The cost for the long-awaited Mumbai Trans Harbour Link (MTHL) project has almost doubled due to the inclusion of a metro lane. Introduction of a soft loan has been suggested to make the project developer-friendly
The project cost for the Mumbai Trans Harbour Link (MTHL) has almost doubled from what was quoted at its initial bidding stage in 2008. It has doubled from Rs4,000 crore to Rs8,300 crore due to the addition of a metro lane. While the cost of the project has gone up, a soft loan is being suggested in the restructured bid.
In 2008, when bids for the project were opened for the first time, the project cost for the sea-link bridge was around Rs4,000 crore. However, two years later, the projected cost is being estimated at Rs8,300 crore. The cost escalation is being attributed to delays and the new provision for metro lanes.
The new restructured bid for MTHL has inclusions of a soft loan along with a two-phased development plan with additional metro lanes. These modifications have been made to make the bid more developer-friendly.
Consultancy firm KPMG, along with Mumbai Transformation Support Unit (MTSU) was assigned the work for restructuring the MTHL bid. The suggestions on the restructured bid had been submitted to the Mumbai Metropolitan and Regional Development Authority (MMRDA) a few months back.
The main features of this restructured bid include: six road lanes and provisions for two metro lanes, introduction of a soft loan and a two-phased development plan.
The soft loan could help make the project more financially viable and investment friendly. "We expect it on a build-operate-transfer (BOT) model. The other financial aspects will depend on the viability gap funding to be quoted by the private developer," said UPS Madan, project manager, MTSU. The bid restructuring has been undertaken after due consultation with the previous bidders and potential developers for the project.
According to sources, private developers are much more comfortable with the provisions of the restructured bid. It is believed that bankers were not happy with the earlier proposed bid.
"It will be completed in two phases - rather than all the eight lanes being completed in one go. The first phase will be completed in four years and the rest in two years. This has been proposed with the intention of starting the usage of the bridge and a revenue stream at the end of a four-year period, than waiting for six years at a stretch," said Mr Madan.
"Financial restructuring has been done keeping in mind the development of (the) Navi Mumbai area. Decongestion of the city through redevelopment of Navi Mumbai is being aimed at," said Ajay Saxena, PPP expert, officer on special duty-Maharashtra, who has been actively involved in restructuring the project.
While the consulting agency has submitted the restructured project proposal, final approval for the project is still awaited. "We have submitted the restructured bid to MMRDA, but the government's decision on the implementing agency is yet to be finalised," said Mr Madan.
MTHL has been plagued by various controversies over the past few decades. The most recent controversies surrounding the project included the Reliance spat followed by a bureaucratic tussle between government entities MMRDA and the Maharashtra State Road Development Corporation (MSRDC).
MMRDA had proposed a city development project which included developing four road lanes and two metro lanes. However, MSRDC's proposal involved building six road lanes, making it a road-development project. MMRDA was finally given the go-ahead to develop the project by State chief minister Ashok Chavan in March 2010.
Total redemptions of all schemes stood at Rs1.19 lakh crore in June while equity funds witnessed Rs1,446 crore of net redemptions, despite the launch of six NFOs
The inflow of Rs1,256 crore for equity funds in May 2010 was a fleeting affair. Equity funds have continued to witness outflows in June 2010 and this time the outflow is one of the highest, which would lead to intense debate on the current regulations that govern fund-selling and put pressure on the market to introspect.
According to data released by the Association of Mutual Funds in India (AMFI), equity mutual funds have recorded Rs1,446 crore of redemptions in June 2010.
Meanwhile, the BSE Sensex was up 7% in June. The total outflow of all schemes stood at Rs1.19 lakh crore. Income funds have also suffered Rs1.34 lakh crore in outflows.
In June, six equity funds were launched. These were Baroda Pioneer Infrastructure Fund, Birla SunLife India Reforms Fund, DSP BlackRock Focus 25 Fund, ICICI Prudential Nifty Junior Index Fund, IDBI Nifty Index Fund and Taurus Nifty Index Fund. Put together, they raised Rs1,068 crore. Gross sales of existing schemes were Rs3,873 crore. However, redemptions from existing schemes were as high as Rs6,387 crore, leaving a net outflow of Rs1,446 crore.
