IVRCL to reshape two key businesses

IVRCL to reshape two key businesses

Hyderabad: Infrastructure conglomerate IVRCL group has outlined plans to remodel its two main businesses to raise more debt and bid for larger contracts.

The group’s flagship IVRCL Infrastructures and Projects Ltd will focus on engineering, procurement and construction (EPC) contracts, and subsidiary IVR Prime Urban Developers Ltd will handle build-operate-transfer (BOT) projects, E. Sudhir Reddy, group chairman and managing director, said on Friday.

IVRCL has been struggling to raise funds to finance its BOT projects. IVR Prime, though, has Rs1,100 crore in cash and more than 3,000 acres that it can leverage to raise debt and equity, said Reddy.

IVR Prime will gain from IVRCL Infra’s credentials to bid for more complex and bigger infrastructure contracts.

“We have sought the services of six professional agencies to conduct valuations for the process of transferring two of the special purpose vehicles of IVRCL Infra with six BOT projects to IVR Prime," Reddy said.

In turn, IVRCL Infra will increase its holding in IVR Prime to more than 75% from 62%.

“If raising equity funds is the only issue, IVRCL could have as well consider transferring all its BOT projects to a wholly owned subsidiary and raise funds through it, instead of transferring assets to a subsidiary that it does not fully own," said Shailesh Kanani, an analyst with Angel Broking Ltd.

The two special purpose vehicles—IVR Strategic Resources and Services Ltd and IVRCL Water Infrastructures Ltd — have road and desalination and sewerage BOT contracts worth Rs1,800 crore.

IVR Prime will also have access to toll revenue of about Rs600 crore a year, though some 80% of this will be used to repay debt over three years.

Reddy expects the transfer of assets to be completed by March, after which IVR Prime will raise equity funds of Rs1,500-1,800 crore in phases to execute BOT projects.

It will raise some Rs600 crore through a qualified institutional placement in the first quarter of 2010-11, said S. Ramachandran, director, business development and corporate strategy, IVRCL Infra.

The company is also selling around 300 acres in Delhi, Pune, Bangalore and Chennai to raise another Rs250 crore.

In the second quarter, IVRCL Infra’s revenue rose 7.8% to Rs1,249 crore over a year ago, but net profit declined 14.6% to Rs48.77 crore.

IVR Prime swung to a loss of Rs6.09 crore in the second quarter from a profit of Rs6.91 crore earlier. Revenue declined 8.5% to Rs34 lakh.

IVRCL Infra shares rose 1.32% to end on Friday at Rs347.95 on the Bombay Stock Exchange, while IVR Prime dropped 4.5% to Rs123.05.