As business environment turns tough, infrastructure companies are looking to exit some projects and bid for new ones.
Some smaller companies and those hard-pressed for funds are seeking to restructure debt. EPC (engineering, procurement and construction) contractors and power companies are among those feeling the pinch. Raising funds through the capital market is not just tough but costlier too, say infrastructure firms.
Mr M. Goutham Reddy, Executive Director, Ramky Infrastructure, said: “The availability of capital and working capital requirement has become difficult, more so for EPC and power sectors. Issues like delays in land acquisition, environment clearance and uncertainty of price in the power sector and delayed payments continue to impact as dues have piled up.”
“For infrastructure companies into EPC contracts, the margins are generally low and timely completion and flow of order book hold the key to success. The sector has faced tough two years with interest rates going up, squeezing margins and making it difficult to service loans,” said Mr R. Balarami Reddy, Chief Financial Officer, IVRCL.
The companies have no other go but to divest stake or exit some of the matured projects. In fact, some smaller firms have approached lenders for corporate debt restructuring, Mr Reddy said.
Mr Y. D. Murthy, Senior Vice-President, NCC, said the company was looking at selling its stake in at least two BOT road projects and in the power subsidiary. “As a construction company, we prefer to focus on construction and then step out. Likewise, there are companies that want to manage completed revenue generation assets.”
A Lanco official said the interest rate has jumped from 9 per cent to 14 per cent and this has brought stress on finances. “Therefore, we have made our intentions clear about exiting from three road projects and divesting stake in the power arm. The focus is on monetising matured assets for redeploying in new projects,” he said.
The infra sector is in far better shape than what people perceive. It is not as bad as the financial markets are treating the sector, Mr Goutham Reddy said.