The government’s new norms on arbitration and financing for the construction sector are seen as a big boost for private players in the sector. Hindustan Construction Company is a major beneficiary. BTVI spoke with HCC CMD Ajit Gulabchand. Excerpts:

The norm of 75-per cent disbursal against bank guarantee will help your company considerably. Can you quantify that for us?

The awards in our favour and those that remain unpaid are worth ₹3,200 crore. Out of these, 75 per cent, or ₹2,400 crore, is what we expect to be paid. We expect this would be done against giving a margin guarantee which the banks will be able to give because they do want the money back as well. So they have lent us the money and have been very good to us, given the stress and non-payment of dues. The banks have done a wonderful job of supporting the company. This helps everybody.

I expect ₹2,400 crore to come within the next 2-3 months. In addition to that, we have about ₹4,500 crore under arbitration. This will be helped by migration to the newly amended Arbitration Act. This will now get fast-tracked significantly. We expect money to come from this as well in the next 12-15 months. We expect another ₹3,200 crore to come from this portion in that period. I think, all in all, given how much money was locked up causing stress to us and the bankers, it augurs very well.

Can you explain the modalities of this payment release? Does it need any approvals from any authority?

These are all contracts that have either been completed or are underway having arbitration clauses. It is for the respective government agencies to get the bank guarantee and release the payment. There is no other approval required for the respective government agency to honour this order.

The government has done one more thing. All the companies require more time than was envisaged to repay the dues, given the extent of the pain in the system. It was this mismatch which was adding to the stress. A one-time solution has been suggested to give these companies a breather, to be able to accomplish what they can get from the arbitration award.

From that point of view, the Department of Financial Services and the RBI will see what they can do to help. This does not come in the way of the payment. That will help considerably.

You have chosen to avail the RBI’s recent S4A scheme (Scheme for Sustainable Structuring of Stressed Assets) on sustainable and unsustainable debt. Can you break down the numbers for us there?

This is under discussion at this time, so I would not like to disclose more right now, but let me tell it another way. If this ₹2,400 crore comes in, it reduces our debt by half. We have a total debt of ₹4,900 and this would halve it. The remainder is working capital finance. S4A gives you time to do that.

There have been certain awards made under the hybrid annuity model. Do you have any projects under that model?

We have not bid for any hybrid annuity contracts because it calls for the developer to invest in that contract and to get it by annuity. We do not wish to be in that at this time for sure. Even on our BOT (build-operate-transfer) company, we find that there are many claims that are there as a result of the delays that have been caused. These claims will be fast-tracked amounting to almost ₹1,000 crore, which HCC will directly receive.

What are your views on the conciliation board that has been proposed?

The conciliation committee will resolve the issues pertaining to contracts that do not have an arbitration clause and do not have a process laid down for dispute resolution. The committee will not go into contracts that have a dispute clause. This will ensure that even those without a clause will get resolved on time and payments go out.

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