Given the need to fund a series of infrastructure projects in its kitty, Hyderabad-based IVRCL Assets and Holdings Ltd plans to raise Rs600-700 crore through a qualified institutional placement (QIP).
The company has projects worth Rs7,800 crore to be executed over the next two-three years. The orders on hand comprise three road projects to build, operate and transfer (BOT) and a crude oil tankage project. Besides, it is the lowest bidder in two road projects that are yet to be awarded. The QIP proceeds will be used to fund the equity portion of the road projects. Most BOT projects require that the bidder invests a minimum of 25% of the project cost by way of equity. Analysts say the QIP should go through at the current?market?price of?Rs175-179.
But QIP proceeds alone would not suffice to fund growth. A senior management executive in the company says IVRCL Assets’ funds requirement could be around Rs1,200 crore in three years, given that it is aggressively bidding for infrastructure projects. Besides roads, it intends bidding for projects in water, ports, mining and even power transmission.
It plans to grow asset size to around Rs20,000 crore in three years. Fortunately, this is not a point of concern. The company, formerly called IVR Prime, was into the real estate business with a land bank worth around Rs1,200 crore. Following restructuring, the group may exit the business and focus on infrastructure. It would then be able to monetize the land when needed to fund future project requirements. In fact, Rs63 crore was recently realized through land sale. An IIFL report states, “Clearly, the land monetization drive has to gather further momentum if IVRCL intends to bid for further road projects in FY11.”
Over the next two years, the company’s success hinges on ramping up execution across projects. Revenue during fiscal 2010 will be barely Rs50-100 crore. The three completed BOT projects will start yielding revenue only from the first quarter of the current fiscal. This along with additional revenue from construction and procurement contracts could take the total revenue during the current fiscal to Rs800-1,000 crore.
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