BackDifficult to find buyers for asset monetization: HCC
Hindustan Construction Company in its annual report says there are hardly any buyers of infrastructure assets, especially those which are under development
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Mumbai: Sitting on a debt pile of over ₹ 12,000 crore, infrastructure firm Hindustan Construction Co. Ltd (HCC) said it is finding it difficult to get buyers for its asset monetization plan.
The company is keen on monetizing its non-core assets to generate cash and repay debt. “To accomplish this (retire debt), the company has sold operating buildings and some land parcels. However, this has been a more difficult task in the current environment where there are hardly any buyers of infrastructure assets, especially those which are under development," HCC chairman and managing director Ajit Gulabchand said in the annual report of 2015-16.
Monetization of large investments such as the toll-road projects under HCC Infrastructure Ltd will take a longer time, he said.
“In a different vein, the efforts of HCC Infrastructure to effect stake sale have been limited by contractual obligations imposed by the National Highways Authority of India (NHAI)," Gulabchand said.
NHAI’s contractual obligations require 51% stake to be withheld for two years post-COD (commercial operation date), for which it has postponed a 100% monetization effort in these projects, he said.
The infrastructure division of the company has monetized two projects that have completed the final leg of their development life cycle. These include the Dhule-Palesner highway (NH-3) where HCC Concessions closed a sale of its 60% stake to Sadbhav Group for ₹ 204 crore in October last year, and the Nirmal annuity project, where stake was sold to Highway Concession One, an IDFC Ltd-managed entity, in December 2015 for ₹ 64 crore.
The proceeds from these stake sales were primarily used to repay debt and contribute to equity for project special purpose vehicles (SPVs), the company said in the report. Gulabchand also said the progress of monetization might be uncertain, going forward.
An improvement in the overall infrastructure climate can make potential buyers eager to purchase parts of Lavasa or HCC Infrastructure at attractive prices. But if there is insufficient tailwind for India in general and infrastructure in particular, such buyers will be hard to find, Gulabchand said.
However, the company will do its best to maximize the process of monetization and thereby reduce the burden of past debt, he added. In fiscal 2013, the company had availed of a corporate debt restructuring (CDR) package with a consortium of its bankers.
HCC had reported a net profit of ₹ 84.97 crore in 2015-16, while its turnover stood at ₹ 4,191 crore. The order book grew by 25.4% to ₹ 18,123 crore, excluding L1 contracts worth ₹ 3,701 crore.
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