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ShareHyderabad: In an attempt to infuse life into the otherwise dormant property arm of the group, infrastructure major IVRCL Infrastructures and Projects Ltd has decided to transfer all its build, operate and transfer (BOT) assets to IVR Prime Urban Developers Ltd.
IVRCL has been working on a bouquet of EPC (engineering, procurement, construction) and build-operate-transfer, or the so-called BOT projects. The company was moving away from BOT projects in order to derisk the business model. However, over a period of time, it has secured several BOT projects and four of them are at an advanced stage of commencing operations.
"IVR Prime will get all the BOT assets of IVRCL. In a way IVRCL is demerging all the BOT assets and merging them with IVR Prime," IVRCL's chairman and managing director E Sudhir Reddy said. This effort, according to him, is to increase the valuation of the dormant company, which has been waiting for a revival in the property market despite having a land bank of about 3,000 acres in various parts of the country.
IVRCL will remain an EPC player henceforth. "IVRCL's balance sheet will support IVR Prime in all BOT biddings. But the parent company will not get into BOT anymore. However, IVRCL has the first right of refusal on the execution of BOT projects won by IVR Prime. IVRCL will take the execution contract from IVR Prime for all its future BOT projects," Reddy said.
IVRCL is working with over half a dozen consultants to arrive at a valuation for the deal. Of the Rs 6.4 crore equity of IVR Prime, IVRCL holds about 62%. As part of the deal, once the valuations are done, IVRCL would get shares of IVR Prime in return of the asset transfer.
"We hope to complete the process before March 2010. The valuation exercise should be over in the next three weeks," he said. The four projects that would be transferred to the group's property company include three toll roads - Salem to Kumarapalayam, Kumarpalayam to Chengapalli (both in Tamil Nadu) and Jalandhar to Amritsar - and a water desalination project near Chennai. Apart from these, there are works of about Rs 19,000 crore that are still to be awarded.
Of the completed four BOT projects, Kumarpalayam to Chengapalli road is already earning a toll collection of about Rs 12 lakh per day. All the four projects are expected to earn a toll of about Rs 1 crore per day once they are operational. "For more than three years, most of the earnings would go towards repaying loans that were taken to construct these projects. It would be only after that the money would start accruing to the company," Reddy said.
IVRCL has so far invested over Rs 1,800 crore on these four projects, including the equity component. As part of the asset transfer, the debt accrued for executing these projects too would be transferred to IVR Prime.
Currently, all these assets, which are operated through special purpose vehicles, are held by two subsidiaries - IVR Strategic & Services Ltd and IVRCL Water Infrastructures Ltd.
Though a debt free company so far, IVR Prime has not been actively executing projects since it was set up with an objective of pursuing opportunities in the property market and the property market turned negative for over a year now.
"We were looking at selling off the land. Even for that, there has not been a good price for the land. We were also working on foraying into affordable housing segment. Even now, the options of selling the land and developing housing projects are on. But, with the demerger of assets from
IVRCL, we are opening other avenues of revenue for the company," Reddy explained.
Once the statutory requirements are met, IVR Prime would raise about Rs 1,500 crore to Rs 1,800 crore from the market for bidding for other projects or developing the projects on hand. The fund raise would be done through a QIP though the quantum of the fund raise would be decided at a later stage.
Meanwhile, IVRCL recorded a turnover of Rs 1,217.63 crore and a profit of about Rs 48.77 crore for the second quarter ended September. IVR Prime for the second quarter has an income of Rs 33.82 lakh from operations and a net loss of Rs 6.10 crore.
