Lanco Infratech Limited is close to tying up major stake divestment deals. Talks with at least three global investors are at an advanced stage. But the regulatory issues for overseas investors and market conditions are holding up the final agreement.

Yet, the company hopes to close one big divestment deal by December or March. This will help infuse equity and trim debt. The Chief Operating Officer, Finance, Lanco Infratech, T. Adi Babu, said, “One deal could not go through as they felt that the market/regulatory conditions are not conducive. We enlisted the services of consultant Macquarie to facilitate the transaction. We are looking at raising about $750 million.”

Interacting with Business Line , Adi Babu outlines some of the key issues and difficulties that infrastructure companies are faced with.

The immediate quarter seems to have taken a major hit due to forex loss?

Yes, we have lost about Rs 230 crore because of currency volatility and interest costs have taken away our profits. In the end, we are disappointed as these were not so much to do with the company performance but the influence of external factors, including poor supply of gas and coal. But we are confident things will get better.

How is the business environment for an infrastructure company like Lanco?

The market conditions are tough, clearances are hard to come by for execution of infra projects, costs have gone up as interest rates have gone up by nearly 2 basis points, and the capital market is sluggish. Liquidity is an issue for all infrastructure companies.

As a CFO, you seem to be faced with the challenge of tackling huge debt?

The company’s overall debt has to be seen in perspective. At the holding company level, we have a debt of about Rs 3,900 crore. Of the total debt, about Rs 16,000 crore is for operating projects and Rs 16,000 crore more for projects under implementation.

The latter is not an issue, as lenders share the burden till the projects get executed. So we will have to look at them only after project execution. For those already executed, a couple of power projects were impacted by inadequate coal and gas supplies. These are not in our control.

You said your objective was to raise up to $750 million. How is the progress?

Stake divestment is a long process and involves several stages for due diligence —technical, financial, legal, etc. Market conditions also play a role. The term sheets are under consideration. At least three investors are in talks. We may raise up to Rs 2,000-crore before March 2013.

How are the power projects progressing?

Most of the projects are doing well but natural gas and coal supplies have been impacted. Gas supply from the KG basin has come down. Coal supply, in spite of linkages, is about 65 per cent. The rest of it has to be purchased. This has impacted the overall plant load factor.

But the Government and Coal India are seeking to address coal supply issues. We hope things will get better. We will add Udipi II once the evacuation line is completed by the month end and another hydel project. But expansion at the Kondapalli plant hinges on gas supply.

What about receivables?

There are nearly Rs 2,700 crore worth of recoveries from State utilities, including overdue of Rs 2,000 crore. We are in consultations and the Centre has agreed to look into the dues from utilities. We are entitled to interest for delayed payments, as per the contractual obligation.

Karnataka owes Rs 800 crore, Haryana Rs 150 crore, Uttar Pradesh Rs 700 crore, and Tamil Nadu Rs 250 crore.

>rishikumar.vundi@thehindu.co.in