Sadbhav Infra Project’s total outstanding debt stood at R6,591.9 cr in July 2015, according to the company’s red herring prospectus
Sadbhav Infrastructure Project, the recently listed arm of Sadbhav Engineering, is looking to refinance four of its operating road projects.
The interest rates on Aurangabad-Jalna (AJTL), Bijapur-Hungund (BHTPL), Dhule-Palasner (DPTL) and Hyderabad-Yadgiri (HYTPL), which currently ranges from 11.25%-11.50%, will come down to 10.10%-10.30%, after refinancing.
This would result in a saving of close to Rs 50 crore on interest payment on an annual basis, said a senior company official.
Varun Mehta, chief financial officer, Sadbhav Infrastructure Project told Fe that refinancing will aid in fetching better valuations at the time of sale. “At construction stage the interest rates are much higher, but once the construction risk is over, there is scope for refinancing at a lower interest rate, which is what we are vying for, and will also help in better valuations,” Mehta said.
He said that while the company’s intention remains to churn its road portfolio, the company is not in a hurry. “We are hopeful that with this financial re-engineering and a pick up in traffic, the assets will fetch better valuations in few quarters from now. Also, we would like to undertake first major maintenance, which typically happens in the 5th-6th year of operations, which will further improve the credit profile of the projects,” he added.
Bijapur-Hungund, Dhule-Palasner and Hyderabad-Yadgiri have been operational since 2012. Aurangabad-Jalna became operational in 2009.
Kuljit Singh, partner (infrastructure), EY says that refinancing aids in improving the return on equity, which has a positive impact on the valuations of the assets. But along with this, lower interest rate also means availability of additional cash from the project, which can be used to fund other projects. “In the Indian context, developers often undertake re-financing, as the excess amount thus infused can be used to fund the cash requirements of other SPVs as well,” Singh says.
Singh’s comments were not specific to Sadbhav Infrastructure’s plans.
The combined debt outstanding on these four projects would be nearly Rs 2,000 crore as on May 31, 2015.
Sadbhav Infrastructure Project’s total outstanding debt stood at Rs 6,591.9 crore, as on July 2015, according to the company’s red herring prospectus filed in August.
While Sadbhav Infrastructure is yet to announce its first quarter earnings after getting listed on September 16, according to the red herring prospectus, the company’s consolidated net loss almost doubled to Rs 301.56 crore in FY15, against a consolidated net loss of R156 crore in FY14. This was primarily on account of a sharp year-on-year jump of 48% in the company’s finance cost which stood at R526 crore as on March 31, 2015.