August 16, 2016
The government has informed law makers that there are 197 road projects that are being developed in the North Eastern region of the country under the watch of Ministry of Road Transport and Highways (MoRTH). The total length and sanctioned cost of these projects are 4320.95 km and Rs 37691.05 crore respectively. This was stated by Jitendra Singh, minister of state for Development of North Eastern Region in a written reply in the Rajya Sabha. “Government is, in fact, giving special attention to infrastructure development projects, such as, road, rail, communication, and telecom network in the North Eastern Region,” the Minister said in his statement.
Apart from the road projects, 20 major railway projects comprising 13 new lines with a length of 2,624 km, costing Rs 52,030 crore have also been taken up in the North Eastern Region. “An expenditure of Rs 2,1336 crore has been incurred on these projects up to March, 2016. An outlay of Rs 5,040 crore has been provided for 2016-17 for these projects and for the residual liabilities of some completed projects,” the minister informed the members.
In addition, the North Eastern Council (NEC) is implementing 715 various developmental projects in North Eastern States, which are under way at a total approved cost of Rs 7,14,864.98 lakh. Ministry of Rural Development is providing assistance to respective state governments under the Pradhan Mantri Gram Sadak Yojana (PMGSY) programme.
July 17, 2014
Citing no interest of private players in highway sector to take projects under public-private-partnership (PPP) mode, the NDA government will now roll out projects on cash contract or engineering, procurement and construction (EPC) mode at least for 2-3 years.
Under this mode, government bears the construction cost and developer exits the project after building the stretches. So, the developers have no risk in executing such projects unlike the PPP ones.
Announcing this on Monday, road transport minister Nitin Gadkari said that his ministry is trying to arrange finances to take up projects on government funding or EPC mode. “Taking up more projects on public-private-partnership (PPP) is not feasible.
We have to go ahead with EPC projects for at least next two years,” he added while blaming the issues “created by the previous government”.
At present, while 160 highway projects are under imple
mentation on PPP mode entailing an investment of Rs 1.6 lakh crore, there is no progress in case of 65 projects.Out of these 65 projects, 28 have been terminated and fate of another big project is likely to be decided very soon.
The CEO of a major highway construction company told TOI, “As such we have not take any project on PPP mode in the past three years. At present, none is interested considering the risk and prevailing market condition. We are struggling to complete the already bagged projects.” Sensing that government has to create a huge corpus to pay for projects on cash contracts spanning over 2-3 years, Gadkari said that his ministry is going to set up a corporation that will deal with financing of such projects.
Gadkari on Monday said that he has already written to the Prime Minister and finance minister for getting portions of huge amount PF lying with the labour ministry as loan to the corporation.
December 10, 2013
Mihir : New Delhi,
The National Highways Authority of India (NHAI) is set to award road projects of over 1,600 km under the Engineering, Procurement and Contract (EPC) route in the next few months, an indication that momentum is picking up in the sector that has been under pressure in recent times.This is part of the 2,500 km of projects earmarked by the authority for awards this year.
“We have already received bids for five projects covering 502 km and the response is good. The number of bids these projects have received range from as low as 4 to 12. We are satisfied with the response under the EPC,” said a senior NHAI official.
In addition, the NHAI has also called bids for another 225 km and are preparing bids for projects covering 800 km.
The official added that these projects will act as a booster for the slowdown-hit infrastructure companies, who are not showing interest in projects under public-private partnership (PPP).
NHAI had to shift its focus from awarding under EPC after projects offered under PPP mode failed to attract takers. The authority did not find any takers for 20 “viable” projects put up for bids during the current fiscal.
Projects under EPC are virtually risk-free for the contractor, as the government funds the construction. Under this mechanism, the contractor has to quote the cost of constructing or upgrading the road section, and if the bid is accepted, the government funds the project.
The official added that the authority has enough cash to fund these projects under EPC during the current fiscal.
“Money is not an issue during the current fiscal, as these projects would require only 15 per cent of the total project cost during the year. Also, we do not have to acquire a large amount of land because these projects are to be built on the existing alignment and land required will already be in place,” said the official.
With the award of 2,500 km under EPC, NHAI would be able to able to improve its award tally for the current fiscal.
