By Arijit Barman & Rachita Prasad , ET Bureau |

MUMBAI: Engineering major Larsen & Toubro is exploring an option to raise between Rs 2000 crore – Rs 2500 crore by clubbing operational road projects of its infrastructure development arm L&T IDPLinto a separate entity which could be listed overseas through a business trust model.This proposal was separately mooted by a European as well as a Japanese bank to the company, said multiple sources briefed on the matter. This new idea is based on the increasing popularity of the model amongst global financial investors who are scouting for high quality operating yield assets in infrastructure,real estate and renewable energy.

Currently L&T IDPL has a portfolio of 18 roads, 10 of which are operational. All the projects are housed under individual special purpose vehicles (SPVs). The total project outlay for the road projects is Rs 21,600 crore. L&T is among the top two road developers in the country.

Interestingly, the trust proposal has come at a time when L&T IDPL is already in advanced negotiations with a clutch of sovereign wealth funds, pension funds and long only investors to raise up to $500 million by diluting 15-20% at an initial equity valuation in excess of $2 billion. Abu Dhabi-headquartered Mubadala Development Corporation and Khazannah, the investment vehicle of the government of Malaysia and a global pension fund are among the potential suitors. Morgan Stanley has already been advising L&T IDPL in those live negotiations.

The sources quoted earlier added that the entire matter is still at a preliminary stage and may or may not translate into a dea. “The proposals are still being evaluated and no final decision has been made as yet. It is still preliminary brain storming,” said a senior official involved directly in ongoing discussions.

Sources add that L&T’s management would not want to upset the ongoing discussions and are evaluating if an equity investment in the parent platform (L&T IDPL) can co-exist with the listing of the operational road asset at level below via the trust model.

“Tapping alternate markets have always been part and parcel of the ideas pool for IDPL. It’s not a new or novel idea. Even some Indian companies have tried it in the past. The company’s operating team will take a final call on its strategy to find growth capital. We haven’t constrained them. Based on their decision, they will come to the board and also to L&T with a concrete proposal…They haven’t so far,” said R Shankar Raman, CFO, L&T and a director of L&T IDPL.

Raman felt that both transactions could potentially co-exist. “Infrastructure is a nascent sector, so are the different investment routes. This structure will evolve over time. If the parent’s mandate is to identify, develop and commission good projects, then post commissioning you don’t have to run them yourself for the next 35 years,” he added.

“Despite the overall slump in infrastructure and considerable macro economic headwinds, the PE transaction at L&T IDPL has progressed considerably even though it’s been slow and challenging. Serious negotiations are on with an interested party and a deal should close in the next few months. So this new development has been a surprise to us but will not be at the cost of the other. The management will only proceed if the potential financial investor does not have an objection,” said one of the sources mentioned above.

However when contacted L&T IDPL CEO K Venkatesh said he had no such plans to list the road portfolio separately or create an investment trust. “Bankers keep suggesting ideas. But we are not looking at that option. Our plan is to get private equity and we have reached a stage where some firms have shown a lot of interest and we are going ahead with due diligence.”

As per new plan, a separate trust will be created where all or most of the operational roads will get transferred. This trust then listed overseas and will be traded amongst investors who look for annualised cash flows or yields. The advisors have suggested three markets — Singapore, Hong Kong and London — for a potential listing where there is still traction for Indian paper.

The move is aimed at raising funds for the roads to meet ongoing and future capital requirements and also to trim the existing debt of parent L&T. If the debt from the operating road projects were to be transferred into a separate trust, the strain on L&T’s consolidated books will reduce significantly. Being an infrastructure developer, L&T IDPL is a cash guzzler but its debt gets reflected in the parent’s books impacting its credit ratings adversely.

Till 31st March 2013, excluding L&T standalone and L&T Financials, the group had Rs 29,000 crore of debt – a lion’s share was on account of L&T IDPL.

Unlike companies, business trusts aren’t required to show profits before distributing available cash funds. As a result, investors can get returns even before profits are generated. This is useful for businesses that generate high cash flows, but see a substantial depreciation of their assets — in this case, capital-intensive highway projects.

“Forming an investment trust looks like a viable option on paper. But in reality, a company like L&T would require to have ample number of operational projects with toll collection data history to make a move like this. Listing an investment trust overseas entails some degree of forex risk too. Also, in with domestic interest rates being high and uncertainty over GDP growth, it may be challenging to get very good valuations,” warned Nitin Bhasin, analyst, Ambit Capital.

