The Hindu Business Line : Tirupur project stakeholders may look to book profit early

WITH the country's first drinking/industrial water project under the private-public partnership through the New Tirupur Area Development Corporation Ltd headed towards implementation soon, is it time for the stake-holders in the special purpose vehicle company to book profit of the shares held by them or will they buy more time before they can confidently unlock the value of the shares?

This may be one of the issues dangling before the equity partners in the Rs 1,023-crore NTADCL project whose 185 MLD (million litre per day) water supply project, essentially to cater to the textile wet-processing industries in Tirupur, is funded under the unusual non-recourse financing route.

While it is possible that some of the participants in the Rs 322-crore equity base may see reasons for early booking of profit of their stakes by seeking an exit route provided in the original agreement of enlisting the equities through listing of the NTADCL shares, there is also a strong view within the SPV company that the project should cross successfully the construction risk phase that is usually associated with all such major infrastructure projects The NTADCL's water project has a debt component of Rs 615 crore, besides another Rs 86 crore of subordinated debt.

The key stakeholders in the company are Tamilnadu Water Investment Company (TWIC) and the Singapore-based AIDQUA Holdings besides the engineering contractors' consortium.

While TWIC and AIDQUA hold equity worth Rs 105 crore and Rs 90 crore respectively, the contractors' consortium wields another Rs 45 crore.

But in all fairness, it appears the NTADCL board may not be rushing for offering any exit route by listing the company's shares. It is also not known if it will be favourable for any of the existing equity holders to offload shares as the corporation's attention is right now concentrated on completing the project in time which may rise the value of the stocks many fold.

According to Mr Samir Vyas, Managing Director of the NTADCL, as per the equity agreement worked out among the partners, the early listing of shares should be done by June 2005 but it is open for the board of the company to decide whether this could be extended so that the full value realisation of the equity could be tapped. "This would be possible if only we had the project completed and its operations started commercially. By the time the capital market too should be bullish so as to get the maximum value tapped out of the shares."

Reliable sources feel that NTADCL has to implement the Tirupur water project flawlessly if it has to access any refinancing for the project and the first sight of the water flowing to the user industry by April 2005 would build up the confidence of the investors.

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