobilising plant and machinery by our clients is to essentially to maintain an asset light model. As and when the pace picks up on awarding the project and due to the recent shift towards mechanisation and digitisation driven by the need of optimizing human resource involvement in project execution this model may gradually shift towards mobilising the critical machineries on an ownership model going forward.
