HEADLINES:
December 14 2018
Reliance Infra eyeing order book worth ₹50,000 crore
15 September 2018

Lalit Jalan, CEO, Reliance Infrastructure   | Photo Credit: Shashi Ashiwal

Firm to focus on engineering, construction, says CEO

Reliance Infrastructure sold its Mumbai city power distribution business to Adani Transmission Limited (ATL) for ₹18,800 crore, making it the largest deal in the Indian power sector till date. Lalit Jalan, CEO, Reliance Infrastructure, spoke about the company’s growth plans. Edited excerpts:

How much cash will the company get on a net basis from the sale of Mumbai power distribution business?

We have received ₹13,800 crore as the first tranche of this transformative deal.

We also expect to get ₹5,000 crore in regulatory assets, which will flow to us over the next couple of years. We have an option of discounting those through AA+ non-convertible debentures and getting the cash upfront.

When can we expect Reliance Infrastructure to become a zero debt company?

We have managed to whittle down our debt by a whopping 65% with the sale of integrated Mumbai power business and the entire proceeds from the transaction - ₹13,800-crore - has been utilised for debt liability payoffs. This, along with the arbitration awards we have already won to tune of ₹6,000 crore, and we’re looking at wiping off the entire debt of the company and becoming cash-surplus in calendar year 2019.

What’s the rationale behind selling the Mumbai power business given that it was generating healthy cash flows?

Three years ago, we embarked upon a strategy for Reliance Infrastructure to transform itself into an asset-light, high-growth, high-dividend and high-ROE company.

Our asset monetisation exercise is now complete. We plan to focus on our fast-growing engineering and construction (E&C) business going forward, where our order book has scaled over nine times in last three years to ₹28,500 crore right now. We aim to grow it to ₹50,000 crore by FY19.

Minus Mumbai power business, what would be the profile of the company in terms of topline, bottomline and operations?

Reliance Infrastructure’s profitability will not be affected on the whole. Reliance Energy had an EBITDA of around ₹1,500 crore, which would reflect in lower EBITDA for Reliance Infrastructure after this deal.

However, since our interest cost will also come down from about ₹2,600 crore to less than ₹800 crore per annum, our profitability will not be impacted.

The turnover could come down a bit in the first year. But next year onwards, with our E&C order book translating into turnover, we will see RInfra’s turnover crossing the current levels.

What would be the debt:equity of Reliance Infrastructure after the deal?

Reliance Infrastructure now has the strongest balance sheet in infrastructure — power sector. Our debt-to-equity ratio is barely 0.33 : 1 whereas the median ratio for the sector is 4:1, often as high as 6 or 8: 1. The company is all set for double-digit growth. We are looking at being cash-surplus in calendar year 2019.

What’s profile of Delhi distribution business?

We’re a company with ₹22,000 crore-plus net worth. Delhi Power Distribution Business, which is two and a half times the size of the Mumbai Business across a range of parameters, is the lynchpin of the company going forward with its annual turnover of ₹16,000 crore and cash EBITDA of ₹4,000 crore. Our Delhi DISCOMs distribute power to 42 lakh customers or 70% of Delhi, and serve a peak demand of 5,000 MW as against 1,800 MW for Mumbai. There’s still a good 15 years to go for license in Delhi, while the business is organically witnessing impressive growth.

What is the company’s order book pipeline as of now?

Our fast-growing engineering and construction business will be the flagship of the company going forward. We have scaled our order book by a factor of over 9 in the last three years to ₹28,500 crore right now. Reliance Infrastructure is pursuing project opportunities worth around ₹2 lakh crore to increase its EPC order book to ₹50,000 crore by FY19. We are well-positioned to garner sizeable market share in transport sector.

The company was planning to sell its portfolio of road assets...

We were looking at the option of monetising our roads assets.

However, further monetisation of the company’s assets is not on the table right now.

The auditor has raised questions about the viability of the Mumbai metro operations as a going concern...

Reliance Mumbai Metro is a marque project. It has an EBITDA of ₹150 crore and, as our chairman Anil D. Ambani has pointed out, given the long concession period, it will be profitable especially as the footfalls are growing exponentially.

Reliance Infra subsidiary Reliance Naval has been referred to the NCLT for resolution as the bankers have failed to approve your resolution plan within the prescribed deadline of RBI. Your comments.

We have presented our Resolution Plan to the bankers. It is for the Committee of Creditors to consider that.

Over 50000 MW of power projects are headed to NCLT for bankruptcy. Is the company looking at stressed assets?

We will look at stressed assets on a case to case basis

R-Infra won the ₹7,000 crore new sealink project. When will the work start and the project be ready?

Once completed, Versova-Bandra Sea Link (VBSL) project will transform the way people live and travel in Mumbai. It will slash commute time from Worli to Versova from almost two hours to a mere 15 minutes. At 17-odd km, VBSL is three times the size of the existing sea link, with 34 km of up and down connectivity. The existing sea link carries 10 lakh vehicles per annum. Once completed, VBSL is estimated to serve nearly ten times that number, or one crore vehicles, annually. The project would allow Mumbaikars to have hassle-free connectivity from Worli to Versova with just one toll stoppage.

Though the project duration is five years, we effectively have only three and a half years to complete it as work would be stalled for three months every year during monsoon. The existing sea link took almost 10 years to complete, despite being only one third in span compared to VBSL. However, Reliance Infrastructure is confident that with our partners, we shall be able to complete the project ahead of time. We plan to start work on the project in October this year.

 

 

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