Ministry plans sops for road developers

November 5, 2012

NEW DELHI: The highways ministry will soon seek Cabinet nod to allow private road builders to “exit” from projects soon after construction is over. The move comes after the proposal mooted by NHAI remained unresolved even after several rounds of discussion in an inter-ministerial group on highways.

National Highways Authority of India (NHAI) has formulated the plan to speed up the exit of contractors, who take up projects under the build-operate-transfer (BOT) route, claiming that this would unleash substantial capital kept in finished projects as companies’ equity. It has also claimed that this flow of capital would help cash-strapped developers take up new highway stretches.

source:http://articles.timesofindia.indiatimes.com

Written by ITW Editor · Filed Under BOT, NHAI

Nitin Gadkari’s tenure as Maharashtra PWD minister saw private firm’s meteoric rise

October 29, 2012

Dattatraya Pandurang Mhaiskar, the original promoter of IRB, might be insisting that hisRs.164 crore “loan” toNitin Gadkari’sPurti Group was out of his personal savings.

But it cannot be denied that the projects given to IRB duringGadkari’stenure as the Maharashtra PWD minister played a significant role in the company’s rise.

Mhaiskar, a civil engineer, started IRBPL as a private company in 1977. Even though the company did a number of odd road construction projects during the first 18 years of its existence, the turning point came in 1995, when it signed the concession agreement for the first phase of the Thane Bhiwandi Bypass, its first Build-Operate-Transfer (BOT) project.

Incidentally, it was in 1995 that Gadkari became the Maharashtra PWD minister.

Between 1995 and 1999, the years Gadkari was at the helm of the state’s PWD ministry, the Mhaiskars got a flurry of big road construction contracts on a BOT basis. It’s completion of the Thane Bhiwandi bypass within two years worked as an advantage and it got contracts for the construction of a bridge over Patalganga river, the Khambatki Ghat project, the Kaman Paygaon project and the Bhiwandi Wada project during this period.

Gadkari emerged as one of the major champions of the BOT model and IRB was one of the main companies that benefited from the system.

During this period, Gadkari is said to have come into conflict with the then powerful Union minister Pramod Mahajan, over the Mumbai-Pune expressway project. It is believed Mahajan and Shiv Sena chief Bal Thackeray wanted the project to be given to a prominent industrial house but Gadkari pushed the case of the Maharashtra State Road Development Corporation.

Even this worked out in IRB’s advantage in the long run as it got the contract for maintenance and toll collection in 2004.

From a small company started by a civil engineer, IRB is one of the country’s largest road construction and infrastructure companies today.

It’s hardly surprising that the group’s USP is its ability to get crucial government contracts.

According to a report by PINC research, “IRB’s unique ability to win bids at competitive levels is a trademark”. The total worth of the contracts IRB got during Gadkari’s tenure as the PWD minister is estimated to be aboutRs.60 crore.

Gadkari, on his part, denies granting any special favours to IRB. “I gave numerous contracts when I was PWD minister as the maximum road construction took place during my time. I have no stake in IRB. These are just efforts to malign me,” Gadkari said. He also maintains that there is nothing wrong if IRBPL invested in the Purti Group. “Anyway I am no longer the chairman of Purti Group,” he said.

Source: http://indiatoday.intoday.in

Written by ITW Editor · Filed Under BOT

Contractors line up for govt-funded projects

October 29, 2012

NEW DELHI: Highway contractors, who have been facing financial crunch, have lined up for road projects to be built with 100% government funding. In the past two weeks, at least 50-60 companies for each such project on engineering-procurement-construction (EPC) mode have applied for pre-qualification to bid for these works.

Initially, National Highways Authority of India (NHAI) has identified eight such projects in Rajasthan and the second set of such works in Uttar Pradesh would be out soon. “All types of road construction companies including the big ones like L&T, GMR and Gammon have applied for pre-qualification. We expect good response when financial bidding starts,” a senior NHAI official said. All the eight projects in Rajasthan are in the range of Rs 200 crore to Rs 500 crore. Officials said projects have been designed in a manner where contractors won’t get more than 10% profit in executing these works.

Industry insiders said that response for such projects is much more since companies don’t need to raise loans from banks.The risk of EPC projects is with the government. “You will get back the entire amount. All responsibilities of clearances are with government. There is no need to invest from your pocket whereas in the build-operate-transfer (BOT) projects, getting loan has become difficult,” a private contractor said.

