NCC mulls infra arm float, bond issue to raise money

Debt-laden NCC has roped in a consultant to finalise fundraising options for NCC Infra, the holding company of its build-operate-transfer (BOT) infrastructure assets.

The fundraising initiative has gained urgency over the past few weeks as credit rating agency Crisil has downgraded the bank facilities of Bangalore Elevated Tollway Ltd (BETL) project, which was bagged and completed by a consortium led by NCC, to ‘D’ rating, indicating default in repayment or expectation that it will default soon.

A highly placed NCC official said the company is analysing various options for raising money. “We are tinkering with an idea of either bringing an initial public offer of NCC Infra or may go ahead with issuing of NCC Infra bonds,” he said, adding that stake dilution in the holding arm is also an option provided it gets a good valuation. NCC Infra owns five BOT road projects and three power plants. Company insiders have earlier claimed a value of over Rs2,500 crore for the company.

The official, however, declined to comment on the amount NCC Infra wants to raise.

Senior officials of the company were also unwilling to come on record on how NCC Infra plans to raise money, given the turbulence in the capital market and the fact that Crisil has downgraded a few of its projects, including BETL.

In a statement dated November 23, Crisil had said that the bank facilities of BETL continue to reflect instances of delay in repaying the interest and principal obligations. BETL has not paid the principal component due in September 2011 and the interest payment due for October 2011.

BETL has been built at a cost of Rs880 crore, part-funded with a term loan of Rs600 crore. The project, which was scheduled for completion in July 2008, got an extension and finally began tolling from April 7, 2010.

Currently, the average toll collection by BETL is Rs6.5 crore a month, which is sufficient to meet just the interest obligations. The principal obligations are met with funds from promoters.

BETL is in negotiation with its lenders to have its debt rescheduled. The proposal has been approved by the lead banker, but is pending with other bankers in the consortium that has lent to the project, said an analyst with a domestic brokerage firm.

Meanwhile, the parent company, NCC Ltd, is no less in trouble. Borrowing to fund projects and investment in subsidiaries pushed up the company’s consolidated debt from Rs3,252 crore in FY10 to Rs4,574 crore in FY11. Despite having a strong order book of over Rs16,000 crore, its profit declined 75% in the second quarter as revenue declined 9% year on year.