The authority managed to award only 800 km of projects in 2012-13.
During the current fiscal, NHAI has awarded projects covering 859 km so far – a substantial portion under EPC. The road transport ministry has awarded projects covering 463 km.
BIDS RECEIVED for 5 projects covering 502 km
THE average number of bids received range from 4 to 12
BIDS are being called for projects covering 225 km, and preparations are underway for an additional 800 km
The award target for projects under EPC is 2,500 km
859 km of road projects have been awarded in this fiscal
November 8, 2013
New Delhi: The Ministry of Road Transport and Highways (MRTH) is to conduct road shows in foreign lands to entice companies abroad to take up road projects in India. The ‘road shows’ are to be conducted primarily in Australia and China over next few months, according to media reports.
November 8, 2013
Move in the wake of domestic developers keeping away from bidding for road projects
With developers in India staying away from bidding for road projects, the Ministry of Road Transport & Highways plans to conduct road shows abroad to attract foreign firms to take up projects here.
According to sources, the road shows are expected to be conducted in China and Australia, among others, over the next few months.
The proposal comes at a time when many private road developers, including infrastructure majors GVK, GMR and Larsen & Toubro, have stopped investing in road projects owing to land acquisition problems and funding constraints, among other reasons. Some other developers have also walked out of road projects due to funding concerns.
With the general elections approaching and road construction turning out to be a crucial factor, reviving construction activity is a priority for the government. It has managed to award only less than 1,000 km so far this year.
Experts, however, say the government will need to sort out problems plaguing Indian companies before inviting foreign developers.
“The Indian road sector is at a crossroads and we need to take policy decisions to help Indian companies. Once the internal problems are sorted, will we be able to see some fruits from the decision to do road shows abroad,” said Vishwas Udgirkar, senior director at Deloitte India.
Private road developers in India have also been plagued by the quantum of premium that companies have to pay to NHAI. The firms have been asking the government to reschedule the payments so as to provide a breather for them. Private developers owe close to Rs 1.51 lakh crore to NHAI as premium over the next 20 years. The government has set up a panel under the Prime Minister’s Economic Advisory Council chairman C Rangarajan to decide the terms and conditions of the premium rescheduling.
Premium is the amount a concessionaire pays NHAI for a build-operate-transfer project, on the assumption the returns will be very high. This is usually decided on the basis of future traffic flow at the time of bidding.
November 7, 2013
Some deals are stuck because developers are demanding high valuation, even though they are facing a liquidity crisis and banks aren’t lending to them
Merchant bankers say almost every developer is looking at doing some kind of a deal today as nearly all of them are facing a cash crunch. The National Highway Authority of India (NHAI) has bid out 240 odd projects under private-public partnership so far, entailing an investment of Rs 200,000 crore. Of these 240 projects, 80 are operational road projects and 160 are under construction. According to investment bankers, developers are looking at doing a transaction-either equity dilution or outright sale-for nearly half of these operational assets.
In the last six months, at least six large deals involving nearly Rs 6,000 crore have happened where strategic investors/funds have acquired stakes in operating road assets. Some of the big players in the segment are SBI Macquarie Infrastructure Fund, IDFC Alternatives, Piramal Enterprises and Uniquest. And many other large foreign entities are sniffing around.
Despite the slowdown and policy paralysis that has hurt India’s infrastructure sector, foreign funds-sovereign, pension and infrastructure funds-are keen to acquire projects that will earn them annuities. According to investment bankers in the know, nearly 40-45 operating road assets are up for grabs. Subahoo Chordia, head of Infrastructure and investment banking at Edelweiss Financial Services, says that most developers are in various stages of discussion to monetise their assets as their other main business is going through liquidity issues. He says: “Other than known infrastructure funds, new platforms are also coming up which are interested in acquiring road assets in India. A few pension funds from Europe and Canada too are looking for opportunities to pick up stakes in operating roads in India. The currency volatility and other macro issues have slowed the pace of deals, but a few could be announced soon which will help in attracting further investment in the sector.”Road deals
There are four or five big players in the sector who are interested in buying road assets in India which are cash positive and operational. Suresh Goyal, chief executive officer and managing director of SBI Macquarie Infrastructure Fund, says: “The roads sector is an important sector for us and we have invested about $300 million in road assets over the last nine months. This is the first time we have picked up majority stakes in two road projects as so far our investment has been through minority stakes. This is changing as promoters are now more willing to divest assets, at least in the roads sector.” Macquarie owns infrastructure assets worth $100 billion across the globe and is a nascent player in India in the infrastructure space. The fund now runs road projects and has put a team in place to look after it. Unlike private equity funds, infrastructure funds look at managing the asset through its lifetime and earn annuities in return. Other infrastructure funds are also actively looking at acquiring majority stakes in operating assets, especially roads. While buyers are willing to buy a part of a developer’s portfolio, foreign funds are not looking at stressed assets which are facing cash flow issues or are unviable. However, contractors are willing to sell controlling stakes in projects if their overall portfolio is stressed.
