MEP Infrastructure Developers (MEPID) has postponed the plan to list its infrastructure investment trust (InvIT), Jayant Mhaiskar, vice-chairman and managing director, MEPIDL, told Rouhan Sharma during an interview, besides also sharing his perspective on other recent developments like the Bharatmala programme. Excerpts:
Are you planning to list your InvIT or have you cancelled the plan?
The kind of response from investors after the listing of the first two InvITs has not been encouraging, though we all need to understand it is a yield-based product and not an equity-based product on which you get an upside on the day of listing. At least a year needs to pass before investors can understand the yield they can expect over four quarters. The yields being discussed are typically between 11.5% and 13.5%, depending on the quality of asset. Whether the InvIT has been able to deliver is something they will need to track over the year. The first two InvITs will have their first anniversaries soon. Post that, we need to do a check on investor appetite again. What it also allows us to do is put another three-four assets into the InvIT. The assets which will complete 50% of construction by that time can also be put into the InvIT and we will evaluate the possibility in Q2 or Q3 of FY19.
Surely, overseas investors must be well-versed with such products…
I think whatever little interaction we had with some investors, we found there is some apprehension with the way the InvIT is currently structured. This is something the regulators need to look at and on which I cannot comment. However, from our viewpoint, for us to go and make a pitch to investors, I think we should start that activity maybe in the second or third quarter of FY19. We have a mix of toll and annuity projects. The HAM projects are most suited to investors who like fixed returns over a longer duration as well as an upside in the tolling business.
Are you looking at any acquisitions?
No. I think there is enough work to be had. The government has announced the Bharatmala Pariyojana, which has a capital expenditure of `7 lakh crore over the next five years. The clear focus is on building new roads. There is enough to do and too few companies to do them. If you see the bidding going on, each HAM project has at least seven bidders, most of them the same. I believe getting into stressed assets and trying to revive them is best left to the large financial investors rather than operating companies like us.
Are public-sector banks staying away from the hybrid model projects?
For us, we have a mix of banks and financial institutions as well as scheduled and cooperative banks. I don’t know if it is right to say all public-sector banks are averse to road projects. It all depends on what is the relationship and the track record with the banks. Fortunately, we have a good record with nationalised banks and institutions. IIFCL is the lead financier in all our six HAM projects. IDBI, a nationalised bank, is the second largest. We also have IFCI, Bank of India and Mumbai District Central Co-operative Bank (MDCC), which is a scheduled cooperative bank. We are in a good position.
What tie-ups do you have in place for the hybrid annuity projects?
We are currently doing six hybrid annuity projects. All of them are with San Jose, our Spanish joint venture partner. We have started construction in four of six projects and have reached the first milestone in three of four projects. We have also received the first tranche of funds from NHAI upon completing this milestone of 20% physical progress. For the fourth project, we have already submitted our documents. NHAI needs to certify it. For the remaining two projects, we expect to receive the appointed date very soon, as it is being deliberated upon currently. Once this is decided, we will be live on all our projects.
Are you in talks to tie up with anyone for the upcoming projects?
We are currently targeting between 10 and 12 bids which will come up in the next 15-20 days. We have finished our pre-bid studies and have a tie-up with a Chinese state-owned company Longjian Road & Bridge Company. However, for two of the projects, we will bid with our new partner ITD Cementation. The tie-up with the Chinese firm allows us to bring in international money at a lower cost than what we would get in India by about 2-3%. We won’t be able to get such a rate on our own, including the hedging costs, which is mandatory as per the external commercial borrowing guidelines.