NHAI terminates Goa contract to IRB Infrastructure

IRB Goa Tollway Pvt. Ltd. will claim compensation as per Termination payment provisions of the Concession Agreement.

IRB Infrastructure Developers Ltd has announced that the National Highways Authority of India (“NHAI”) had issued Letter of Award (“LOA”) on January 05, 2010 to the Company for the Project of Four Laning of Goa/ Karnataka Border to Panaji – Goa stretch of NH-4A from Km 84.000 to Km 153.070 in the State of Goa on BOT Toll Basis on DBFO pattern (the “Project”). The Company had subsequently incorporated Special Purpose Vehicle (SPV) i.e. IRB Goa Tollway Pvt. Ltd. – wholly-owned Subsidiaries of the Company for implementation of this Project. IRB Goa Tollway Pvt. Ltd. had executed Concession agreement with the NHAI in February 2010 and subsequently the Project had also achieved financial closure in March 2010. Construction period of the Project was 30 months.

However, NHAI could not provide necessary Land for implementation of the Project. Considering substantial delay in providing the Land, the Company had removed the Project from its Consolidated Order Book as on September 30, 2011 as a measure of Good Corporate Governance and accordingly modified Order book was represented in the presentation uploaded on the Company’s website.

Now, the Company have received a formal letter from NHAI informing the Company, termination of this concession agreement of the Project due to their inability to provide necessary Land for implementation of the Project. In this regard, IRB Goa Tollway Pvt. Ltd. will claim compensation as per Termination payment provisions of the Concession Agreement.

Source: indiainfoline.com

Indian stock market and companies daily report (December 26, 2011, Monday)

Indian markets are expected to open in the green following positive cues from opening trade in most of the Asian markets today and gains in US markets on Friday. There was quite a lot of volatility, but the Indian markets managed to end in the green, gaining close to 1.5% over the last week.

US stocks closed higher on encouraging economic reports as the number of Americans that applied for unemployment benefits dropped last week to the lowest level since April 2008 in the latest sign that the job market is healing. The Conference Board also reported that its measure of future economic activity had a big increase in November. It was the second straight gain, signalling that the US economy is picking up some speed.

The markets will closely track the developments on the domestic front; RBI is likely be more watchful now as moderating inflation is likely to resolve the predicament of trimming interest rates in order to support growth. Nonetheless, one cannot rule out the pessimism surrounding the policy paralysis on the macro front which, in tandem with weakening of global cues, can reverse the market directions.

Markets Today

The trend deciding level for the day is 15,774 / 4,724 levels. If NIFTY trades  above this level during the first half-an-hour of trade then we may witness a further rally up to 15,876 – 16,014 / 4,754 – 4,794 levels. However, if NIFTY trades below 15,774 / 4,724 levels for the first half-an-hour of trade then it may correct up to 15,636 – 15,534 / 4,684 – 4,653 levels.

Increase in NRE FD rates

Following the deregulation of NRE Savings and Fixed Deposit rates by the RBI, several banks, including smaller private banks such as Yes Bank as well as larger ones such as HDFC Bank have aggressively increased the rates on these deposits. NRE FDs are rupee denominated accounts meant for NRI customers on which the interest earned is tax-free. For banks, these deposits are a source of raising rupee funds just like ordinary domestic FDs.

Hence, following the deregulation, several banks have increased the rates offered on these accounts close to their domestic FD rates (as in case of HDFC Bank offering 8.5% on NRE FDs less than Rs.15 lakhs vs. 9.25% on domestic FDs) or in some cases equal to their domestic FD rates (as in case of Yes Bank offering 9.6% on both domestic and NRE FDs as well as 7% on domestic and NRE savings accounts greater than Rs.1 lakh). Prior to the deregulation, interest rate on NRE FDs had been increased on November 23, 2011, by 100bp to LIBOR+275 bp (which worked out to about 3.75-4%). Considering that the interest on these FDs is tax-free, at about 8.5-9.5%, in our view this represents a compelling return (and a massive jump from the rate hardly a couple of months back of 2.75-3%), which could attract significant NRI inflows into the country.

Within the banking sector, Federal Bank and South Indian Bank have a disproportionately large share of NRE deposits in their overall funding mix at about 12% and 8.5%, respectively. Immediately post the deregulation, both the banks had increased their NRE FD rates to around 6.5%, but following the recent moves by other private banks, Federal Bank has also raised the rate to 8.25-9.10% and South Indian Bank’s management has also indicated that by Monday it will hike NRE FD rates to similar levels (management has indicated that it is unlikely to hike rates on NRE savings account). Hence, the low-cost advantage of these FDs vis-à-vis domestic FDs is expected to erode going forward. Also, so far, rates on NRE savings accounts were higher than NRE FD rates prior to the deregulation, but now with NRE FD rates being more than 500bp higher, a large part of NRE savings balances of these banks are also likely to move to NRE FDs.

