IRB Infrastructure Developers (IRB), a leading integrated roads and highways infrastructure developer, is planning to nearly double its highway asset base to Rs 1.4 lakh crore in three years, managing director Virendra D Mhaiskar tells Mukesh Jagota in an interview. The company remains bullish on the Build Operate Transfer (BOT) model of highway development and expects to bid for projects that the government rolls out in the coming months from its pipeline of Rs 2.1 lakh crore, he adds. Excerpts:
What is IRB’s outlook on capital expenditure for the coming years?
If you look at cash in hand and our ability to grow the asset base, we are bullish on increasing our portfolio from the current Rs 80,000 crore to Rs 1.4 lakh crore over three years. That is the kind of deployment we will be able to make and grow the portfolio in a robust manner.
In order to increase the asset base, we need to grow at Rs 15,000 crore to Rs 20,000 crore annually. We are well-aligned to deploy these funds to win assets and bid for them.
The government wants to encourage highway development through BOT. Will IRB participate in the bids?
Most certainly.In fact, we have been one of the biggest proponents of that particular method of bidding. Today we have 26 road projects, out of which 18 are BOT, four are TOT and another four are on the hybrid annuity model. A significant amount of our investment is by way of BOT. Of the total 18 BOT projects, 17 are operational and one – the Ganga Expressway – is under construction.
The share of highways would be the largest in the government’s next asset monetisation plan. How is IRB expected to participate in this cycle?
I think the government is focused on creating infrastructure and not on just managing it or running it. We completely endorse this. We are also interested to participate in the upcoming TOT opportunities. Last year, we had bagged two TOT projects in Madhya Pradesh. Even now we are looking at these opportunities very seriously. This particular avenue has attracted the best names in the global funding space. The government has been able to attract quality and cheap capital to undertake these projects which is proving to be beneficial for it.
How do you see the slowdown in awarding of new highways in the last 18 months? Would it impact the pace of construction?
There has been some sluggishness in new orders. The pace of construction is holding up primarily because of the earlier awarded projects where the execution is still under way. As a result, new order flows have been sluggish. This trend is likely to continue in the coming financial year as well.
Separately, I also think that the government is prioritising what needs to be done while balancing the fiscal deficit. And this slowdown seems to be a ‘balancing act’ arriving out of that. I don’t see anything wrong in the way the projects are being awarded. The government is trying to complete the highways where maximum work has been done. It is giving priorities to stretches where there is a revenue potential, and accordinly channelling funds towards those projects to ensure timely completion.
Do you think model concession agreements for BOT and TOT need to be reviewed to make them more attractive?
I think it is an ever-evolving process. No document can be said to be perfect, which doesn’t require any revision. But at the same time, the present document is not something which is not a bankable document.
So, I would be very fearful of an idea where another six months are wasted in revising the TOT document. I would rather suggest that the ongoing project should be allowed to see the light of the day. The review or innovation can continue on the sidelines.
For the last 25 years, MCA documents for BOT have been undergoing revisions. But none of the executed agreements ran into any trouble. So, while reform is an ongoing process, given the fact that there has been a slowdown in the award in the last eight-nine months, the projects ready to be bid out shouldn’t be delayed.