At the same time, not all deals in the road sector are due to stress. Some developers are also getting premium valuation in the market. Satish Parakh, managing director of Ashoka Buildcon, which has raised Rs 700 crore from SBI Macquarie Infrastructure Fund, believes the sector holds promise for investors as only 2 per cent of India’s highways are national highways and plenty of work needs to be done on the existing roadways. He says: “The sector will see a revival as serious investors who have a portfolio of assets globally are looking at India. However, players with viable experience in execution will score. We formed a holding company with seven road projects (six national highways and one state highway), and of this six are tolling. Macquarie has given us a premium valuation for the 34 per cent stake picked up in the holding company.”
However, not all projects are going for a premium, even if they are not being sold below book value (cost of building the asset). Developers are still not climbing down from their expectations, which is why a number of deals are stuck, but many of them could materialise soon. MK Sinha, CEO of IDFC Alternatives, which has also acquired a couple of road projects, does not think that deals are happening below book value. Also, merchant bankers say that since these are operating assets, they are valued on the basis of the cash flow they generate and not on the cost incurred in building the asset.
Valuations of road projects are also being driven by their viability. The road sector projects can largely be classified into two distinct phases. Projects that are most viable were bid between 2003 and 2006. Thereafter, things went awry and overbidding became the norm by 2007. Jayesh Desai, head of investments at Piramal Enterprises, which has acquired a stake in Hyderabad-based road developer Navayuga Engineering, says: “Road projects which were bid before 2006 are viable and have an internal rate of return, or IRR, upwards of 15-16 per cent.” While things did improve marginally in 2008-2010, the “blue-sky bidding” came back into vogue with developers offering unrealistic premiums to NHAI as order inflows started drying up from 2011 onwards.
Investors are looking at consistent returns rather than high returns, explains Parakh of Ashoka Buildcon. Even though traffic growth has fallen 4-5 per cent on a year-on-year basis, investors are happy to put their money in road projects that have been tolling for three to four years. Investors believe that things are unlikely to worsen from here and once interest rates start coming down, the IRRs will inch up from 16 per cent levels to around 20 per cent. It’s the anticipation of an improvement in the macro-economic environment and possibility of a fall in interest rates that is driving these deals.
ONE FOR THE ROAD
ROAD PROJECTS WHICH HAVE SEEN INVESTOR INTEREST IN THE LAST SIX MONTHS
Assets on the block: Seven highway projects, of which six are tolling with concessionaire period of over 20 years
Investor/Acquirer: SBI Macquarie Infrastructure
Size of deal: Rs 700 crore. The holding company with these roads gets premium equity valuation (30 per cent of project cost) of Rs 2000 crore
Deal Structure: SBI Macquarie picked up 34 per cent in a holding company with seven road projects for Rs 700 crore
Assets on the block: Seven road projects in different stages of development. Company owns 100 per cent in these assets
Investor/Acquirer: Piramal Enterprises
Size of deal: Rs 530 crore is what Piramal has invested in the holding company with seven road assets
Deal Structure: Investment through convertible debentures, stake rises or falls depending on the performance of the roads
GMR JADCHERLA EXPRESSWAYS
Assets on the block: Farukhnagar-Jadcherla highway in Andhra Pradesh
Investor/Acquirer: Macquarie SBI Infrastructure Fund & SBI Macquarie Infrastructure Trust
Size of deal: Rs 206 crore
Deal Structure: Acquiring companies buy 74 per cent in the road project
Assets on the block: Sells 74 per cent in its Ulundurpet highway project in Tamil Nadu stretching over 73 km
Investor/Acquirer: IDFC Alternatives
Size of deal: Rs 222 crore paid to acquire 74 per cent in the special purpose vehicle
Deal Structure: Acquisition is in a single road project that will earn annuity for the investor
Assets on the block: Three road projects in Tamil Nadu: Salem Tollways, Kumarapalayam Tollways and IVRCL Chengapally Tollways
Investor/Acquirer: TRIL Roads, a Tata group company
Size of deal: Rs 2,200 crore
Deal Structure: Salem and Kamarapalayam project have been tolling for the last few years and the controlling stake gives buyer annuity income.
