Speedier exits for highway developers in offing

August 13, 2012

There is good news for highway developers such as L&T, Reliance and GMR with the National Highways Authority of India (NHAI) formulating a plan to speed up the exit of contractors, who take up projects under the build-operate-transfer (BOT) route.

The move follows a virtual standstill in the award of new contracts as developers are strained for equity and are unable to raise fresh resources to take up new road stretches. Apart from a weak equity markets preventing public offers, such as those by IL&FS Transportation Networks a few years ago, even private equity funding has dried up in recent months because of the global economic environment and the resultant slowdown in India.

Since 2009, the rules allow developers to exit two years after a project is completed. Developers of around a 100 projects, which run into thousands of crores, do not have this option for projects bagged before 2009.

The new plan is to permit exit immediately after construction is completed in all BOT projects, helping developers unlock value from these projects where cash flow has begun. Last month, the NHAI board decided to amend the rules but a final decision will be taken by an inter-ministerial group.

NHAI feels once they are also allowed to 100% divestment of their stake in the already completed projects, these companies will have more equity available with them. As they exit from the project, firms of similar net worth specializing in operation and maintenance would take over the project for rest of the concession period.

Officials said several international majors such as Macquarie and Morgan Stanley have evinced interest in running projects after taking them over from the developer. In addition, NHAI has sounded out Indian banks to scout for other potential investors, although the sale needs to be approved by the highway authority. The developers are, of course, cheering the move. “Why should companies be made to stick to a project for 15-20 years when they can take up new projects? Allowing them to exit from completed projects will improve investment scenario,” O B Raju, managing director (highways) of GMR said.

Raising the concern of private equity drying up, Singh in his letter has said shares of many highway developer companies those case out with IPOs four-five years back are going to the market at “steep discounts.”

SOURCE: http://timesofindia.indiatimes.com

3 Comments on “Speedier exits for highway developers in offing” Post your comment

  1. Daljit Singh Khokhar on August 20th, 2012 8:50 pm

    I have stressed in my blogs and articles that when financial budget of 2011-12 is having allocation of Rs. 2,14,000 crores for the development of infrastructure and yet we are not in the position to pay to the builders their cost of construction of roads under BOT model of payment but allowing the builders to recover the cost by way of charging Toll Tax for the number of years depending on their amount of invested procured from the funding institution for which the Government is paying annuity . This model of BOT has made the builders the owner of the road and dictate to Government and NHAI which is clear from the court case of DSC Ltd and NHAI.. They DSC. have created permanent chaos of traffic jams at Delhi Gurgaon and Kherki Dhaula toll plazas. The Delhi and Haryana Governments could easily pay their dues of balance amount of app. Rs.750 crore for the length of 27.5 KM and could make the commuters free from the clutches of the concessionaires The Govt. could recover from the public by nominally increasing the road tax iby both both the states and make the toll free at least two Toll Plazas.
    Please refer to my article Holiday for Delhi Gurgaon Toll plazas in http://www.easydriveforum.com and my twitter account.

    High court is suggesting the increase of 5 Toll boths in either side to tackl;e the Jams at peak hours. My simple logic is that increasing the booths will further increase the chaos of traffic on Gurgaon side because four lane traffic is entering go to 16+5 toll lanes and then converging the entire traffic to 4 lanes again having very short lead space specially when Ambience Mall is at a distance of 75 to 100 metres and collision of vehicles is bound to occur and exit of plaza will be blocked due to slow movement of traffic to Gurgaon at peak hours.

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