Choked at home, Reliance Infrastructure looks for projects overseas

December 12, 2011

BANGALORE: Reliance Infrastructure is evaluating projects in Vietnam, Turkey, Oman and Nepal as it seeks to build a portfolio of $1.5 billion in two years and expand its footprint beyond India, where analysts say cut-throat competition and land acquisition problems are thwarting projects.

The company, part of the Anil Dhirubhai Ambani Group (ADAG), sees an internal rate of return of 20% from projects, which it aims to execute quickly, a senior company official who did not want to be identified, said.

“There are issues related to land acquisition and environmental clearances which delays projects in India making it unviable. Also the construction period is over five years here against two years overseas,” said a senior official from Reliance Infrastructure’s Road division.

Reliance has stated it is looking at five government road projects in Vietnam under the build, operate and transfer (BOT) model and is preparing to file expressions of interest (EoI) for it. The company is also evaluating, operate-maintain and toll road projects in Turkey, which will help it earn a revenue ofRs 4,000 crore annually.

With orders, especially from the central government, diminishing in the infrastructure sector, the company — which is also executing Mumbai’s Worli-Haji Ali sea link project — is looking at state roads and highways projects in the range of Rs 500-1,000 crore across the country.

“The bidding has been very aggressive with as many as 30-40 infrastructure companies bidding for the same projects. We do not want to dilute our return and portfolio value and RInfra will only choose projects which are high-density traffic corridors and offer 18-20% return,” said the official.

Recently, companies such as GMR InfrastructureL&T Infrastructure Development Projects and IRB Infrastructure had quoted a premium of over Rs 300 crore for national highway projects. Currently, bids from as many as 30-40 infrastructure companies, most of whom have bid for multiple projects, are awaiting progress. As many as 60 road projects by the NHAI, worth around Rs 40,000 crore, are stuck in clearances with the Planning Commission. In FY12, NHAI has awarded 3,300 km of projects and will award 4,200 km by December 2011.

“Land hassles, high interest rates, adverse currency movement, low ordering environment and intense competition for the few projects that are available are several problems that companies in the India construction and infrastructure space are facing. The private sector’s confidence to invest in capacity creation remains low and that both public and private capex are likely to take longer to recover this time,” Morgan Stanley said in a report.

Separately, Reliance is also in talks to acquire national highway road projects in Tamil Nadu, Gujarat and Karnataka worthRs 2,000 crore. “We are looking at building our portfolio through secondary market and are evaluating some assets. The project should be viable and make healthy return for us,” said the Reliance official.

Reliance Infrastructure has emerged as the largest concessionaire of NHAI and currently has 11 road projects totalling 1,000 km valued at aroundRs 12,000 crore under various stages of execution. Six projects would become revenue operational by March, 2012, while four have already started generating revenues.

These projects include sixlaning of the NH 4 between Pune and Satara of length 140 km in Maharashtra, six-laning of NH 7 between Hosur and Krishnagiri of length 60 km in Tamil Nadu, six-laning of NH 2 between Delhi and Agra of length 180 km in Haryana and Uttar Pradesh. The 10 road projects are expected to be fully-commissioned by 2014 and will generate a revenue of Rs 1,200-1,400 crore annually.

“The company is also looking to bid for mega highway projects upward of Rs 2,000 crore and expects a 10-12% increase in traffic growth annually,” he said. RInfra has 25 infrastructure projects totallingRs 40,000 crore, including these 10 projects under different stage of execution. The company had posted a net profit of Rs 362 crore in the quarter ended September 30, 2011. On Friday, the firm’s stock closed up 1.78% at Rs 413 on BSE.


2 Comments on “Choked at home, Reliance Infrastructure looks for projects overseas” Post your comment

  1. surat singh on July 14th, 2012 6:18 pm

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  2. kamalraj R on October 12th, 2012 10:35 pm

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