Assuming that the entire NRE term and savings balances re-price gradually over the next one year to the new NRE FD rates, the impact on the NIMs could be up to 35bp for South Indian Bank and up to 45bp for Federal Bank. In any case, both these stocks (along with other older private sector banks) have outperformed of late, and current valuations at about 1x P/ABV are significantly higher than mid-size PSU banks with similar or better fundamentals. Accordingly, we downgrade both stocks to Neutral.

IRB’s Goa road BOT project terminated by NHAI

IRB’s Goa road BOT project (TPC: Rs.833cr) has been terminated by NHAI (formal letter received by IRB) due to NHAI’s inability to provide land for implementation of this project. This move by NHAI was on expected lines as IRB had removed this project from its order book in 2QFY2012 and subsequently we had factored the same in our model (read IRB 2QFY2012 result update). Further, according to management, IRB will claim compensation charge as per the provisions of the concession agreement.

Project details: IRB had received LOA from NHAI on January 5, 2010, for the four laning of Goa/ Karnataka Border to Panaji – Goa stretch in Goa on BOT toll basis. The company had subsequently incorporated SPV – IRB Goa Tollway Pvt. Ltd. (wholly owned subsidiary of IRB) for the project’s implementation. IRB Goa Tollway Pvt. Ltd. had executed concession agreement with the NHAI in February 2010 and subsequently the project had also achieved financial closure in March 2010. Construction period of the project was 30 months. However, NHAI could not provide necessary land for implementation of the project.

We have arrived at an SOTP-based target price of Rs.182/share, which implies an upside of 30.0%. Hence, we recommend a Buy rating on the stock.

Monnet Ispat Board approves share buyback

Monnet Ispat Board has approved share buyback upto Rs.100cr from the open market at a price not exceeding Rs.500/share. We expect the company to finance the buyback program from its internal accruals as it has been consistently generating quarterly EBITDA in excess of Rs.100cr. The share buyback could boost Monnet Ispat’s FY2013 EPS by 3-5%, depending on the average cost of shares bought back. We maintain our Buy recommendation on the stock with an SOTP target price of Rs.528.

Discontinuation of coverage

We have discontinued coverage on the following stocks: Electrosteel Castings, Godawari Ispat, Prakash Industries, Sarda Energy, Gujarat Gas, Gujarat State Petronet, Indraprasth Gas and Petronet LNG.

Economic and Political News
- Energy deficit may rise up to 15% as weak rupee hurts coal imports
- Forex reserves dip by US$4.67bn
- FDI dips 50% to US$1.16bn in October 2011
- State run banks told to discard fast-track promotion policies

Corporate News
- Oil Ministry says no provision for penalty in RIL’s KG-D6 contract
- Power trading firms hit by payment delay
- Domestic airfares fall as capacity rises
- Coal India will switch to new pricing mechanism from January 2012

Source: stockmarketsreview.com

IRB Infra project cancellation just a one off case: NHAI

The National Highways Authority of India cancelled the Goa road project that it had awarded to IRB Infrastructure in January 2010 due to the inability to acquire land for the project.

In an interview to CNBC-TY18, AK Upadhyay, chairman of NHAI says, this is just one off case. “I don’t think this is a serious concern,” he adds.

He expects land acquisition costs to rise going forward.

Upadhyay expects awards of close to 7,000 km by year-end.

Below is the edited transcript of his interview with CNBC-TV18’s Latha Venkatesh and Sonia Shenoy. Also watch the accompanying videos.

Q: The most disturbing news we heard lately was the cancellation of Goa road project given to IRB Infra because of the inability to acquire land. Can you just confirm this for us? How disturbing it is that you are not able to acquire land?

A: This is just one off case. In some states, we do face problems, but you don’t take it as a repetitive case. The other projects are going on very well. It is just one-two projects, out of 40-50 projects that we are going to bid this year. So, I don’t think this is a serious concern.

Q: What went wrong? Where did the resistance and the inability to acquire land come from?

A: The state government has solutions. Because the alignment was passing through some fishermen’s areas and they wanted to have an elevated highway for a very long stretch, it made it difficult to fund it. We had to restructure the project. So, the project as it was structured that could not go ahead. So, we had to cancel the bid. I would again say this is a one off case.

Q: What kind of interaction have you had with IRB on this and penalty that you may have to pay them?

