HCC sells Farakka Raiganj Highway to Cube at Rs 1,508 cr enterprise value

Sale is part of HCC's larger effort to pare debt at company level. A separate process to sell an SPV that holds half the firm's debt and significant claims is also underway

Hindustan Construction Co (HCC) on Tuesday said the company has closed the sale of its Farakka Raiganj Highway project to Cube Highways at an enterprise value of Rs 1508 crore. The company also looks to raise another Rs 1,000 crore from various sources by next year.

The road sale is part of HCC’s larger effort to reduce debt at the company level. A separate process to sell a special purpose vehicle (SPV) which holds half of the company’s debt and significant claims is also underway. Tuesday’s road deal will lead to debt reduction of Rs 1,000 crore, with Rs 900 crore as project finance of the asset and another Rs 100 crore debt paid off.

In January, lenders to HCC approved a debt asset carve-out to a sperate special purpose vehicle (SPV). “Of our present debt of Rs 5,600 crore, about half will move out tp the SPV along with claims as a 2.2-times cover,” said Arjun Dhawan, group CEO. He added that the process to finalise an investor for the SPV is underway and the lenders and the company have already received binding bids. Dhawan is hopeful of closing this process by the end of the current calendar year. Lenders to HCC, the company said, have also agreed for a 4-5 year moratorium on the remaining debt on HCC’s books.

In addition, HCC looks to raise another Rs 1,000 crore in a year’s time through a combination sale of land parcels, non-core assets and conciliation of claims. Dhawan SAID these funds would be invested for growing the company’s business.

With the sale of the Farakka Raiganj Highways project to Cube, HCC’s road portfolio will consist of the operational Bahrampore – Farakka Highway, which has another 18 months of construction work pending. Dhawan added the company plans to sell the asset once closer to completion, worth an enterprise value of Rs1300 crore. Once sold, this would mark HCC’s exit from the build operate transfer (BOT)-Toll model. “Our core construction business in engineering, procurement and construction (EPC). Once that achieves stability, we will look at BOT projects as a function of supplementing our EPC business.”

HCC’s current order backlog stands at Rs 16500 crore and it has set a Rs 6000 to 7000 crore order inflow target for the current financial year. Company executives said, with Rs 3500 crore worth of new orders won so far, they have met half of the target set.

Part of the road sale agreement, HCC Group will be entitled to a revenue share from Farakka Raiganj Highwavs over the entire concession period, the details of which will be specified on completion of the ongoing conciliations with National Highways Authority of India (NHAI). The enterprise value also excludes a structure section of the project, which was descoped by NHAI, and for which Cube has offered a contingent pay-out. “A successful closure with NHAI in the coming months of its  tolling right confirmation, would entitle HCC  Group to additional consideration estimated at Rs 200 crore," the company said in its statement.