IVRCL Chairman, E Sudhir Reddy said several regulatory changes need to be brought about to accelerate the growth of the country’s infrastructure, which is now in a state of considerable stress.
Both by the Central Government and the Reserve Bank of India need to address issues, the latter by softening the high interest rate regime. As the Government seeks to grow the country’s economy, it is crucial for it to lay special thrust on infra sector and address its concerns, he told Business Line.
Speaking to shareholders at the company’s twenty-fifth annual general meeting here, he assured them all out efforts are being made by the company to accelerate the growth but the market conditions continue to be tough providing little flexibility to the company and also other players in the sector.
The interest rate for instance has gone up from about 8 to 12 per cent. This saps out all the profits a company makes. However, for all the contracts which IVRCL and other infra companies are signing at high interest rate will gain when the interest rates come down to say 9 or 10 per cent over the next two years.
While interest rate is clearly cyclical, the current phase has been on for too long aimed at containing inflation. There are lot many issues such as environmental clearances, hurdles in implementation and delayed payments by States. All these need to be addressed by the Government on a priority basis to accelerate the sector.
ASSET CHURN
He said most of the infra companies are seeking to divest assets which are matured. This is common practice to exit matured projects and focus on new ones. But clearly there is dislike for bidding for BOT projects as the NHAI approach needs to change. Therefore, IVRCL has decided to focus on EPC projects, he said.
Reddy told shareholders that the sector will pass through tough phase for some more quarters as government fixes some of the concerns. This will enable the firm to accelerate project implementation. The company is currently holding an order book of over Rs 27,000 crore.