Source: http://timesofindia.indiatimes.com

Written by ITW Editor · Filed Under BOT, Highway, NHAI

Cabinet approves road projects worth Rs 1,500 crore

October 15, 2012

New Delhi: The government on Thursday approved Rs 899.24 crore investment proposal for building a section of National Highway 758 in Rajasthan.

It also cleared a project worth over Rs 600 crore for two-laning of Salasar-Haryana Border section of NH 65.

The Cabinet Committee on Infrastructure has approved the investment proposal for implementing the project for the development of 4-laning of Rajasamand-Bhilwara section of the National Highway 758 in Rajasthan, an official statement said.

The total project cost estimated of the project for implementing under Design, Build, Finance, Operate and Transfer (DBFOT) pattern will be Rs 899.24 crore out of which Rs 221.45 crore will be for land acquisition, rehabilitation, resettlement and pre-construction cost.

The total length of the project will be 87.250 km and is covered in the districts of Rajasamand and Bhilwara in Rajasthan, the statement said.

The main object of the project is to expedite the improvement of infrastructure in Rajasthan and reduce the time and cost of travel for traffic, particularly heavy traffic, plying between Rajasamand and Bhilwara.

The Cabinet in its meeting held in July 2008 had approved the proposal for up-gradation of 5,000 km. It was proposed that keeping in view of traffic justification, additional 2,000 km may be undertaken as four-laned stretches.

CCI note for a unified NHDP Phase -IV, for 20,000 km, subsuming within it the 5000 km already approved under NHDP Phase -IV-A was approved by the CCI on February, 2012.

Rajasamand – Bhilwara is one of the projects approved for 4-laning, included under NHDP Phase-IV and within the ceiling of 4000 km for 4-laning. The same is also the part of annual work programme for the year 2012-13 of this Ministry.

The Cabinet also cleared 2-laning with paved side shoulders of Salasar-Haryana Border section of NH 65 from start to km-154.141 km in Rajasthan under NHDP-IV to be executed on BOT (Toll) mode on DBFOT basis.

The total project cost estimated for implementation under DBFOT pattern will be Rs 601.19 crore out of which Rs 71.12 crore will be towards land acquisition, rehabilitation, resettlement and pre-construction cost.

The project aims at reducing the time and cost of traffic plying between Salasar and Haryana border.

Source: http://zeenews.india.com

Written by ITW Editor · Filed Under BOT, Projects

Infrastructure companies going slow on highway projects

September 13, 2012

Faced with a tough business environment, infrastructure and construction companies are treading cautiously on tollways and build, operate and transfer mode (BOT) PPP projects of the National Highway Authority of India (NHAI).

They now prefer the engineering, procurement and construction (EPC) mode projects .

IVRCL on Monday indicated that it has decided to take a holiday from bidding for BOT projects to focus on EPC. This is not an isolated case; most infrastructure companies are in a pause mode re-strategising looking at EPC projects.

Interaction with leading infra sector firms shows that they are all faced with difficulties of high interest costs, challenges of achieving financial closure, as banks and lenders have hit sectoral cap, and have been demanding more equity in a market where equity is hard to come by.

M. Gautham Reddy, Executive Director of Ramky Infra, said the number of projects that have come up for participation are less and companies have become extra cautious, given the market conditions. They are looking at the opportunity to take up EPC mode projects where NHAI will pump in funds.

The Chief Financial Officer of Madhucon Projects, S. Vaikuntanathan, said most companies enjoy being EPC contractors, but NHAI wanted BOT projects, forcing developers to take to them.

“Developers are facing difficulties in meeting the equity requirements for BOT projects as equity markets have dried up and foreign investors are wary to come in. Most developers want to exit, making it a tough situation,” Vaikuntanathan said.

Madhucon has nine road projects with four being operational, three under development, and two close to financial closure.

T. Adi Babu, Chief Operating Officer, Finance, Lanco Infratech, said with lenders demanding higher equity participation up from 25 to even 40 per cent, difficulties in securing right of way and local implementation issues, are all creating problems for developers.

AGGRESSIVE BIDDING

“The aggressive bidding in the past by some companies is also taking a toll. All projects are not like the Gurgaon highway,” he felt.

R. Balarami Reddy, Executive Director Finance, said the traffic projections are often high and this causes unexpected expectation from developers. This is also one of the reason why NHAI needs to look at PPP mode projects closely and restructure contracts.

