RInfra executes Rs 10,000-cr Mumbai projects under auditors' oversight

Auditors to Reliance Infrastructure (RInfra) last week raised concerns over loans extended to some of its construction entities. RInfra, which is executing more than Rs 10,000 crore worth of Mumbai’s projects, will now have a sharper oversight by development authorities so that the project is not impacted.

As of March 2019, RInfra’s order book was at Rs 28,000 crore, all of which are state or central government orders. Three packages of the Mumbai metro project, one package of Mumbai-Nagpur Expressway and the Versova-Bandra Sea Link project in the city are parts of some of the projects underway.

“The current woes can impact the company’s order book. In the past, we have seen project termination for weak EPC (engineering, procurement and construction) contractors,” said an official from a rating agency who did not wish to be identified.

In September 2018, RInfra and Astaldi SpA (Italy) Consortium signed an agreement with the MSRDC for construction of the Versova-Bandra Sea Link project for Rs 7,000 crore. The project is facing protests over green concerns and other approvals, unrelated to RInfra.

An RInfra-Astaldi Joint Venture spokesperson said, “After receiving the letter of acceptance, we signed an EPC agreement with the MSRDC and submitted Rs 350 crore as performance bank guarantee. Work will commence after finalisation of casting yard’s location through pending legal process and adjudication.” 

In addition to the sea link project, the company is executing one of the 13 packages for the Mumbai-Nagpur Expressway for Rs 1,907 crore. RInfra is also executing three packages for the Mumbai Metro Line-4 project for Rs 1,584 crore. “So far there have not been any delays. We closely monitor all packages and take corrective measures if there is a delay,” said R A Rajeev, metropolitan commissioner for the Mumbai Metropolitan Region Development Authority.

In a note last week, auditors  referred to investments of Rs 7,082.96 crore comprising inter-corporate deposits and other corporate guarantees of Rs 1,775 crore given to parties. While RInfra said these were related to their EPC services, the auditors were unable to obtain sufficient audit evidence for the same. The management, however, is confident there is no concern on the EPC side. “These are multiple companies from where we get the EPC work done. It is a norm to pay advances to these firms,” Punit Garg, CEO and ED for RInfra, had said earlier. 

The auditors want to see the financial statement of those companies, but these mid-sized companies get more time, up to September, to highlight their account,” Punit Garg, executive director and chief executive officer for RInfra, had told Business Standard earlier.