October 10, 2013
By YASHODHARA DASGUPTA, ET Bureau |
This also includes the Rs9,654-crore Agra to Lucknow eight-lane expressway project, which will be implemented by the Uttar Pradesh Expressways Industrial Development Authority (UPEIDA).
“This can be a good barometer to judge the market sentiment. There are people who are hungry, but only financially viable projects which have land and requisite clearances in place will find takers,” said Abhaya Agarwal, Partner and Leader, PPP, at EY.
The pace of award of highway projects has been slow because of issues like poor market sentiment, shortage of equity, lenders’ demand for 100% possession of land, delays in getting clearances, banks reaching their exposure limit towards the infrastructure sector and a ban on quarrying of stones and minig of ordinary earth used in road construction.
This year the National Highways Authority of India (NHAI) has awarded only 479 km against its target of 3,000 km by September. In the previous financial year, projects for only 1,116 km were awarded against the target of 9,500 km.
However, Shravan Shah, senior research analyst at The Market Financial Intelligence, is optimistic. “The projects being opened for awarding could bring a ray of hope.
Most of these projects including those in Assam, J&K as well as the Agra-Lucknow expressway are largely ready and there is a high chance that developers would pick them up,” said Shah.
The drastic slump in market sentiments prompted Prime Minister Manmohan Singh to address things personally. The PM promised to kickstart several stalled infrastructure projects worth Rs 1.5
lakh crore including two new ports, eight new airports, new industrial corridors and rail projects. “We have recently taken many steps to speed up the process of government clearances for industry, build an environment more conducive to trade and industry and increase investment in the economy.
A special cell has been set up to help big projects with clearances. The Cabinet Committee on Investment is working to remove hindrances in the way of stalled projects,” said the Singh in his Independence Day speech, adding that investments would increase because of these efforts in the coming months.
Several of the issues have been addressed with the government allowing de-linking of environment and forest clearances, relaxations on mining of ordinary earth and so on. It has also approved policy changes allowing stressed developers to fully exit highway projects.
“At this point, developers are looking for a balanced portfolio with a mix of toll-based and annuity-based projects. Toll-based projects have risks involved including traffic projections not matching the actual.
Annuity on the other hand, means assured payments,” said a senior official from an infrastructure major, adding that private players have lost their appetite and would only take up projects after doing a proper assessment on the viability.
September 27, 2013
(The government today approved two highways projects in Maharashtra, including JNPT Port road )
The projects for widening of four laning of Solapur- Yedeshi section of NH 211 and 6/8 laning of JNPT Port road project of Mumbai JNPT Port Road Company were approved by the Cabinet Committee on Economic Affairs (CCEA).
“The CCEA has given its approval for four laning of the Solapur-Yedeshi section of National Highway-211 under the National Highways Development Project (NHDP) Phase IV on Build, Operate and Transfer (BOT-Annuity) in Design, Build, Finance, Operate and Transfer (DBFOT) pattern,” an official statement said.
The cost of the 99 km project is estimated to be Rs 1,057.82 crore including the cost of land acquisition, resettlement and rehabilitation and other pre-construction activities.
The project will expedite improvement of infrastructure in the state and also reduce the time and cost of travel for traffic, particularly heavy traffic, plying between Solapur and Yedeshi.
Development of this stretch will also help in uplifting the socio-economic condition of this region and increase employment potential for local labourers for project activities, it said.
