Company has proposed to convert 50% loans into equity in form of long-term bonds; the balance will be debt
Reliance Infrastructure’s (RInfra) unit that operates metro services in Mumbai has submitted a proposal under Scheme for Sustainable Structuring of Stressed Assets (S4A) to its lenders to lower its debt exposure, sources told DNA Money.
S4A scheme is an optional framework for the resolution of large stressed accounts introduced by the Reserve Bank of India in June 2016. The scheme envisages determination of the sustainable debt level for a stressed borrower, and bifurcation of the outstanding debt into sustainable debt and equity that may provide upside to the lenders when the borrower turns around.
RInfra holds 69% of the equity share capital in Mumbai Metro One Pvt Ltd (MMOPL), a special purpose vehicle formed in June 2008 for metro services on a stretch of 11.40-kilometre between Versova-Andheri-Ghatkopar.
Mumbai Metropolitan Region Development Authority (MMRDA) holds 26% stake in MMOPL and the remaining 5% is with Veolia Transport RATP Asia, France through a separate joint venture company.
The main reason for the Anil Ambani-promoted firm to initiate proceedings under the S4A scheme is high interest payout of around Rs 165 crore per annum.
The rate of interest for the company is around 11% at present, higher than 9-9.5% for a debt of similar tenure in the current scenario. Until around three years ago, it was even higher.
Sources said that the proposal has been put up with Syndicate Bank-led consortium, and the joint lenders’ forum is going through it and is yet to meet to take a final call.
IDBI Bank, Canara Bank are also among banks that have extended a loan to the infrastructure firm.
RInfra did not reply to an email questionnaire sent by DNA Money regarding the debt restructuring under S4A.
RInfra has proposed conversion of 50% of debt into equity in the form of long-term bonds and the balance will have to be serviced as debt, thereby reducing MMOPL’s interest payment as well, said a source.
This will help Anil Ambani’s Mumbai metro business tide over the losses it has been making despite the revenue and ridership increasing every quarter. For the second quarter ending September 30, MMOPL’s revenues went up 21% year on year to Rs 74 crore.
After a recent Bombay High Court order striking down Fare Fixation Committee’s recommendation on levying up to Rs 110 fare, MMOPL will have to maintain its fare structure at up to Rs 40. Thus, it intends to increase its revenue earnings from advertisement, station branding and retail rentals.
The present repayment tenure of RInfra is just above 15 years to service the debt of around Rs 1,250 crore.
The actual cost of the project is under arbitration. While RInfra said the cost escalated to Rs 4,321 crore due to various delays, MMRDA pegs it at Rs 2,356 crore, which was the cost during the bidding stage in 2006.
If MMOPL’s or RInfra’s project cost is considered, around Rs 650 crore was given by the government as viability gap funding for this public-private partnership metro project.
Around Rs 1,800 crore was debt from various banks and the cost escalation or balance amount was borne by RInfra as ‘sub-debt’ to the special purpose vehicle.
CUTTING COSTS
- The main reason for the Anil Ambani-promoted firm to initiate proceedings under the S4A scheme is high interest payout of around Rs 165 crore per annum
- The joint lenders forum is going through the proposal submitted, and is yet to meet to take a final call
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