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IL&FS Transportation Networks Ltd.

BSE: 533177 Sector: Engineering
NSE: IL&FSTRANS ISIN Code: INE975G01012
BSE 00:00 | 26 Nov 4.05 0.18
(4.65%)
OPEN

4.06

HIGH

4.06

LOW

3.95

NSE 00:00 | 26 Nov 4.05 0.10
(2.53%)
OPEN

4.10

HIGH

4.10

LOW

3.85

OPEN 4.06
PREVIOUS CLOSE 3.87
VOLUME 74330
52-Week high 6.99
52-Week low 1.34
P/E
Mkt Cap.(Rs cr) 133
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 4.06
CLOSE 3.87
VOLUME 74330
52-Week high 6.99
52-Week low 1.34
P/E
Mkt Cap.(Rs cr) 133
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

IL&FS Transportation Networks Ltd. (IL&FSTRANS) - Chairman Speech

Company chairman speech

Dear Shareholders

The year 2017 was marked by key economic reforms by the Government ofIndia. In July the Indian economy witnessed the launch of the transformational Goods andService Tax (GST). While a game-changer the teething problems gave rise to a climate ofuncertainty. However conducive policies reform initiatives and corrective measures ledto signs of revival in the second half of the year. The Indian economy posted a growthrate of 7.7% during Q4 FY 2017-18 enabling the country to retain its position as thefastest-growing major economy. Domestically over the medium term GST promises to deliverpositive results as India becomes a single more competitive market. The Governmentcontinues to drive reforms across sectors to improve transparency and boost investments inour country

INFRASTRUCTURE OPPORTUNITY

The development of a country's infrastructure is vital to thegrowth of its sectors and the overall economy. The increased spending in this sector has amultiplier effect on the overall economic growth as it necessitates industrial growth andmanufacturing. This in turn boosts aggregate demand by improving living conditions

In the fiscal year ending March 2018 the National Highways Authorityof India (NHAI) and Ministry of Road Transport and Highways (MoRTH) awarded contracts fora record ~17000 km of roads and constructed ~10000 km. During the current fiscal theGovernment has set a target to increase road award and construction to about 20000 km and16000 km respectively. The sector's visibility improved with the Governmentannouncing the Bharatmala project under which it plans to construct 83677 km of roads by2022. MoRTH expects to fund it with H71000 Crore in budgetary support and around H1.5Lakh Crore by monetising 100 highway projects. It has already monetised nine projects andraised H10000 Crore. NHAI proposes to issue bonds including masala bonds to fund theresidual amount

The mix of awards by both NHAI and MoRTH have also changed with theshift to HAM and EPC from BOT. This was largely driven by the need to protect road playersfrom the volatility of traffic growth which had rendered several older projects unviablelimiting debt funding from banks for future growth. The Government has continued itsthrust on the Pradhan Mantri Gram Sadak Yojana (PMGSY) as allocation towards it remainedat H19000 Crore. The Phase-III of PMGSY has been launched to connect hospitals andschools through major link routes through the interiors of villages. The Government'starget is to construct 57000 km involving 28.35 Crore man-days

OPERATIONAL PERFORMANCE

Our construction revenue for the reporting period stood at H2538Crore around 14% lower than that of 2016-17 (H2952 Crore) on account of reduction in thenumber of projects under implementation. The year ended with a consolidated order bookincluding business from international territories of H20664 Crore against

H15339 Crore at the start of financial year. New orders worth€19.67 Million were secured in the Spanish region

We secured the construction operation and maintenance of the 14-kmlong two-lane bi-directional Zojila tunnel with parallel escape (egress) tunnel excludingapproaches on the Srinagar-Leh section in EPC mode. We have successfully refinanced thedebt in the Jorabat-Shillong Road project amounting to H883 Crore at 8.3% which has inturn led to lowering of interest rate by 2-3% and consequent savings in interest cost. Forthe year ending March 2018 Yuhe Expressway recorded sales of US$ 84.26 Million againstUS$ 72.56 Million in the previous year

CHALLENGES

While the Government has been doing the needful in providing the rightboost to the infrastructure sector the industry still has some miles to go to overcomeits challenges. ITNL too has been facing its share of difficulties. For instancecoupled with lower fees revenue from operations is lower on account of decreasedconstruction income due to the completion of major projects; and the commencement ofconstruction work in new projects as well

As the Government's mode of project delivery has moved fromPrivate-Public Partnership (PPP) to EPC and HAM models a sector in which we are emergingwe remain cautious while bidding for such projects

We also witnessed considerable cost overruns in the projects as aresult of the authority failing in their obligations such as to provide right of way andforest clearances among others. Keeping in line with its philosophy of not abandoning anyprojects as a principal sponsor the Company borrowed additional money to fund the costoverruns. However claims and compensation have been sought by the project companies fromthe respective authority the realisation of which is subject to procedural delays. Onesuch case is the award passed by the Arbitration Tribunal in favour of our projectcompany Pune Sholapur Road Development Company Limited for an amount of H548 Crore onNovember 30 2017 after a period of 1.5 years. However the authority has appealed againstthis award which is yet to be finally disposed. In the process the Company's debtposition worsened and the Company also incurred additional interest cost

With the intent to overcome these hurdles we plan to criticallyreassess our project portfolio and take appropriate actions including stake saledivestment and refinancing and shift our focus to EPC and HAM projects

We are hopeful that the current issues the infrastructure sector isgrappling with namely reluctance of bankers to lend delays in land acquisition andmultiple and delayed dispute resolutions will be gradually resolved as the Governmentembarks on its ambitious agenda of infrastructure creation. We have a promising butdifficult roadmap given the economic potential of India and the intent of the Governmentboth at a vision level and the seriousness of implementation from a regulatory standpoint.The Government's large-scale infrastructure development programmes providesignificant opportunities for investors and market players to help transform the sectorand partner India's socio-economic progress

GOING FORWARD

There are tremendous opportunities in the near and long term for theinfrastructure space in India. We will look to build on our EPC project portfolio bybidding both as a single entity for large complex projects and in JVs while aiming tosecure feasible HAM projects that meet the Company's criteria

To add to the vast opportunity in this changing scenario is theincrease in the number of projects and an expectation to see an additional demand in everyaspect of the engineering manufacturing and construction activities

We will continue to leverage our inherent strengths and expand ourhorizons to capture a larger share of the infrastructure opportunity and be seen as apreferred infrastructure partner. Our passion professionalism and perseverance give us anexceptional future outlook. Our objective is to drive innovation across each aspect of ourbusiness and make that an integral part of a sustainable approach

Let me end by thanking all our shareholders for their support andencouragement during the year and for the trust and faith you repose in us

Best Regards

Deepak Dasgupta

.