Ask Karunakaran Ramchand, MD at IL&FS Transportation Networks, if he is particularly proud of any of the company's road projects and he would not single out any project. Nudge him a bit and he starts talking about the two tunnel projects the company is building in Jammu and Kashmir. The nine km Chenani Nashri tunnel, when completed in May next year, will be the longest tunnel in India and will reduce the travel time between Jammu and Srinagar by almost two hours. The 6.5 km tunnel, the second between Srinagar and Sonmarg, also passes through a treacherous terrain, and Ramchand has a bag full of anecdotes on the difficulties he faced in the projects from unpredictable weather to threat from militants. From an engineering point of view too, the Himalayan projects are challenging. "It is a remarkable achievement for an Indian company," says Hari Sankaran, Vice Chairman and MD. So, what sets IL&FS apart from its peers? "It doesn't bid for just any project that comes its way. It ensures it bids only for projects that have high margins," says Anubhav Gupta, Senior Analyst at brokerage Maybank Kim Eng. Gupta endorses the company's strategy of working on annuity projects. "Most of its peers go only for tollbased projects, hoping to earn a higher return on equity, but that's not always the case. Annuity ensures a fixed source of income and it makes sense to have a mix of both." Although 60 per cent of the company's revenue comes from concession projects, Ramchand likes to call IL&FS more an operations company than a construction firm. "Twenty per cent of our revenue comes from toll and annuity projects. We collect Rs 6.5 crore a day from toll projects. By 2017, this will rise to Rs 1112 crore a day. Then, almost one third of revenue, about Rs4,000 crore, will come from annuity and toll income." Ramchand also expects international business to contribute around 25 per cent to the company's revenue in the next few years from 20 per cent now. It is focusing on the road maintenance business through its 2008 acquisition of the Spanish operations and maintenance company Elsamex. Through this unit, IL&FS has a presence in Latin America, the US, West Asia and China. It is also planning to enter Bangladesh and Nepal. Ramchand say Elsamex will give IL&FS an edge even in India. "In India, importance is given only to building roads. That's not longterm strategic thinking. You also have to plan maintenance, as it brings down the lifecycle cost." IL&FS has 9,000 lane km of roads operational and another 3,000 lane km will be ready by 2017. Overall, it has projects worth Rs 36,000 crore in its portfolio. What's next? "India will continue to need good roads and better airports," says Sankaran. "We will have enough on our plate."
Interview of Mr Mukund Sapre, Executive Director, IL&FS Transportation Networks Limited (ITNL) on how he has made a success of "risky" projects.
Toll shortfall of around Rs 2-2.5 lakh from the Warora Chandrapur Ballarpur Toll Road Limited (WCBTRL) will be compensated by the government on quarterly basis, Mukund Sapre, ED, IL&FS Transportation said. Maharashtra government will exempt the light motor vehicles and MSRTC from paying toll on WCBTRL in which IL&FS Transportation holds a 35 percent stake. Sapre told CNBC-TV18 the company collects nearly Rs 16 lakh toll per day and the above decision will not impact its consolidated numbers. Discussing performance of the company, Sapre said last year it had got contracts from National Highway Authority of India (NHAI) and Ministry of Road Transport and Highways (MoRTH). In FY16, the company is expecting an increase in order inflows by Rs 5,000 crore. “Last year, we covered 7,000 kms. Going forward, we are expecting the same or even better,” Sapre said. The company is expecting a building, operating and transfer (BOT) order from Nepal in the next two months for which it will submit a revised proposal on June 13th. Besides this, it is hoping for another tunnel project, the Zojila project for which it will submit the bid on June 15th. Sapre said the existing projects are expected to be completed by 2017.
IL&FS Transportation has bid for most National Highways Authority of India (NHAI) tenders in the last 2-3 months. The company’s arm has raised 690 million yuan or Rs 692 crore in a bond sale in March. In an interview to CNBC-TV18, Mukund Sapre, ED of IL&FS Transportation, said the company has been awarded around 3,000 km of road orders by NHAI in FY15 and has been expecting another Rs 5,000 crore worth of add-on orders in FY16. The company has also been eyeing to bid for the 13-km Zojila tunnel project in Kargil, Sapre said.