Beyond roads, L&T IDPL’s portfolio of 27 infrastructure assets includes three ports and a metro rail project. Out of that, Rs 16,400-crore Hyderabad Metro project is one of the most ambitious BOT (build operate and transfer) asset.

The company has also partnered with Tata Steel for an equal venture for the Rs 3,000-crore Dhamra Port, with a debt equity of 2:1. As on March 2013, the total project cost of all the SPVs put together is a whopping Rs 65,600 crore. While the equity is Rs 5500 crore, the residual equity commitment of Rs 8700 crore is yet to flow in. The debt in the projects stood at Rs 51,400 crore.

Source-http://economictimes.indiatimes.com

“The matter will go to the Committee of Secretaries, we want that the net present value of the project does not change,” a Road Ministry official told reporters.The difference between the present value of cash inflows and the present value of cash outflows is the net present value of a project.

The Ministry and the company are already in discussions to rescue the project.According to sources, GMR Infrastructure BSE 0.76 % was ready to start the project with some preconditions, including making piece-meal payments.The company has also said it would pay about 50 per cent of the amount to restart the work on project at present and pay the remaining sum in the subsequent years, including interest.The official added that the proposal from the Ministry is to ask the company to make the requisite payments in time and to seek its guarantee to ensure that the project is not abandoned mid-way, leading to the financial burden falling on the the government.

Earlier this year, GMR Infrastructure walked out of the Kishangarh-Udaipur-Ahmedabad project 16 months after securing the order.The project is estimated to have required an investment of Rs 5,387 crore. The Bangalore-based group had won the project in western India through international competitive bidding at Rs 636 crore annual premium for 26 years.It is believed that the company terminated the contract on account of difficulties in taking up the project due to regulatory hurdles, including delays in environment clearance and land acquisition.However, NHAI had said that the company exited the project on account of financial hurdles in arranging finance for the project and not due to lack of regulatory clearances.The company had won the project in September, 2011, through the international competitive bidding route. It is to be implemented through the Public Private Partnership (PPP) model on Design, Build, Finance, Operate and Transfer basis.

Source-http://economictimes.indiatimes.com

Amid the brouhaha in India over the border incursions by their troops, Chinese engineers were last week calmly tunneling in the heart of the national capital for the heritage line of the Delhi Metro network, signifying the growing commercial linkages between the two neighbours. Engineers of the

Shanghai Urban Construction Group (SUCG) lowered a massive 300-tonne Tunnel Boring Machine (TBM) into a crater that was once a park in the shadows of the city’s main mosque – the 17th century Jama Masjid in old Delhi.

A station will be built here as part of the Delhi Metro’s 9.37 km Central Secretariat- Kashmiri Gate corridor, also called the heritage line because of its proximity to many monuments. “Tunneling this section is quite a difficult and sensitive job because of so many historic monuments here. The task is complicated by the rocky and sandy nature of the soil in this section,” Lu Yuanqiang, chairman, SUCG Infrastructure India, told IANS on location. SUCG has formed a joint venture (JV) with Indian conglomerate L&T that has been awarded different projects by the Delhi Metro Rail Corporation (DMRC). With another Indian company, it has already constructed the New Delhi Elevated Subway (viaduct) for the second phase of DMRC’s project. Lu said his company had the expertise required to stabilise the soil in rocky areas where tunneling disturbs stability and increases the risk of subsidence.

On the Mandi House-ITO section of the line, where soil conditions were much better, 500 metres (of the 750-metre long section) of tunnel had been constructed, he said. The JV’s 2009 tunnel section for the Delhi Metro Airport Express – again requiring specialised expertise – was completed well before schedule, Lu said. The heritage line is located nine metres below the existing ramp for the Dwarka-Noida/Vaishali line and runs for 80 metres along the corridor. “The work has to be meticulous as it’s coming up under an operational corridor,” Shen Chenming, the project director, told IANS. Shen, who has been in Delhi for nearly five years, leads the workforce that is largely Chinese. Lu pointed out the difficulties that could arise from externalities in what is otherwise a fruitful collaboration between Indian and Chinese businesses.

“Specifically we face visa problems, delays and uncertainties if the relationship runs into complications for political reasons,” he said. From the business perspective, he had special praise for India, where, he said, public opinion ensures that it is “fair” for those wanting to do business. “India is a very important market for us. The Indian market is open, fair and just, while active public opinion ensures this, at least from our experience in the construction sector,” Lu said. The SUCG-L&T JV also has the contract for constructing the tunnel and stations for the Delhi Metro’s Vasant Vihar-Hauz Khas section.

