Though the lockdown has had a severe economic impact and has impacted traffic movement and toll collections on highways, Virendra Mhaiskar, chairman and MD, IRB Infrastructure Developers told Sandeep Singh that traffic has been rising with every passing week and should be back to pre-COVID levels in a month of two. He, however, added that as infrastructure companies have been hit by tight liquidity scenario and lack of adequate funding support, an intervention from NHAI or other government agencies would hold key. Edited excerpts:
What are the three ways in which the pandemic and the subsequent lockdown affects your company?
Three areas where the pandemic has affected are: financial, operational and structural. While the financial impact will be compensated by government/authorities making the event NPV neutral for developers, it will have a lasting impact in the ways industry operates and business is done. Effectively, this event has caused a deferment or shift in our economy — pushing everything by couple of months — and India has managed the situation extremely well with one of the most aggressive lockdowns to contain the spread — resulting in least impact to life and well being.
Economic slowdown created temporary softness in traffic movement and hence toll collections. Most of the loss in collections with respect to COVID will be compensated by NHAI and we are seeing strong pick up in traffic with every passing week and are already above 50 per cent pre-COVID levels — even as lockdown is continuing in key states. We believe once lockdown is lifted, we should see a rebound to earlier traffic levels within a month or two.
Delays have set in for under construction projects and the working cycle wheel has been stalled with lockdown. With gradual opening up of economy, things are coming back on track slowly.
Tightening of liquidity in the system for companies rated below AA has posed some challenges. Most of the infra companies are in this category and hence sitting tight on funds available at present. Moratorium and additional funding support effected by RBI helps to some extent, but it will take a few months for the system to start functioning. For us, closure of the deal with GIC and inflow of Rs 3,700cr was very timely — that helped in deleveraging and improving our financials in this grim situation. As lockdown is lifted and all sites become fully operational, stability and funding cycle will be restored.
What kind of government support would cushion COVID’s adverse impact on your company and the industry?
At present, industry is in a fix due to lack of adequate funding support and growth opportunities. Any step to improve situation in these aspects, through intervention of NHAI or other government agencies, would be the key requirement.
Lifting of lockdown and facilitation of liquidity in the system is the basic requirement to pump prime the economy and become the self-reliant India that the country is now working towards.
What are the challenges you for your company and the industry in the current financial year?
Largely, acceptance and implementation of the new standards and ways of working across construction labour and toll operators would be the key challenge. This will also impact costs as well as pace of construction versus that budgeted earlier.
With a strong balance sheet, we are well poised for growth and tap opportunities as and when they come in — the same way we bagged largest TOT in India, Mumbai Pune project, in Feb 2020.
What makes you feel optimistic?
While this pandemic has hit the economy and stretched government balance sheet for coming quarters, it has also provided a strong case for BOT model to be reinstated as preferred mode of award in coming rounds of bids.
China has reported an increase in sale of passenger vehicles since the lifting of lockdown, as people have started opting for personal transport over public/hired transport options. And accordingly, traffic growth has meaningfully bounced back — expect the same trend in Indian industry as well.
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