A: I don’t think so because this is not at the award stage, so no liability has yet occurred. But I don’t think there should be any major penalty.

Q: How much are you expected to raise via the bond issue? hHw much demand do you see for these kind of tax free issuances at this point?

A: Our perception is that the bonds will be highly in demand. We hope to have full subscription. We are going for first tranche of Rs 5,000 crore with option to retain up to Rs 10,000 crore. From whatever feedback we have got, our impression is that this is going to be very successful.

Q: How many projects in 2011 went on a premium?

A: Let me talk of this fiscal starting from April 1, out of 33 projects, we have awarded so far of over 4300 km, 22 have gone on premium.

Q: In that case, would you consider increasing the viability gap funding for those that did not go at a premium?

A: Viability gap funding has 40% cap. If you over 40%, you might as well fund it entirely from public funding. Therefore, it is a rational limit. We don’t think it’s necessary to increase that. But what it means is that the funds we are getting it would help us in case of any increase land acquisitions cost. After the viable projects under BoT toll are exhausted, we will have to go for more and more EPC projects. That would be almost entirely public funded. So, therefore, this premium is good for us, it has cushioned for future years.

Q: From now, up until FY13, what is the order target that you have? How many have been awarded? How many you expect government to approve?

A: To give you a picture of this financial year, the total target we had set was 7,300 km. This was about 40% more than last year’s target. We are on course. We have awarded over 4,300 km.  Another 1,000 km of the bids are in the pipeline either in evaluation or the bids have to come shortly. So that means that very shortly we will be crossing 5,300 km. Another 2,000 km of 14 projects are in various stages of evaluation and approving process.

Source: moneycontrol.com

Plan panel questions four-laning of some national highway sections

NEW DELHI: The Planning Commission has kicked off a fresh debate, questioning how National Highways Authority of India ( NHAI) has gone ahead with four-laning of national highways even when the daily traffic volume on these stretches did not qualify them to be widened beyond two lanes.

In a recent letter to highways minister C P Joshi, deputy chairman of Planning Commission Montek Singh Ahluwalia raised questions on five projects, including the 70-km Lucknow-Rai Bareli section. Ahluwalia said there were standards – daily traffic volume – set by the Indian Road Congress (IRC) for considering widening of roads to two lanes, four lanes and six lanes. The letter said these standards were bypassed to push certain projects for four-laning under the build-operate-transfer (BOT) model.

Moreover, Ahluwalia mentioned that such a move could have adverse bearing on the finances available for the highway development programme in the country since the allocated budget could get exhausted in less number of projects.

The letter came despite the recent experience of how government had to start six-laning of the Golden Quadrilateral project only 6-7 years after its construction because of the high increase in traffic. “We will always compare our infrastructure development with China to push the need to go on overdrive, but we are caught in issues like this. We have seen how four-lane roads built in the past 10 years are becoming inadequate to handle huge traffic. Are we building roads for the next five years or for decades,” asked a senior ministry official.

Engineers working with IRC said it was not mandatory for the government to follow the recommendations set by the professional body. “But we can see how the Planning Commission uses our recommendation as per its convenience. It has downplayed the views of IRC so far as making safe roads are concerned,” said a senior retired engineer from the ministry who is associated with IRC.

In fact, Ahluwalia reiterated the views of his colleagues in the plan panel on such issues. In his letter to Joshi, he wrote that all highways should be at grid (surface) level without any flyover. Besides, he said there was no need to construct service roads all along the highways in rural areas, though accidents are on the rise in these areas. His juniors have been raising these issues, which have been termed impractical and compromises safety aspects.

A source in IRC said they had told the government that it could “downsize” the plan if it did no have “enough funds” rather than build unsafe roads and those which don’t meet operational needs. “Here, the Planning Commission does not find the merit of IRC’s recommendations,” a senior IRC member said.

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

New road projects boosts Ramky Infrastructure

Ramky Infrastructure surged 7.19% to Rs. 220 at 14:35 IST on BSE after the company said it has secured two road projects aggregating Rs. 2240.65 crore from National Highways Authority of India.

