The reforms initiated by the Government to re-vamp the functioning of State Electricity Boards will boost investments in the power sector, according to L. Madhusudhan Rao, Executive Chairman of Lanco Infratech Ltd. The implications of the re-structuring are far-reaching. It will improve the financial health of boards; this in turn will ensure timely payments to utilities, and utilities in turn will be able to re-deploy funds into new projects, and the provision to increase tariffs will benefit the sector. Banks will again begin to lend power projects, he said. Speaking after the company’s annual general meeting held here on Thursday, Rao said the company is looking at 2012-13 as a year of consolidation of business. The strategy is multi-pronged — divesting stake in power, road projects and realty and focus on bringing down the debt and execution of projects. Excerpts.
How do you see the power reforms playing a role for you?
This is one of the biggest initiative of the Government. In our case we have pending dues of over Rs 3,000 crore. See the far-reaching implications. Timely payments will encourage fresh investments and banks will be encouraged to lend, once the health of State boards picks up . In fact, this is a much bigger initiative than securing 85 per cent coal for power projects. Even if we were getting 65 per cent coal, the incremental gain is less compared to the move to re-vamp boards and regularly re-visit tariffs.
The Perdaman case seems to be a matter of concern? What are your plans for Griffin mine?
We are confident that we will come through successfully out of the Perdaman case. There are indications that the trial will begin in February next year and may take about three months to complete. The Griffin mine is promising. We are looking at overall investment of about $1.2 billion in the Griffin mine, which includes 50 per cent towards strengthening the infrastructure, and another 50 per cent to increase the output. This is a functional mine and the focus now is on increasing the output. We have everything in place, coal mines, rail network and port. We may have to increase its capacity and possibly set up a jetty to help manage higher capacity. We are looking at the possibility of bringing in a strategic partner for the Griffin mine project. This may even mean selling major stake but by retaining management control. We are about 30 months from harnessing its potential.
How is the Mahatamil project progressing?
The Mahatamil project is prestigious and may take about four years to complete both the mine and power project. We have recently finalised a business plan and submitted it. The land for a 2,000 MW power plant has been identified. We will have to go through a series of processes before we finalise the overall business plan and expenditure, subject to various mandatory clearances.
What about road projects and airports?
We are very clear we do not want to bid for airports. We also do not want to bid for road projects which are beset with problems. Several companies have aggressively bid for road projects. In fact, we plan to exit two of the completed road projects.
You are divesting stake in power and road projects? What is the progress?
We are at advanced stake and this may take more than one deal. The problem is investors are still vary of market conditions. There are more sellers than buyers. But once conditions improve, the interest will go up.
Do you feel stretched out with the debt?
We are looking at bringing down the debt equity ratio to 4:1 by March next at the holding company level. We are not so much concerned about debt at special purpose vehicle level.