Mumbai: HCC Concessions, the infrastructure development arm of the HCC Group, has started the process of selling its 100km-long Bahrampore-Farakka Highway project in West Bengal, said two people aware of the development, requesting anonymity. The company is already in talks with investors for the sale, a move which will help to free up its balance sheet.
HCC Concessions is also looking to exit the concessions business which requires a company to take a project exposure on its balance sheet in addition to construction, operation and management of assets.
“HCC is now looking to move out of concessions business and become an engineering, procurement and construction firm. Considering that Lavasa is already undergoing insolvency proceedings at the National Company Law Tribunal, HCC is keen on getting out of asset ownership format," said the first person cited above. “The EPC model allows for an asset-light operational model."
A spokesperson for HCC said the company doesn’t comment on market speculation. “We would like to clarify however that while the core of our business remains EPC, the recent announcement to sell our Farakka-Raiganj Highway project does not construe an exit from our subsidiary concessions business," the spokesperson said in an email.
On 30 August 2018, the Mumbai bench of the NCLT admitted an insolvency petition against Lavasa Corp. Ltd, a subsidiary of HCC Ltd. Lavasa is India’s first privately-developed city, about 180 km from Mumbai. It is owned jointly by HCC (68.7%), Avantha Group (17.18%), Venkateshwara Hatcheries (7.81%) and Vithal Maniar (6.29%). Lavasa, which owes more than ₹ 3,000 crore to lenders, owns about 20,000 acres in Maharashtra.
In September, HCC sold its Farakka-Raiganj highway to Singapore-based Cube Highways and Infrastructure II Pte Ltd. Bahrampore-Farakka is a contiguous stretch. HCC is also the concessionaire for Raiganj-Dalkhola highway project in the same region.
“The company has already started talking to investors and is trying to iron out valuation issues pertaining to the incomplete stretch within the Bahrampore-Farakka project. Of the 100 km, around 77 km is operational and tolling," the second person said. He said the enterprise value of the project is around ₹ 1,400 crore- ₹ 1,500 crore on a fully operational basis as against the total project cost of around ₹ 1,800 crore.
Given that over 75% of the project has been completed, the firm has been granted a provisional completion certificate. The project has been operational since March 2014 and its daily toll collection is about ₹ 45 lakh.
The incomplete stretch, however, is likely to introduce complications in structuring of the deal as the operational section is not generating enough cash surplus to service the balance stretch, the first person said.
“The balance cost of completion is around ₹ 350 crore. Large part of cash surplus is going towards servicing of debt. Apart from this, there are ₹ 450 crore worth of arbitration claims which are likely to be awarded. The key challenge for the firm now is to structure the deal to ensure maximum recovery," he said adding the debt component of the project is about ₹ 800 crore.
Separately, HCC Concessions has also commitments towards Xander Group, a US-based investment firm which invested ₹ 240 crore in lieu of a 14.5% stake in the company from HCC Infrastructure Co. Ltd.
HCC has been looking to cut debt and has undergone restructuring outside the insolvency code in the past. In June last year, lenders to the company had approved restructuring of its debt under the S4A (sustainable structuring of stressed assets scheme), making it the first company to be restructured under the scheme. According to Capitaline, HCC’s standalone debt as on 30 September stood at ₹ 3,129 crore and its consolidated debt as of end-March was ₹ 9,455 crore.