Hope NHAI orders pick up; focus on EPC projects: NCC

YD Murthy, executive VP-finance, NCC explains to CNBC-TV18 that the award of orders from NHAI have slowed down significantly. The economic environment has made it difficult for infrastructure companies to achieve financial closure for road projects.

Murthy adds that the company will now to focus on bagging EPC contracts in the roads sector. He expects the momentum of award of orders by NHAI to pick up going forward though participants in the infrastructure are unlikely to bid aggressively.

"The market is not conducive for deleveraging of balance-sheets making it tough to exit road projects and the valuations are not attractive. We are in talks with investors to exit two BoT projects," he highlights.

Below is an edited transcript of the interview on CNBC-TV18

Q: There has been a lot of talk about how poor National High Authority of India's (NHAI) award of projects have been this time around. How is it affecting companies like you?

A: In the current year, the award of orders by NHAI has slowed down and many companies are finding it difficult to declare financial closure after getting the orders. So the developer's interest in NHAI build-operate-transfer (BoT) projects is a bit subdued as far as the current year is concerned. But I think NHA is planning increase its award of projects.

For example, in 2012 NHAI awarded nearly 7,300-km of road projects. For 2013, the NHAI's target is about 8,500 km and I do not think it awarded more than 2,500 km in the first seven-to-eight months of the current year. So, the pick up is expected now. The NHAI is also looking awarding engineering, procurement and construction (EPC) contracts for some of the unviable stretches.

EPC contracts have been very good for construction companies like ours and it is likely to revive our road construction business.

Q: Why has it become so difficult to achieve financial closure for some of these projects?

A: It is becoming increasingly difficult to bid aggressively as last year and lenders are also becoming a bit restless. Lenders have also become cautious as some of the projects have turned financially unviable after being aggressively bid for.

Q: Do you think this will lead to bidding becoming less aggressive for the next few projects which might be on offer?

A: It is difficult to say. That will be decided by the market forces. However, a reduction in the aggressiveness witnessed in the in bidding seen earlier is good for the industry and the developers in the long run.