An independent regulator would help.

[email protected]

SOURCE: http://www.thehindubusinessline.com

Written by ITW Editor · Filed Under BOT, Highway, Infrastructure, News, NHAI

Better than peers

September 6, 2012

While the construction sector is going through a rough phase for the last two financial years, Simplex Infrastructure Ltd has done relatively better than its peers like IVRCL Infrastr-uctures and Projects Ltd, NCC and Hindustan Construction Co. Not only has the company exhibited consistently strong execution with topline growth of over 20 per cent, but it has also witnessed lesser pressure on the bottomline despite high interest costs. However, with increasing exposure to BOT (build-operate-transfer) projects, the company’s debt levels are on the rise, which is seen as the biggest risk.

Nevertheless, analysts remain positive on Simplex despite the challenges continuing for the construction sector. Says Parvez Akhtar Qazi, analyst at Edelweiss Securities: “Simplex is one of the few pure contracting plays available in the construction industry.” Adds Deepak Purswani, analyst at ICICI Direct: “Its strong well-diversified order book, relatively lower equity commitment towards subsidiary and execution capabilities make it a strong candidate for re-rating in multiples when the macro environment improves.” The stock, which has done better than its peers (except for IVRCL, which had gained on news of possible takeover Essel group) in the last one year, is likely to sustain its lead going ahead.

Consistently better performance
Simplex exceeded analysts’ expectations in the June quarter, wherein its performance was even better compared to FY12. The June quarter was the fourth consecutive quarter of revenues growing in excess of 25 per cent. The company has been able to report better performance (compared to its peers) partly due to its well-diversified and balanced order book in terms of sectors, clients and geographies.

SIMPLEX: HEALTHY OUTLOOK
In Rs crore	FY13E	FY14E
Net sales	6669.3	7459.7
% change y-o-y	13.1	11.9
Operating profit	591.7	663.0
% change y-o-y	29.0	12.1
Net profit	103.8	118.0
% change y-o-y	16.4	13.6
EPS (Rs)	21.0	23.8
P/E (x)	9.1	8.0
E: Estimates

The top three sectors contribute 70 per cent of total order book with building and housing (25 per cent) having the biggest contribution followed by roads and power (each 23 per cent). Also, the company has lower presence in capital intensive and high gestation BOT projects. Says Nitin Arora, analyst at Angel Broking: “Simplex is a well-diversified player in terms of sectors, geographies and client mix and, unlike its peers, has limited exposure to road BOT assets.”

HOW THEY STACK UP
In Rs crore	Simplex		IVRCL		NCC*		HCC
In Rs crore	FY12	Q1′ FY13	FY12	Q1′ FY13	FY12	Q1′ FY13	FY12*	Q1′ FY13
Net sales	5,897.6	1,585.3	4,971.0	NA	6,665.0	1,793.0	8,158.0	969.4
% change y-o-y	23.8	25.7	-12.0	NA	7.0	11.9	14.1	-8.4
Operating profit	458.6	126.9	377.0	NA	897.5	204.5	423.5	68.9
% change y-o-y	-2.5	5.7	-26.6	NA	25.5	-40.7	-26.0	-50.1
Net profit	89.2	20.1	36.0	NA	54.9	20.3	-364.0	-40.5
% change y-o-y	-27.6	-16.5	-77.2	NA	-75.0	-35.0	NA	PTL
* Consolidated; NA is not available; PTL is Profit to Loss Source: Companies

But, some concerns emerging
Though the company’s order book of Rs 15,500 crore gives revenue visibility of 2.3 times (based on FY13 estimated sales), the same has grown only 5.5 per cent since FY11-end. Also, 55 per cent of total order inflow (Rs 1,870 crore) in the June quarter was from in-house road BOT project. With slowing economic growth, order inflows remain a concern across the sector, including for Simplex. The management expects order inflow and order book to remain flattish if the environment continues to remain challenging. Acco-rdingly, it has given a top line growth guidance of 10-15 per cent in FY13 despite good show on the topline front in the June quarter.

Further, the company’s debt at Rs 2,400 crore as on June 30 was higher than Rs 2,130 crore at FY12- end. Its debt to equity ratio at 1.8 times is also expected to rise due to its increasing BOT presence and growing working capital requirements. While it has added two road BOT projects to its existing three totalling to five road assets worth Rs 4,000-odd crore in the June quarter, its working capital cycle also worsened to 132 days as compared to 113 days in March 2012 quarter.

