Workers are silhouetted as they walk along a road running through the project site for a 920-square-kilometer industrial area, located on the Delhi-Mumbai Industrial Corridor, near the village of Dholera, Gujarat, India. (Photographer: Anindito Mukherjee/Bloomberg)

Project Financing An Issue After Land Acquisition Woes Ease: KNR Construction

KNR Constructions Ltd. welcomes the National Highway Authority of India’s decision to award projects only after securing 80 percent land acquisition approval even as award of fresh contracts slowed down in the months of June and July.

“The NHAI is paying nearly three times the government price for land acquisition,” Executive Director K Jalendar Reddy told BloombergQuint.

Reddy expects the NHAI to award projects worth Rs 1 lakh crore between December 2018 and March 2019 but said project financing remains a cause of concern.

Working capital and project financing needs of infrastructure companies are largely met by state-run banks that are reeling under mounting bad loans.

“We see little interest from these banks to fund the working capital or other financing requirements of infrastructure players, which make financial disclosures problematic for most of these players,” Reddy said.

KNR Constructions, however, has achieved financial closures for three hybrid annuity model projects with the help of private sector banks. It expects to achieve financial closure for one of its final HAM projects within a month.

Following were the other highlights of the conversation

  • NHAI waiting for 80-90 percent land acquisition approvals before floating tender.
  • Expect project awards to pick up August-September onward.
  • Company secured more than Rs 5,000 crore worth HAM projects in the March quarter.
  • Expects completion of March-quarter projects by the end of the ongoing financial year.
  • Sees single-digit revenue growth in FY19 due to land acquisition process.
  • Company expects better revenues in the ongoing and the next financial year.
  • Has received assurances from NHAI officials for faster availability of land.

Watch the full interview here:

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