ITNL eyes operational road assets

IL&FS Transportation Networks (ITNL) is looking to acquire road projects that have been operational for around two-three years.

Mukund Sapre, executive director, said the company would prefer to look at projects that had been operational for a few years, giving it visibility for revenues in the future.

He said the company had got at least two such offers from promoters of highway projects who wanted to sell out. As many as 50 road projects are up for sale.

“This indicates that promoters are looking to churn equity, which is their business model. At ITNL, we would want to be long-term asset owners, and do not intend to dilute assets,” said Sapre. The company wants assets which have a concession period of at least ten years ahead of them.

The company plans to wait until many such projects on sale would go operational, and believes that valuations would be in its favour at that stage.

“If you allow these projects to go into an operational stage and promoters make losses at the operational cash flow level, there would be lesser valuation mismatch,” said Sapre. ITNL is constructing projects with a total cost of Rs 12,000 crore. Last financial year, it won three projects in March, which totalled to around Rs 5,000 crore.

According to Sapre, the outlook for new projects is also good. The National Highways Authority of India (NHAI) revised its target upwards, and sought bids for 9,500 kilometres of roads. Last year, NHAI sought bids for around 7,000 kilometers.

“We expect around 70-80 per cent of targets should come through. In the first two quarters, things have not moved. But in the fourth quarter of last financial year, they had pushed many projects. Things have started moving now,” said Sapre.

The outlook on its ability to win new projects has encouraged the company in its plans to look internationally. It is planning to bid for projects in Kenya, Nigeria and other East European countries, like Ukraine and Poland, which are expected to come up with projects in the build-operate-transfer route.

It has already bid for a $1.5-billion project in Kazhakasthan with three Italian companies.

“We would like to restrain our international project size to below $500 million. The ideal size is between $200 million and $500 million,” said Sapre. He insists ITNL would remain an India-centric company, and these were mere “contingency” plans, if things did not move in India.

“This is to keep our learning curve going with latest technology. Tomorrow, if things come to a grinding halt, we will have our skill base ready,” he said.