Hindustan Construction may sell non-core assets

Bangalore: Hindustan Construction Co. Ltd (HCC) sold 20 acres of land along the Mumbai-Pune expressway for ₹ 27 crore to encash a non-core asset, a top official said on condition of anonymity.

This could mark the start of the disposal of such assets by the company, analysts said. The cash-strapped engineering and construction firm had asked lenders to restructure its debt in March. HCC’s stand-alone debt amounted to around ₹ 4,200 crore as of 31 March.

HCC may sell another 80 acres at the same location in Khopoli, Navi Mumbai, and also residential apartments it owns in New Delhi, Kolkata and Lucknow, the executive said. “These are smaller properties that were acquired when the company did projects there, such as the Metro rail project in Kolkata," the executive said. “But now, everyone is in a cash crunch and wants to sell."

An HCC official spokesperson declined to comment for this story. HCC had acquired 100 acres of additional land when it built a portion of the Mumbai-Pune expressway between 1997 and 2000.

HCC had approached a consortium of banks to restructure its debt in March. In a filing to BSE, the firm said it took this decision after failing to see expected cash flow, primarily because of delays in outstanding payments. The firm submitted its restructuring scheme to bankers and has asked for a two-year moratorium and six years to repay debt, along with a marginal relaxation in the interest rate.

The Motilal Oswal report also mentions that, according to the management, approval of the restructuring package will provide some flexibility in the company’s operations, including interest and principal repayment, though the environment for the current financial year has not changed much.

Given that HCC needs capital, and while the management has indicated it will monetize some assets, it has not said which ones these would be, said Rohit Patni, an analyst with Edelweiss Securities Ltd.

A 30 April Edelweiss report said the key risks for HCC include its venturing into real estate and the build-operate-transfer segments, both of which mean upfront investments with profits coming in after a few years of operation.

In this context, fund-raising for the Lavasa township project needs to be monitored, according to Edelweiss.

There will also be demands on the company’s balance sheet since its core contracting business requires funds and working capital management has become a key issue for the company, Edelweiss said.

The company’s order book is geared towards hydropower projects that typically have long gestation periods. There are inherent risks in execution of such a long-duration portfolio, the Edelweiss report said.

PTI contributed to this story.