The company made this announcement during trading hours today, 1 December 2011. Meanwhile, the BSE Sensex was up 355 points, or 2.2% to 16,478.46. On BSE, 35,995 shares were traded in the counter as against average daily volume of 6,139 shares in the past one quarter. The stock hit a high of Rs. 226.70 and a low of Rs. 208 so far during the day. The stock had hit a record low of Rs. 200 on 5 October 2011. The stock had hit a 52-week high of Rs. 363.85 on 1 December 2010. The stock underperformed the market over the past one month till 30 November 2011, falling 14.21% compared with the Sensex’s 9.44% fall. The stock had also underperformed the market in past one quarter, sliding 9.84% as against Sensex’s decline of 3.32%. The mid-cap infrastructure developer has an equity capital of Rs. 57.20 crore. Face value per share is Rs. 10. Ramky Infrastructure said the first road project is for six laning of Agra – Etawah bypass section of national highway (NH)-2 covering the stretch between 199.660 Kilometres (KM) to 323 KM under National Highways Development Project (NHDP) Phase V in Uttar Pradesh. The project is to be executed on built-operate-transfer (BOT) (Toll) on design, build, finance operate and transfer (DBFOT) pattern, the company said in a statement. The concession period for the project is 30 years including the construction period of 910 days. The estimated cost of the project as per the client is Rs. 1207 crore, Ramky added. The second road project involves four laning of Hospet – Chitradurga section of NH-13 covering the stretch between 299 KM to 418.60 KM in Karnataka under NHDP Phase III. The project is to be executed on BOT (Toll) on DBFOT pattern, the company said in a statement. The concession period for the project is 25 years including the construction period of 910 days. The estimated cost of the project as per the client is Rs. 1033.65 crore, Ramky added. On a consolidated basis, Ramky Infrastructure’s net profit rose 9.5% to Rs. 44.20 crore on 31.6% rise in net sales to Rs. 736.63 crore in Q2 September 2011 over Q2 September 2010. Ramky Infrastructure is an integrated construction, infrastructure development and management company. Since the commencement of its business in 1994, the company has undertaken a range of construction and infrastructure projects in various sectors such as water and waste water, transportation, irrigation, industrial construction & parks (including special economic zones), power transmission and distribution, and residential, commercial & retail property. Source: indiainfoline.com

Radio Frequency Identification

The Government has a proposal to introduce Radio Frequency Identification (RFID) Smart Tag on certain highways in the country National Highways Authority of India (NHAI) has adopted Public Private Partnership (PPP) mode as the preferred mode of delivery. Two variants of PPP model i.e. Build, Operate and Transfer (BOT) (Toll) and BOT (Annuity) have been adopted. So far 149 projects of length 13791.25 km have been awarded on BOT (Toll) and 29 projects of total length 3311.42 km have been awarded on BOT (Annuity).

It is proposed to extend the scheme to other parts of the country also. The Electronic Toll Collection scheme shall be implemented on all India basis.

It is also proposed to build toll roads on Public Private Partnership (PPP) model in various parts of the country. The specification for Radio Frequency Identification (RFID) transceivers, RFID Tag & Data Exchange format between Toll Plaza server and the Central Electronic Toll Collection (ETC) System for implementation of national wide interoperable ETC system based on RFID technology on National Highways has been finalized. RFID will be based on EPC Gen-2, ISO 18000-6C standards for Electronic Toll Collection on National Highways in India.

This information was given by the Minister of State of Road Transport and Highways, Shri Jitin Prasada in a written reply in Lok Sabha today

Source: http://pib.nic.in

Banks lend 200% of road project costs, govt worried

NEW DELHI: If you were to buy a house, banks would give you a loan of 80-85% of the value of the property. If you were to build a road, though, you could get double the project cost computed by the highways authority.

On an average, banks lend 39% more than the project cost arrived at by the National Highways Authority of India, the agency that hands out bids across the country. A key reason is the huge gap between the cost arrived at by NHAI and the estimate drawn up by developers who bag the contracts.

With private developers bidding aggressively for highway contracts and willing to fork out a significant premium (an annual amount paid upfront to National Highways Authority of India), the road transport and highways ministry decided to examine 66 projects where funding has been tied up.

Source: indiatimes.com

Atlanta bags order worth Rs. 10435.1mn

Atlanta has registered a cumulative revenue growth of 30% during the last two years.

Mumbai-based infrastructure and real estate firm, Atlanta in consortium has bagged around Rs. 10435.1mn order from National Highway Authority of India (NHAI), the flagship road building programme of the Ministry of Transport and Highways. Atlanta along with a Joint Venture partner Essar Projects has bagged the order for four laning of Lucknow-Sultanpur road widening project of around 126 kilometres in Uttar Pradesh. The project has a concession period of 23 years, which includes two-and-a-half years of construction time and is based on Public Private Partnership (PPP) mode on Design, Build, Finance, Operate & Transfer (DBFOT) basis. The debt equity ratio is proposed at 3:1

“We expect to bag additional road project orders worth Rs. 20bn in this fiscal,” said Rajhoo Bbarot, MD, Atlanta. He declined to divulge details of the fund raising.
A total of 34 players, including Gammon Infrastructure, L& T Infrastructure, HCC Concessions and IL&FS Transportation, had shown interest in the project.

