Indian Highway Builder Sees Infrastructure Push Doubling Sales

Dilip Buildcon Ltd., one of the top highway builders in India, expects revenue to double in the next 4-5 years on an infrastructure push by Prime Minister Narendra Modi’s government, Rohan Suryavanshi, the company’s head of strategy & planning, said in an interview with Bloomberg TV.

“We should be looking at 15%-20% growth year-on-year, which will lead us to double our sales in next 4-5 years,” he said. “We should be looking at an increasing order book.”

India announced the highest ever outlay of 1.18 trillion rupees ($16 billion) for the development of highways and roads in its 2021-22 budget. A custom Bloomberg gauge of Indian road builders has gained 27.6% since the budget was presented on Feb. 1 as compared to a gain of 2.99% in the benchmark BSE Sensex. Dilip Buildcon has jumped 53% during the period.

The Bhopal-based engineering procurement and construction company has focused on selling assets as soon as they near completion. The company has monetized 29 road assets in the last three years, including the sale of five under-construction road assets in August 2019 to Cube Highways and Infrastructure, a Singapore-based firm -- backed by investors including the World Bank’s financial arm, Abu Dhabi Investment Authority and I Squared Capital.

It is now in talks to sell seven under-construction road assets to a global investor. The company has signed a term sheet, completed due diligence and expects to sign a sales-purchase agreement soon, Suryavanshi said, without divulging more information about the investor.

“Global investors do come in at early stages of construction but the money starts coming only when assets are completed,” he said.

The highway builder expects to receive 20 billion rupees from the monetization of the Cube Highways deal and the one being negotiated as construction is completed over the next two years. Meanwhile, the company has added ten new roads in its portfolio and will also seek to sell them, Suryavanshi said in a separate call today.

Global yield hungry investors including Macquarie Group, GIC, The Canada Pension Plan Investment Board and Cube Highways have been chasing opportunities in India’s highway sector either through direct acquisitions or through investment in private road trusts and road builders. India’s highway sector construction and order activity picked up this financial year, which ends on March 31, despite the pandemic, according to government data.

Apart from roads, Dilip Buildcon will look at forming partnerships with global investors for other infrastructure assets, Suryavanshi said, without elaborating on the type of assets. In recent years, Dilip Buildcon has received several orders for assets including railways, metro rail, tunnels, bridges and airports.

Suryavanshi said that the company’s debt level had seen a slight increase last year following the pandemic but it aims to bring down its debt to equity ratio to 0.3%-0.5% from around 0.8% currently with asset sales and internal accruals.

©2021 Bloomberg L.P.

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