Taking a U-turn from its strategy of owning assets and cresting the infrastructure growth wave, IVRCL, the Hyderabad-based contractor, is turning into a pureplay EPC (engineering, procurement and construction) entity.
As part of this revised strategy, the company will sell three road projects by this month end. “We are at an advanced stage of signing definitive agreements for these projects including Salem-Kumarapalayam and Chengapally-Walayar. We are expecting the agreements to be signed by the month end. We’ve put on the block all our assets. We have realised that EPC is going to be our bread and butter,” E Sudhir Reddy, IVRCL’s chairman and managing director, told analysts during the company’s earnings call on Monday.
In addition to selling off the assets, the company is also exploring the option of diluting stake in other projects. IVRCL blames the bureaucracy for stalling projects. It has been citing approval delays, cost escalations and other issues as roadblocks to execution.
“Four to five other projects are also stuck in the process. One road project in Tamil Nadu is stuck due to state related issues. For another road project in Maharashtra, there is a state-Centre dispute in getting a grant of about Rs100 crore. These issues are causing problems in taking things forward,” he said.
According to him, there has been a difference of opinion among various agencies on interpretation of statutes, thereby making financial closures extremely difficult.
“There is a need for the language in various documents to be understood equally by the agencies. There is a difference of opinion between them. The Reserve Bank of India, banks and the National Highways Authority of India, for instance, have their own way of interpreting the language. In fact, it is a larger problem that has to be addressed by the government. It’s not about IVRCL alone. The problem is equally bothering all other infrastructure companies. That is precisely why we have excused ourselves by not bidding for any further projects,” Reddy said.
For the September quarter, IVRCL recorded Rs994.72 crore in revenue as against Rs1,207.06 crore in the corresponding quarter the previous year. The company has closed the second quarter of the fiscal with a net loss of about Rs39.59 crore as against `6-crore loss in the second quarter of the previous year.
IVRCL currently has an order book of about Rs26,365 crore. Water and transportation segments have a majority of the orders with each accounting for over Rs9,000 crore worth orders.