The Digital Duniya – Computer Education on Wheels is a part of Parivartan, a CSR initiative of the private company, IL&FS Transportation Network Limited (ITNL) being implemented by IL&FS Education and Technology Services (IETS).
In a chat with ET Now, Ramchand Karunakaran, MD, IL&FS Transportation Network Limited, shares his business outlook.
The coming Union Budget needs to address the issues in the infrastructure sector, including road building, with a pragmatic approach. Infrastructure projects require long-term investments, which ideally match the long duration investments of pensions funds and sovereign wealth funds. There should be a paradigm shift in the thought process, especially in resolving concerns related to financing infrastructure. The Budget should make more provisions to increase foreign investor participation in the sector. Policy framework needs to be put in place to recognise pension and insurance funds as recognised lenders; this will permit Indian infrastructure developers to avail themselves of external commercial borrowings (ECB) for repayment of loans taken from domestic banks. Measures should be introduced to improve long-term funding availability for the infra sector. A framework is essential for banks to raise resources to finance their long-term loans to infrastructure. Investors’ confidence has significantly deteriorated, mainly due to lack of dispute resolution mechanisms, project price escalation and delayed policy decisions. It is necessary to have an expeditious modus of dispute resolution. Single-window clearance, increasing role of e-governance to fast-track pre-execution process, improved monitoring of road projects and awarding projects only when all requisite approvals are in place will all help. Budgetary allocations to the sector should be increased to meet the target to build 30 km a day. A clear road map for setting up an independent road sector regulator and clarity on its role is essential. Amendment of Section 80-IA regarding upgrading existing infrastructure is a necessity. The tax incentives under Section 80-IA gets neutralised by paying MAT at 20.01 per cent on book profits
News paper article on construction and demolition waste recycling plant in Burari.
Pointing out that public private partnership (PPP) has delivered iconic infrastructure like airports and highways, Union Finance Minister Arun Jaitley on Thursday maintained a steady focus on PPP in his maiden Budget for 2014-15, announcing a number of steps to fast-track such projects in several areas. In his Budget speech, Mr. Jaitley proposed setting up of an institution, called 3P India, with a corpus of Rs. 500 crore to provide support to mainstreaming PPPs. The stamp of ‘Modinomics’ could not be missed in favouring the PPP route for development as the BJP’s manifesto and Prime Minister Narendra Modi rooted for it to help create world-class infrastructure in the country. However, Mr. Modi during his tenure as Gujarat Chief Minister had added another ‘P’ (People) to it to signify people’s involvement in such project and the 4P concept was successfully tried in the Vadodara Halot Toll Road project. The favoured PPP route ran like a common thread in Mr. Jaitley’s speech when he touched upon sectors such as urban renewal, urban transportation, real estate and gas pipelines. “The task before me today is very challenging because we need to revive growth, particularly in manufacturing and infrastructure to raise adequate resources for our developmental needs,” Mr. Jaitley said The Finance Minister said India had emerged as the largest PPP market in the world with over 900 projects in various stages of development. Iconic infrastructure like airports, ports and highways, delivered through PPPs, are seen as models for development globally, he said. Sounding a note of caution, Mr. Jaitley said: “But we have also seen the weaknesses of PPP framework, the rigidities in contractual arrangements, the need to develop more nuanced and sophisticated models of contracting and develop quick dispute redressal mechanism.” He reiterated the government’s commitment towards improving infrastructure in all sectors including roads, port, airports, railways, urban, rural and industrial infrastructure besides ensuring adequate flow of funds and financing of projects. Mr. Jaitley proposed to develop an additional 15,000 km of gas pipeline systems in the country using appropriate PPP models This will help increase the usage of gas, domestic as well as imported, which in the long-term will be beneficial in reducing dependence on any one energy source,’’ Mr. Jaitley said