RInfra to move aggressively on defence; quit roads, cement biz

Mumbai: Reliance Infrastructure (RInfra) Wednesday reported a tepid 4.62 percent rise in net profit for July-September quarter at Rs 451.1 crore, and said it will focus on the defence sector, while exiting the cement and road businesses by monetising these assets.

Under the asset and capital-light strategy, wherein it will focus on less capital intensive defence business, the Anil Ambani-led company will monetise all of its 11 completed road projects in which it has invested Rs 8,800 crore.

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RInfra will also sell the 5.6-million tonne per annum cement business, which the firm entered only a few years back.

"It is our strategy to focus on low capital intensive businesses. We recently made a foray into the defence sector which is relatively low capital intensive, has lower gestation period but has potential for superior return on equity," RInfra Chief Executive M S Mehta told reporters here.

He said the board has stipulated that "the defence sector will be primary driver" for growth and given nod to "dispose of cement business" for which seven potential buyers have already been short-listed from a total of 15 parties that submitted preliminary expressions of interest.

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"We expect to get a good valuation for this cement business mainly because of the success we've achieved in a short period. Our capacity utilisation is at par with the industry standards. Also, we've coal mines, which we recently won through auctions. All these factors are enough for us to get a better valuation for the business," Mehta said.

He said due diligence process has commenced and the company will soon make an announcement.

On plans to monetise road assets, he said, "we've already made an investment of Rs 8,800 crore in the roads business, comprising 11 projects of around 1,000km across seven States. Ten of them are already revenue generating and the last one will start operations by next month."

The company plans to sell the projects in a bunch and not monetise it asset by asset, he added.

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"We hope to complete the process by next March. There are many stressed assets out there but we are seeing good interest from international players who want to buy such projects. We also expect interest from pension funds."

Group Chairman Anil Ambani had told the shareholders at the last AGM that, "defence is an opportunity that is now available to the private sector which was earlier only with the public sector. Our entry into the defence sector is in line with Prime Minister Narendra Modi's thinking about moving India forward, support Make in India and skilling programmes."

RInfra expects to complete the acquisition process of

Pipavav Defence and Offshore Engineering Company this fiscal itself post which it will be renamed as Reliance Defence and Engineering.

In the biggest deal in the defence sector, RInfra had in March announced acquisition of controlling stake in Pipavav Defence and Offshore Engineering for Rs 2,082.3 crore.

Pipavav Defence houses the country's largest dry dock facility to build warships and other naval vessels.

The Maharashtra government has allotted 290 acres at Mihan near Nagpur for the development of the country's first smart city for the defence sector, known as Dhirubhai Ambani Aerospace Park.

Meanwhile, RInfra reported a net profit of Rs 431.19 crore in the September quarter. Total income rose to Rs 4,377.86 crore from Rs 4,057.95 crore, while total expenditure shot up to Rs 3,775 crore in the July-September period from Rs 3,560.49 crore a year ago.

Segment-wise, power business revenue declined to Rs 3,116.62 crore from Rs 3,277.49 crore, EPC and contract business revenue rose to Rs 682.24 crore from Rs 576.78 crore.

Infrastructure business garnered a revenue of Rs 211.59 crore, while Rs 379.11 crore came from the cement business.

During the quarter, the company incurred higher finance costs of Rs 638.77 crore up from Rs 564.64 crore a year ago.

On the Mumbai Metro fare row, Mehta said "we have approached the State Government to consider its proposal for arriving at some solution to ensure that the commuters are not affected by the tariff hike as proposed by the fare fixation committee of Rs 10 to Rs 110 for the 11-km metro corridor."

Meanwhile, RInfra has decided to continue with its current fares of Rs 10 to Rs 40 for the corridor.