Says Abhinav Bhandari, analyst at Elara Securities: “The present net debt to equity ratio threatens to reach 2.5 times over next four-six quarters considering no major easing in the operating and financing environment, coupled with pending equity infusion across existing assets over the next 24-30 months.” Analysts feel rising leverage could negate the impact of strong topline growth and good operational performance.

SOURCE: http://www.business-standard.com

Written by ITW Editor · Filed Under BOT, Construction, HCC, IVRCL, NCC, News, Simplex

NHAI to award nearly 55 projects on BOT basis in FY13

June 7, 2012

The National Highways Authority of India (NHAI) cancelled two projects awarded last year because they couldn’t achieve financial closure. In an interview to CNBC-TV18 AK Upadhyay, chairman, NHAI said these projects would be now put up for fresh bidding.

“In the history of last three years starting from 2009 out of 147 projects awarded these are only 2 which have failed to achieve financial closure. So, I would say that the market is mixed,” he added. He don’t see further cancellation of projects due to funding issues.

Meanwhile, NHAI has set a target of awarding 9,500 kilometers of road projects in FY13. Out of which about 3,000 kilometers would be awarded on engineering procurement and construction (EPC) basis. Around 5,000-6,000 kilometers (50-55 projects) of the total will be awarded on build -operate-transfer (BOT) toll or BOT annuity basis.

Below is the edited transcript of Upadhyay’s interview with CNBC-TV18. Also watch the accompanying videos.(http://www.moneycontrol.com/video/business/nhai-to-award-nearly-55-projectsbot-basisfy13_714645.html?utm_source=Article_Vid)

Q: The market is quite concerned about the fact that two projects you awarded last year have been cancelled because they couldn’t achieve financial closure. What exactly happened and is this now up for a fresh bid or have they been passed onto the L2 bidders?

A: They have to be put up for fresh bids. But to look at it in the perspective, in the history of last three years starting from 2009 out of 147 projects awarded these are only 2 which have failed to achieve financial closure. Now let us look at another picture. Three projects were seen to be very aggressive last year, one was Ahmadabad-Udaipur-Kishangarh, it had a premium of Rs 636 crore and it was for GMR. That project has achieved financial closure in time.

The Ahmadabad Vadodara which had Rs 309 crore premium also achieved financial closure. The Pali-Beawar-Pindwara which had Rs 251 crore premium also achieved financial closure for L&T. So, all these three mega projects which were seen as very aggressive last year and all the big companies have achieved financial closure.

Two projects which we awarded first in this current fiscal have also gone on a very high premium. So, I would say that the market is mixed. For the two projects which failed to achieve financial closure, I would say that for one case it was their internal problem. I would say one case has failed and that’s not such a bad situation, because at the same time we are also getting big projects getting financial closure.

Q: Who were the two companies that were involved with these two projects that have now faced cancellation and what kind of premiums and size of projects were we talking about?

A: I won’t like to take names. You already mentioned they are two projects. Let’s leave at that. We hope that there should be no problem because we are also having a dialogue with the bankers and concessioners in general, we are brainstorming and looking at what are the generic problems across the sector. As of now we don’t see a matter of concern.

Q: You had set out a target of 8,800 kilometers for FY13 in terms of road projects and the Prime Minister revised this target upwards. In your sense how doable do you think this target is of 9,500 kilometers for FY13 and the bigger problem has been follow through or implementation of these. On that account how easy do you think it will be for both financial closure and for implementation of these projects?

A: Let me mention two or three points. One is that out of these 9,500 kilometers, a fairly good number would be also EPC (Engineering Procurement and Construction) now. Last year all the 62 projects taken together of ministry of about 8,000 kilometers were PPP projects, but necessarily as we award the better projects we would have some stretches which may not be viable on BOT toll. So, we are expecting that about 3,000 kilometers out of this target would be EPC, cash funded projects.

That doesn’t depend on the financial closure or the lenders or the investment. So that is government funded and we are well funded for that. So take out 3,000 kilometers. We are talking about essentially 6,000 on BOT toll. When the PM revised the targets upwards we also got an assurance and confer that as we go along in case we face any difficulties and there will be intervention from the highest level to resolve those difficulties. We saw that last year and we are all aware that last year our very impressive achievement was also in account for the support from the topmost level including PMO.

