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Sale of 7 highway projects
ROADS & HIGHWAYS

Sale of 7 highway projects

Madhya Pradesh based Dilip Buildcon (DBL) is in talks with large global financial investors to sell seven of its road projects.

The company claims to be India’s largest road construction company. It is currently said to be building 16 percent of all National Highways. 

The company had won 12 HAM (hybrid annuity model) projects in 2018-19. It has already sold five of its projects to Cube Highways. It entered into an agreement with Cube Highways later in the month of August for the sale of 5 under construction Hybrid Annuity Model (HAM) projects. The company had agreed to sell its entire shareholding to Cube in these five projects. It was decided to execute this in a phased manner following shareholding transfer restrictions envisaged in the Concession Agreement(s) executed between the National Highways Authority of India (NHAI) and the project SPVs, and approval of lenders and NHAI. 

The total equity valuation of the said five projects is expected to be Rs 7.02 billion on required equity (equity share capital and promoter's unsecured loan) of Rs 5.68 billion.

The company is focusing on the efficient use of equity. It is reportedly planning on improving the Return on Equity by exploring possibilities for monetizing the remaining 7 HAM projects out of the 12 for which it is in talks with a few large financial investors.

Launched in 2016, HAM is a variant of public private partnership (PPP). Under this, the government bears 40% of the project cost and gives money to the developer. The rest comes from the developer over the execution period. This was launched to stimulate the development of highway projects and protect private developers from any commercial risks.

DBL bagged projects worth Rs 67.25 billion across 5 verticals of road, mining, airport, special bridge and irrigation in 6 states in 2019-20.

Even during adverse pandemic situation, Dilip Buildcon was able to complete 14 projects worth Rs 105.445 billion in 2019-20. Six road projects out of these were completed before the scheduled time and earned an early completion bonus of Rs 1.282 billion.

The company reportedly plans to focus on EPC (engineering, procurement, construction) projects, invest in equipment bank, improve process and control, recycle our equity and attract a talented workforce. They are also looking at de-risking their business through geographical and segmental diversification.

Reportedly, the company will improve its project selection strategy, increase control on costs, emphasise on cash flow generation and de-leverage the balance sheet for better returns for better financial performance. DBL will try every possible course of action to enhance its execution skills through innovation, on-time delivery, strengthening its IT systems and other internal processes.

Madhya Pradesh based Dilip Buildcon (DBL) is in talks with large global financial investors to sell seven of its road projects.The company claims to be India’s largest road construction company. It is currently said to be building 16 percent of all National Highways. The company had won 12 HAM (hybrid annuity model) projects in 2018-19. It has already sold five of its projects to Cube Highways. It entered into an agreement with Cube Highways later in the month of August for the sale of 5 under construction Hybrid Annuity Model (HAM) projects. The company had agreed to sell its entire shareholding to Cube in these five projects. It was decided to execute this in a phased manner following shareholding transfer restrictions envisaged in the Concession Agreement(s) executed between the National Highways Authority of India (NHAI) and the project SPVs, and approval of lenders and NHAI. The total equity valuation of the said five projects is expected to be Rs 7.02 billion on required equity (equity share capital and promoter's unsecured loan) of Rs 5.68 billion.The company is focusing on the efficient use of equity. It is reportedly planning on improving the Return on Equity by exploring possibilities for monetizing the remaining 7 HAM projects out of the 12 for which it is in talks with a few large financial investors.Launched in 2016, HAM is a variant of public private partnership (PPP). Under this, the government bears 40% of the project cost and gives money to the developer. The rest comes from the developer over the execution period. This was launched to stimulate the development of highway projects and protect private developers from any commercial risks.DBL bagged projects worth Rs 67.25 billion across 5 verticals of road, mining, airport, special bridge and irrigation in 6 states in 2019-20.Even during adverse pandemic situation, Dilip Buildcon was able to complete 14 projects worth Rs 105.445 billion in 2019-20. Six road projects out of these were completed before the scheduled time and earned an early completion bonus of Rs 1.282 billion.The company reportedly plans to focus on EPC (engineering, procurement, construction) projects, invest in equipment bank, improve process and control, recycle our equity and attract a talented workforce. They are also looking at de-risking their business through geographical and segmental diversification.Reportedly, the company will improve its project selection strategy, increase control on costs, emphasise on cash flow generation and de-leverage the balance sheet for better returns for better financial performance. DBL will try every possible course of action to enhance its execution skills through innovation, on-time delivery, strengthening its IT systems and other internal processes.

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