There have been reports that several highway projects of Sadbhav Engineering have become eligible for deferment of premium payments. CNBC-TV18's Latha Venkatesh and Sonia Shenoy spoke with Nitin Patel, ED, Sadbhav Engineering to understand the development.
It will also give a big relief to almost all [road] developers in terms of working capital.
Nitin Patel
ED
Sadbhav Engineering
There have been reports that several highway projects of Sadbhav Engineering have become eligible for deferment of premium payments.
Premiums are payments road developers pay to the government in lieu of the right to develop a road and levy tolls.
CNBC-TV18's Latha Venkatesh and Sonia Shenoy spoke with Nitin Patel, ED, Sadbhav Engineering to understand the development.
Also read: 21 projects will benefit due to premium rescheduling: NHAI
Below are the excerpts from the interview:
Q: What does this mean for you? And what is the amount of projects that have become eligible for deferred payment?
A: It is almost between Rs 2500-2600 crore, total value of these three project.
Q: And what is the advantage? They become eligible in 2015. You don't have to pay, and will there be some working capital relief for you in 2015 itself?
A: As per the terms and conditions of agreement and waterfall mechanism prescribed by National Highways Authority of India (NHAI), whatever revenue accrues first, payments will go towards statutory dues, then operational maintenance costs and premiums to NHAI. Whatever balance is left would be paid to lenders of the project.
Now, with this change, the government of India given precedence to lenders over the premium payment to NHAI and the premium has also been allowed to be deferred by the developers one year before the end of the consistent year period.
Obviously it will give a big relief to almost all developers in terms of working capital. Credit quality of all special purpose vehicles (SPVs) will also improve over the period of time.
Q: Credit quality will improve but whatever money you would have paid as premium now you have to pay the lenders, correct?
A: Premium is to be paid to the NHAI
Q: The money you can pay much late in the concession period. Therefore, the money that you save by not paying premium immediately, you have to pay to lenders?
A: Lenders have to be paid, so lenders have got the precedence over the premium payments.
Sadbhav Engg stock price
On February 24, 2014, Sadbhav Engineering closed at Rs 90.05, down Rs 0.55, or 0.61 percent. The 52-week high of the share was Rs 129.00 and the 52-week low was Rs 52.00.
The company's trailing 12-month (TTM) EPS was at Rs 5.39 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 16.71. The latest book value of the company is Rs 54.90 per share. At current value, the price-to-book value of the company is 1.64.
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