Source -http://constructionsphere.com

Advocating the need to de-clog the road network in the country, the Union Minister insisted transporting bulk goods through rail instead of roadways as it would be cost effective and environment friendly.

“The 570 km long corridor from Sonnagar to Dankuni in the Eastern DFC will be executed through PPP route,” Bansal said at a conference here.

The Eastern and Western corridors of DFC are being constructed covering a length of 3,328 km route for exclusive freight movement in the country.

Giving the timeline, Bansal said, “the DFC project has to be completed by 2018 which is an uphill task. There is a tangible progress as 87 per cent land has been acquired. It would cost about Rs 95,000 crore including land acquisition cost.”

Highlighting the importance of the DFC, he said, “we need DFC as it is for the growth of our economy. In order to meet the growth we need to encourage private participation.”

Currently, the share of railways in goods transportation is 36 per cent whereas in the USA  and China the share is 48 per cent 47 per cent respectively.

Comparing with the road carriers, Bansal said “one freight with 59 wagons and one electric engine of 5,000 Horsepower to 6,000 Horsepower would carry 4,600 tons while 400 trucks of each of having 150 Horsepower carrying 10 tons are required to carry the same load.”

Bansal said the movement of goods on rail is six to 10 times more efficient as compared to its impact on environment, long queues at toll plazas, the time factor and the additional cost involved on roads.

Source-http://economictimes.indiatimes.com

By PTI | 24 Apr, 2013, 09.10PM IST

NEW DELHI: The Urban Development Ministry has begun looking into the report of the two-member inquiry committee appointed to ascertain the causes of closure of the Airport Metro line.

The cars at the Intelligent Transport System site receive information from sensors and transmitters installed on the streets to minimize the risk of accidents in situations such as missing a red traffic light, cars advancing from blind spots and pedestrians crossing the street. The system also tests cars that transmit such information to each other.

In a test drive for reporters Monday, the presence of a pedestrian triggered a beeping sound in the car and a picture of a person popped up on a screen in front of the driver. A picture of an arrow popped up to indicate an approaching car at an intersection. An electronic female voice said, “It’s a red light,” if the driver was about to ignore a red light.

The 3.5 hectare test site looks much like the artificial roads at driving schools, except bigger, and is in a corner of the Japanese automaker’s technology center near Mount Fuji in Shizuoka Prefecture, central Japan.

Toyota’s Lexus LS stops automatically in front of a dummy during a Toyota Motor Corp. demonstration of the pre-collision system (PCS) at its Higashi-Fuji Technical Center in Susono. AP

Toyota officials said the smart-car technology it is developing will be tested on some Japanese roads starting in 2014. Similar tests are planned for the US, although details were not decided. Such technology is expected to be effective because half of car accidents happen at intersections, according to Toyota.

Managing Officer Moritaka Yoshida said Toyota sees preventing collisions, watching out for pedestrians and helping the driving of the elderly as key to ensuring safety in the cars of the future.

“We offer the world’s top-level technology,” he told reporters.

All automakers are working on pre-crash safety technology to add value to their cars, especially for developed markets such as the US, Europe and Japan. But the strongest sales growth is coming from emerging markets which are eventually expected to show more interest in safety technology.

Toyota’s Japanese rival Nissan Motor Co. recently showed cars that were smart enough to stop on their own, park themselves and swerve away from pedestrians who suddenly jumped into the vehicle’s path.

Toyota also showed a new feature that helps the driver brake harder to prevent bumping into the vehicle in front. Toyota officials said drivers often fail to push hard on their brakes in such situations because they get into a panic.

Toyota said the technology will be available “soon,” without giving a date, and hinted it will be offered for Lexus luxury models. Luxury models already offer similar safety features such as automatic braking. Technology involving precise sensors remains expensive, sometimes costing as much as a cheaper Toyota car.

Toyota has also developed sonar sensors that help drivers avoid crashing in parking lots. One system even knows when the driver pushes on the gas pedal by mistake instead of the brakes, and will stop automatically.

Rear-end collisions make up 34 percent of car accidents in Japan, comprising the biggest category, followed by head-on collisions at 27 percent.

Cars that stop and go on their own, avoiding accidents, are not pure science fiction, experts say.

Alberto Broggi, professor at the University of Parma and an expert on intelligent transportation systems, said the idea of the accident-free cars is “very hot,” and probably within reach on some roads within several years.

“I’m sure we will arrive to such a technology even if I don’t know when exactly,” he said.

AP

Source-http://www.firstpost.com