Companies

Will cut losses with new projects, airport revenues: GVK chief

V Rishi Kumar Hyderabad | Updated on January 23, 2018 Published on August 18, 2015

GVK Reddy, Chairman, GVK Group

Group will expand Bengaluru airport with an investment of ₹3,500 crore, says GVK Reddy





GVK Power & Infrastructure Ltd hopes to stage a turnaround by the next fiscal, with several new projects having gone on stream and some more likely to follow suit during the year.

The diversified Hyderabad-based infrastructure company, with interests in power, airports, roads, mining, etc, managed to trim its losses during the first quarter following the commissioning of a hydel project and improved performance of the airport vertical.

In an interaction with BusinessLine here, GVK Reddy, Chairman of the GVK Group, spoke about why the company faced losses, and how it expects to step out of them. Excerpts:

How do you expect to drive out of the current tough business environment?

We are confident of overcoming this difficult phase.

With the commencement of operations of the 330 MW Alaknanda hydel project in June 2015, and the likely commissioning of the Goindwal Sahib thermal project in Punjab and the commencement of toll collection at the Deoli-Kota road project, things will get better.

The Goindwal project is subject to allocation of coal, and the road project, to toll collection. Further, during the current fiscal, we expect domestic operations will start at the new integrated Terminal 2 at Mumbai International Airport.

What are the main reasons for the losses? How will you address them?

The losses are mainly due to a significant drop in power generation from the gas-based plants and increase in interest burden on the funds borrowed to acquire airport assets.

The company is in the process of bringing down its debt this financial year, mainly through the divestment of stakes in airports.

The revenues from these projects, along with the efforts of the management to raise funds in the airport vertical, are expected to bring down the losses considerably from the next financial year.

But the situation continues to be bad...When do you see a turnaround?

It is unfortunate we are faced with such a scenario. We are not the only infra company to be in such a situation. Most infra companies with gas plants are in a similar position. Once we enter a power purchase agreement, it is the responsibility of the government to provide fuel.

We have not been getting gas to run the plants. The coal mine allocated to the Goindwal Sahib project has been cancelled. In such a situation, what option does a private developer have?

However, we hope the Union Ministry of Coal and the Punjab government — both of whom have been promising that they will ensure coal supplies for the plant — help fix the supply issue.

This, along with gas for other plants, would help them become operational.

What about the Andhra Pradesh power utility move to take over the 217 MW gas-based Jegurupadu plant?

We do not have any objection to the takeover of the power plant, as the power purchase agreement has expired after 15 years. Let them take it away. There is no gas supply.

However, they need to settle our dues, which work out to about ₹600 crore and not ₹300 crore as mentioned by AP.

Apart from the assessment made by an independent valuer at ₹300 crore, there are about ₹75 crore for spares and another ₹300 crore towards completed project cost. The matter is under consideration.

You have been talking about selling stakes in some assets and the holding company. What is the progress?

Talks are still under way and the potential investors are in wait-and-watch mode.

The market conditions are also adding to the delays. We hope to conclude some transaction during the year. We are also talking to strategic investors for the coal mine project in Australia.

Both the airports at Mumbai and Bengaluru are performing well and continue to provide higher revenues. The Bengaluru airport is expected to reach its capacity of about 20 million passengers per annum, necessitating expansion.

We will expand the airport to handle 40-45 million passengers with an investment of ₹3,000-3,500 crore.

Published on August 18, 2015
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