Mumbai trans-harbour link unviable: Infra firms

Even as most infrastructure companies are complaining of lack of new orders from the government, not a single firm has bid for the 22-km trans-harbour sea link road project connecting New Mumbai to Sewri, saying the project is unviable.

Chief executives (CEO) of infra firms say the government’s traffic projections have gone way off the mark in the past, making many projects unviable. This was in spite of a 20 per cent viability gap funding given by the government.

Take, for example, the Bandra-Worli sea link, constructed by Hindustan Construction Company after protests and cost overrun. It is yet to break even. “There is no certainty on the status of the Navi Mumbai airport and, hence,  no one can make any projections on the traffic on the Navi Mumbai sea link. As hundreds of clearances, including from the environment ministry, are required, delaying the project unnecessarily, we decided to stay away from the project,” said the CEO of an infrastructure firm on condition of anonymity.

INFRA COMPANIES WARY

• Negative outlook
• Falling order book
• Declining profits
• High finance costs
• Tight liquidity
• Falling credit metrics

Lack of liquidity and high finance costs are other reasons cited to refrain from bidding for the Rs 10,000-crore project. Shares of most infrastructure firms have lost value by 25-50 per cent this calendar year to date, making it difficult for them to raise funds via equity.

At the same time, high rate of interest has discouraged companies from approaching banks. Rating companies say road projects continue to be plagued by execution challenges and that’s why no company is interested in a massive project like the sea link project.

“Lower-than-expected traffic growth continues to be the single largest rating constraint for toll road and greenfield (new) port projects, which have completed construction and are in the ramp-up phase. Low economic growth is resulting in depressing vehicular growth even on high-density roads while issues pertaining to land and right of way acquisition continue to magnify completion risks,” says a recent report by India Ratings and Research.

It says the long-term credit fundamentals for infrastructure projects remain protected, underpinned by favourable demand trends due to India’s massive infrastructure deficit.

However, the pain points, over the next six to 12 months, are unlikely to materially subside. In this backdrop, not many Indian companies including the big boys L&T and Ambani brothers decided to enter the fray this time.