Larsen and Toubro will not bid for build-operate-transfer road and Metro rail projects over the next few months.
The decision, taken at the earnings call in July last week, is an indicator of the liquidity pressures road developers are facing.
But this could open doors for investors looking to buy into the highway and Metro project portfolio of L&T.
L&T Infrastructure Development Projects Ltd, the L&T arm that holds all BOT projects, requires an equity infusion of over Rs 6,100 crore, of which Rs 3,594 crore is for the Hyderabad Metro project and Rs 2,519 crore for highway projects.
On August 1, a few days after L&T’s decision, L&T Infra told a few investors that it was “watchful for attractive exit opportunities to ensure availability of capital to meet our growth requirements.” L&T earlier exited from two highway projects, one port project and an airport redevelopment project.
L&T STANCE
“Going forward, L&T will not bid for projects on a BOT basis as it already has 44 projects worth Rs 84,400 crore in its kitty (L&T infra) and wants to contain equity funding from parent to subsidiaries,” said an Angel Broking analyst, who tracks L&T.
Two other analysts present at the earnings call confirmed to Business Line that the L&T management said it would go slow on bidding for highway and Metro projects on BOT basis.
DEBT NEEDS
When contacted by Business Line , the L&T spokesperson attempted to distance the company from its arm saying that L&T does not bid and it is L&T Infra, the subsidiary in which L&T has over 97 per cent stake, which bids for such projects.
On the debt side, L&T Infra, which has a debt requirement of over Rs 22,000 crore for the Hyderabad Metro and highway project, is looking at various options to raise finances, including bond issues backed by toll revenue cash-flows as security. For the road portfolio, L&T IDPL has a debt-equity ratio of 2.94. The company requires Rs 21,802 crore, of which Rs 4,212 crore is equity and Rs 16,750 crore debt. IDPL has already put in equity of Rs 1,693 crore drawn for the road projects, while another Rs 2,519 crore is yet to be drawn.
From the total debt, a balance of Rs 10,695 crore is required.
Toll collections
L&T Infra has rights to develop over 9,000 lane kilometres of road stretches, of which 4,968 km are already being tolled.
The toll collections have registered a 32 per cent growth in last three years, and there has been a 26 per cent growth in cash accruals.
mamuni.das@thehindu.co.in