Industry experts are citing low sales and continuous profit-booking as the reason for redemption in equity funds. Sales of equity schemes stood at Rs1,068 crore in June 2010.
All the loss-making broadcasting businesses would now come under one roof and so would all the loss-making print and digital businesses
The Network18 Group announced a business-restructuring plan on Wednesday which involves the consolidation of its various activities under two entities - one, broadcasting and two, digital initiatives and publishing.
The group's main businesses have been haemorrhaging cash for over two years now, following ill-timed expansion and diversification on a massive scale between 2006-08. But will the restructuring help the bottom-line? Not quite. The stock market's reaction says it all. Network18 crashed by 14% today and TV18 collapsed by 12%.
In a filing to the Bombay Stock Exchange (BSE), Network18 said that all its TV businesses - including CNBC-TV18, CNN-IBN, IBN7, CNBC-Awaaz and the group's 50% stake in Colors, MTV, Nick, VH1 and IBN Lokmat - have been consolidated into IBN18 which will be the new TV18. Separately, the group's website (moneycontrol.com, in.com etc.), publishing (Infomedia, which mainly runs the magazines and yellow pages), sports and event management businesses will come under the new Network18.
The New Network18 will also hold all group investments in HomeShop18, Newswire18, DEN, Yatra and Capital18. Interestingly, the Yellow Pages and magazine-publishing businesses of Infomedia18 will be merged with Network18, while printing press operations will continue to remain with the company. This means that the loss-making and difficult-to-run printing business may be up for sale.
Under the rearrangement, shareholders with 100 TV18 shares will receive 68 shares of IBN18 (eventually TV18) and 13 shares of Network18, the company said. Besides this, those who have 100 shares of Infomedia18 will retain their existing shares and receive 14 additional ones of Network18 (taking the transfer of Yellow Pages and the publishing business into consideration).
According to Network18 Group CEO Haresh Chawla, "The New TV18 will be a compelling bouquet of the most vied-for channels in the Indian television space for all stakeholders - be it viewers or advertisers... New Network18 remains well-poised to exploit the gamut of opportunities offered by the television space."
Investors have heard similar stories before. By now, the astute among them may have also seen that when in doubt, the first thing promoters do (especially in media) is to restructure their businesses. It buys them time and allows them to again raise money by spinning a new story of growth. The truth is the group has been living on borrowed time and money. Some parts of its business came into the black thanks to massive slash-and-burn operations (see http://www.moneylife.in/article/8/6010.html) after years of high overheads and high salaries especially undermined by poor quality of output and low productivity. The group started getting rid of excess staff in early 2009 and the process is still continuing. In the March quarter, several businesses showed higher operating profits thanks to "other income" and lower costs but not higher revenues. How would shifting businesses from one legal entity to another solve this fundamental problem with its business model?
The problem starts with the fact that 40% of TV18's business is broadcasting that helps pull in revenues for other businesses. And there, revenues show not traction. Revenues were actually down in the March quarter even over the terrible quarter that was March 2009, despite the fact that this year's March quarter revenues should have been buoyed by the big event of the Union Budget. The silver lining is that one part of ibn18's business-entertainment channel Colors-is making money. But other broadcasting businesses of ibn18 (CNN IBN, IBN Lokmat and IBN7) are in deep losses again and have no real growth traction. Competition is intense because others can also play the same game as Network18 can. Their operational costs are high too, mainly because salaries are exorbitant, relative to quality and quantity of output. Most importantly, these news operations have no real edge; they are indistinguishable from the others. The 50% profit from Colors will be eaten up by losses from the news channels.
The second leg of the business - the sunrise business of digital content - is not going anywhere either. Web18 revenues were up by just 8.5% in the March quarter and profits fell. The fourth leg of the group - printing and publishing of Infomedia - is a combination of legacy business (printing, which belonged to Tata Press) and a bunch of money-losing new titles ambitiously launched against strong headwinds in advertising. Whether these businesses are under TV18 or Network18 is really cosmetic.
In short, the restructuring exercise of the group currently amounts to aimless shuffling of pieces on a chessboard.