SOURCE: http://www.moneycontrol.com

Written by ITW Editor · Filed Under BOT, NHAI

Ramky to raise Rs700 cr for BOT projects

June 4, 2012

Ramky Infrastructure is evaluating options for raising funds for its key build-operate-transfer (BOT) road projects. Though the quantum is yet to be determined, the company would require about Rs700 crore in the form of equity to complete these projects.

According to company officials, Ramky has about Rs5,000 crore worth of road projects and the equity infusion required for them is estimated at about Rs1,100 crore. While about Rs300 crore has already gone into these projects either through equity or working capital requirements, the balance would be required in the next 30-36 months.

“We have the strength to fund the projects internally. But, we are evaluating the option of raising funds at the holding company or special purpose vehicle level. We may require about Rs520 crore in the next two years,” Gautham Reddy, Ramky Group’s executive director, told analysts on an earnings call on Wednesday.

Ramky bagged two significant road projects by the National Highways Authority of India (NHAI) in the last fiscal. One of the projects is in Uttar Pradesh is for six-laning of Agra – Etawah bypass section on the NH-2 under the NHDP Phase V to be executed on BOT (toll) basis. The project is estimated to cost about Rs1,207 crore and would be completed in about 30 months.

The other BOT project is in Karnataka for four-laning of Hospet-Chitradurga section of NH-13 with an estimated cost of about Rs1,033.65 crore. Both the projects have been taken up with equity and debt component in a ratio of 25:75.

“We are hopeful of signing a concession agreement for these projects on July 17. The financial closure for the projects would be achieved by June-end. We are already in discussion with the bankers for raising the required debt,” Reddy said.

SOURCE: http://www.dnaindia.com

Written by ITW Editor · Filed Under BOT

More bidders, high cost to trim returns on BOT projects: Crisil

June 4, 2012

Aggressive bidding and higher premium quoted by developers for new toll road projects on BOT (Build-Operate-Transfer) basis are expected to bring down the average return to 14 per cent, according to a survey by ratings agency Crisil.
Projects awarded before 2009, however, earned an average equity return of 22 percent for developers, the survey found.

“Aggressive bidding and sharp increase in developers’ costs, due to the high premium amounts, is likely to take a toll on future BOT road projects. It is expected to bring down the average equity return of the newer BOT projects to about 14 percent,” the agency said in a report.
With aggressive bidding driving up project costs, the newer projects will earn lower returns. In most bids for newer projects, developers have been offering higher premium (a committed annual payment to the government over the term of the project), the report noted.
According to the study, in case of 23 BOT toll road projects which were awarded before 2009, fewer bids had kept bid amounts modest while higher than expected growth in traffic boosted toll revenues.
Noting that in FY12, almost 65 per cent of the road projects were awarded on premium basis, compared to 25 per cent in fiscal 2009, the survey says, “The premium amounts even exceeded the project costs in some of the projects for which bidding was particularly aggressive. We expect the higher premium to bring down the average equity returns to about 14 percent,” Crisil Research’s senior director Prasad Koparkar said.
The survey also noted that the degree of competition was modest for projects awarded before 2009 with an average of five developers bidding for each project, given the uncertainties in the policies that governed these projects.
Uncertainty about transfer of land to developers by the government as well as absence of an exit option meant that developers could not sell their equity stake in these projects, kept bid amounts modest and project costs moderate, Crisil said.
However, with government speeding up land acquisition process, providing an exit option in the licensing agreement, and awarding lucrative highway stretches under the National Highway Development Programme, the bidding has become aggressive for new projects and the average number of bidders per project increased almost sixfold to 25-30 from that in 2009, the report found.

SOURCE: http://profit.ndtv.com

Written by ITW Editor · Filed Under BOT

IRB Infra acquires MVR Tollways for Rs 130 crore

May 14, 2012

IRB Infrastructure said it acquired 100 percent stake in road BOT firm MVR Infrastructure and Tollways in Tamil Nadu for about Rs 130 crore.

“This is the first time that any company has acquired a road BOT company. Going forward, we will continue to look at such opportunities,” IRB Infrastructure Chief Financial Officer Anil Yadav told PTI here.

Source: http://articles.economictimes.indiatimes.com

Written by ITW Editor · Filed Under BOT, IRB Infra

« Previous Page — Next Page »