Atlanta has registered a cumulative revenue growth of 30% during the last two years. The current order book of Rs. 1,950 crore is seven times its FY11 sales, while the average execution cycle is three years. This gives good visibility of revenues for the coming three years.

Atlanta recently secured an order of 117 km Mohania-Ara for Rs. 9170mn in Bihar and another one in Punjab for Rs. 2200mn. The Bihar project entails four laning of Mohania -Ara section on National Highway 30 under the public-private-partnership mode for a length of 117 km.

Currently Atlanta has two operational road projects. First is Mumbra bypass on NH 4 and the second is Nagpur Kondhali on NH 6. Other than this it is pre-qualified for projects worth Rs. 400bn. So far, the company has done 225 lane kms and 600 lane Kms are in pipeline.

Atlanta’s focus areas for EPC business comprises highways, bridges, railways, and other urban infrastructure projects across the country. It has over 3 decades of experience in Engineering, procurement, Construction (EPC) and Realty.

Atlanta is credited with successfully commissioning India’s first greenfield BOT project on National Highways – Udaipur Bypass within the record time of 18 months as against stipulated time of 36 months. Atlanta has already developed three projects on DBFOT basis on Public private partnership basis.

Source: www.indiainfoline.com

Highway investment 11% short of XIth Plan estimate

Investments in road and bridges during the XIth Five Year Plan would be 11% lower than the initial estimates on account of poor performance by the private and central sectors, according to the Planning Commission.

Railways is also set to miss the investment target during the ongoing Plan.

The revised projected investment in roads is Rs278,658 crore as compared with the initial projections of Rs314,152 crore.

“The investment from the Centre is expected to decline due to award of lower than projected road projects by National Highways Authority of India (NHAI) during the first three years of the Plan,” said a plan panel report.

In the Railways, the investment projection has been lowered to Rs200,802 crore as against the initial aim Rs258,439 crore.

“The investment by the private sector is also expected to go down due to award of a lower number of BOT (build, operate and transfer) projects in the first three years of the XIth Plan,” the report said.

A senior NHAI official attributed the development to economic recession in 2008-09.

“Highway tendering came to a grinding halt during that year as bidders turned away following a funding freeze. Out of the plans to award 45 highway projects worth around Rs60,000 crore during that year, the authority could barely manage to award eight,” the official said.

In case of Railways, the basic tenets of the public-private partnership have not been yet decided, which is delaying the mega locomotive and coach factory projects.

The downward revision of investments projections in the Railways is in both central and the private sectors.

“As per latest estimates, only Rs8,316 crore is expected by way of private investment, which is only 16.5% of original projections,” said the report.

Source: www.dnaindia.com

Govt approves Rs 1,835 cr road projects in AP

New Delhi: The government on Tuesday approved two projects of widening of National Highways in Andhra Pradesh and Orissa entailing a total investment of about Rs 1,835 crore under its flagship road building programme NHDP.

The Cabinet Committee of Infrastructure (CCI) on tuesday approved projects for four laning of Vijayawada-Machlipatnam section of NH 9 in Andhra Pradesh and four/two laning of Birmitrapur-Barkote section on NH 23 in Orissa under National Highways Development Project (NHDP) phase IV-A, an official release said.

“The total estimated cost of the project (Andhra Pradesh) is Rs 736 crore. The total estimated cost of the project (Orissa) is Rs 1,098.90 crore,” the release said.

On land acquisition, resettlement, rehabilitation and pre-construction, Rs 130 crore and Rs 320.75 crore will be spent on Andhra Pradesh and Orissa projects, respectively.

Both the projects will be built on design, build, finance, operate and transfer (DBFOT) basis in BOT (Toll) mode of delivery.

“The total length of the project is 64.611 km. The concession period is 20 years, including construction period of 24 months,” the statement said about the Andhra Pradesh project, located in Krishna district.

“The project will reduce the time and cost of travel for traffic, particularly heavy traffic, plying between Vijayawada and Machilipatnam. It will also increase the employment potential for the local labourers for the project activities,” it added.

On the Orissa project, which is based in Sundargah and Deogarh districts, it said the concession period is 23 years including construction period of 30 months for 125.61 km scheme.

“The project will reduce the time and cost of travel for traffic, particularly heavy traffic, plying between Birmitrapur-Barkote. It will also increase the employment potential for the local labourers for the project activities,” it said.

Source: zeenews.india.com

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