Firm is in advanced discussions with a fund for operational BOT assets, says MD Vikram Sharma
Mumbai-based infrastructure firm Supreme Infrastructure India Ltd has put its portfolio of operational road assets on the block, which would help it fund delayed or under-construction projects amid cost overruns and high interest costs, according to two people familiar with the matter.
Supreme Infra, which has 11 build-operate-transfer, or BOT, road projects in its portfolio, would also be keen to sell stakes in under-construction assets if it manages to find a buyer, the people said, asking not to be named as they are not authorized to speak to the media.
The company is in advanced discussions with a fund for its operational BOT assets, managing director Vikram Sharma said in a phone interview.
“There is nothing which is concrete or nothing which is closed or in the process of getting crystallized right now. There are a lot of things which are under discussions; there are a lot of options which we are working out,” Sharma said.
He declined to name the fund or the projects the company was in discussions for.
Of the 11 BOT assets, four are operational and another three are expecting to receive a commercial operation date (COD) “any moment now”, Sharma said.
Supreme Infra’s 84km Panvel-Indapur highway project in Maharashtra was stuck for years due to lack of land clearances, hurting the firm as costs shot up. The project, estimated to cost Rs.1,206 crore, is targeting a completion date of June 2017. Supreme Infra is in the process of readying a proposal with a revised project cost to submit to lenders, Sharma said.
Of the four operational BOT road projects the company operates, it has a 100% stake in the Patiala-Nabha-Malerkotla project in Punjab and Vasai-Bhiwandi project in Maharashtra. It has a 51% stake in Kopargaon-Ahmednagar Tollways and 49% in Manor Wada Bhiwandi project, both in Maharashtra.
In BOT projects, a private operator builds an infrastructure project from its own funds, operates it for a period of time to recover its investment and make a profit and then transfers it to the government.
Supreme Infra’s under-construction projects include the 40km Jaipur Ring Road project in Rajasthan; the 61.1km Ahmednagar-Karmala-Tembhurni asset, the 30km Sangli-Shiroli road and the 42km Ahmednagar-Kopargaon project in Maharashtra; and the 30km Kotkapura-Muktsar road in Punjab.
In January 2015, the structured investment group of Piramal Capital was looking to acquire two of Supreme Infra’s BOT road projects. The talks have since been called off, Sharma said.
The company’s projects in the last six months had received faster clearances, lifting the viability concerns that its investors had raised around them, he said. “Fundamentally for us, we need to complete these projects and get the cash flows going… People were finding these projects at distress or at low viability situation earlier, but now there is a certain amount of interest.”
Besides the BOT assets, the firm’s engineering, procurement and construction (EPC) business undertakes projects across sectors such as roads, bridges, buildings, railways, power and water infrastructure.
As of 30 September, Supreme Infra had stand-alone debt of Rs.1,775 crore.
Several infrastructure developers, weighed down by debt, continue to announce exits from individual highway projects to monetize operational assets and repay creditors.
India has attracted the attention of sovereign wealth funds, global pension funds and insurance firms looking for a majority stake in operational infrastructure assets. Such investors could come to the rescue of Indian firms struggling with huge debts and a liquidity crunch.
Global pension funds and sovereign wealth funds may invest up to $50 billion in India’s infrastructure sector over the next five years, a report last month by investment bank Ambit Corporate Finance and the UK’s City of London said.
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