IVRCL knocks at the door of CDR cell

Move to retire one-fifth of Rs 5,000-crore consolidated debt makes little headway

After making little headway in the proposed sale of road projects, Hyderabad-based infrastructure company IVRCL has finally  approached the Corporate Debt Restructuring (CDR) cell seeking additional time to meet its debt obligations.

The company on Tuesday informed the BSE that it had initiated the process of CDR prescribed under the Reserve Bank of India guidelines.

IVRCL in September last year announced it was planning to sell six road projects to retire at least one-fifth of the Rs 5,000-crore consolidated debt by the end of the current financial year. As the time was running out for meeting the immediate debt obligations, it has apparently opted for the CDR route in a bid to avoid loan defaults and problems in accessing fresh debt.

Like many of its peers in Andhra Pradesh, IVRCL too had been facing the challenges in terms of shrinking revenues and project delays resulting in losses. During the financial year 2012-13, its revenues decreased 12 per cent to Rs 6,178 crore while net profit fell much more sharply by almost 90 per cent to just Rs 18.08 crore. The financial woes only grew bigger thereafter as it incurred a net loss of Rs 204 crore during the first half of the current financial year.

According to the financial statement for the three-month period ending September, 2013, the company's current liabilities, excluding trade payable, stood at over Rs 5,000 crore. These include  a short-term debt of Rs 2,795 crore.

The company had earlier said it required about Rs 4,500 crore top line to break even and any income over and above would add to its profits. The performance during the first half of this year is already short of this threshold.

When asked sometime back as to why there was little or no progress on the proposed asset sale programme, company's chairman and managing director E Sudhir Reddy had said for the sale of BoT projects, the lenders also should be satisfied with the credentials of the prospective buyers even if there were interested parties around.  The company shunned bidding for fresh BoT road projects citing practical difficulties in securing clearances and delays in land acquisition among other things.

On why the company chose the asset sale route over CDR, Reddy earlier told Business Standard they took decisions purely on professional lines unlike some company promoters who become sentimental about the projects they execute. Issues like project delays and shrinking EPC business had added to the financial woes of the infrastructure companies as most of them are already overleveraged.

The company's share gained 25 paise over the previous close at Rs 14.90 on the BSE on Tuesday.