About the Jawahar Lal Nehru Port Trust (JNPT) Port Road Project of the Mumbai JNPT Port Road Company (MJPRCL), the statement said it will be build on BOT-Annuity mode in Design, Build, Finance, Operate and Transfer (DBFOT) pattern.
“The cost is estimated to be Rs 1943.37 crore including the cost of land acquisition, resettlement and rehabilitation and other pre-construction activities,” it said.
The total length of the road will be approximately 43.912 kms of which 20.95 km will be of 6-laning and 22.962 kms will be of 8-laning, it added.
The project will expedite improvement of infrastructure in the state and also reduce the time and cost of travel for traffic, particularly heavy traffic, going towards JNPT.
The project corridor highway consists of NH-4B and NH-348. This network connects the JNPT, including its proposed Navi Mumbai International Airport in Maharashtra.
Development of this stretch will also help in uplifting the socio-economic condition of this region of Maharashtra, the statement said, adding, it will also increase employment potential for local labourers for project activities.
September 25, 2013
OUR BUREAU |Mamuni Das
Govt officials cannot deal with such projects: Mayaram
Arvind Mayaram, Secretary, Department of Economic Affairs, stressed the need to have a regulator for the road sector to handle disputes in public-private-partnership (PPP) projects.
He said Government officials do not have the capacity to deal with PPP projects where contracts between the Government and private sector span 20-30 years, thus requiring constant interaction and adjustment between the two parties based on the changing circumstances.
“Traditionally, we were used to paying the private sector to do a job in two-three years, after which the relationship ended. How to manage relationships in post award framework is an area where there is scope for improvement,” Mayaram said speaking at a FICCI conference here on Monday.
The regulator can help manage when the Government’s relationship with the private sector gets rocky, said Mayaram.
Incidentally, the Planning Commission has taken a stance against the idea of having a road sector regulator to deal with such issues. It has rather supported the idea of an omnibus Bill, which will spell out ways for dealing with disputes in PPP projects.
The Government has been increasingly wooing the private sector to build infrastructure through public private partnership basis.
In 2005, it decided to bid out all road projects on BOT-toll mode first, where the private developer designs, finances and builds a road, maintains it, collects toll from users for a long-term period. Vijay Chhibber, Secretary, Road Transport and Highways, said the Ministry is working on a proposal to have a regulator, as was announced in the Finance Minister P. Chidambaram’s Budget speech this year.
The regulator would have an advisory role on renegotiation of existing contracts, setting of service standards, project entry and exit options, tariff structuring and toll mechanism and knowledge management, according to the proposal under the consideration of the Road Ministry.
It would also have an adjudicatory role on contract dispute resolution, renegotiation of future contracts and enforcement of contractual provisions.
This is for the first time that the Highways Ministry has officially spelled out its detailed proposal for the regulator.
September 11, 2013
Prashanth Chintala |
NCCL is also reported to have decided to exit from the two joint venture power projects in which it had made investments
Hyderabad-based NCC Limited (NCCL) has decided to sell some of its build, operate and transfer (BOT) assets and other properties, including land parcels, to bring down debt on the company’s books.
The BOT assets of the infrastructure development company include five road projects, which have commenced commercial operations.
“We are looking at a strategic sale of two road projects and some real estate assets to reduce our debt, which is to the tune of Rs 2,225 crore,” company’s executive vice president (finance), YD Murthy, told Business Standard.
He said the company was currently holding discussions with potential buyers for the sale of two toll projects located in western Uttar Pradesh and Karnataka. He was expecting the sale proceeds would be Rs 200-250 crore.
NCCL is also reported to have decided to exit from the two joint venture power projects in which it had made investments. While it is stated to have sold a 5 per cent stake in the 100-Mw Himachal Sorang Power Limited, discussions are being held with interested company’s for a stake sale in the 1,320-Mw coal fire project at Krishnapatnam in Andhra Pradesh.
According NCCL managing director AAV Ranga Raju, the company expects a 10-15 per cent growth in both order book and topline in 2013-14. It had already received fresh order of Rs 4,814 crore.
NCC had achieved a consolidated turnover of Rs 7,059 crore and a net profit of Rs 56.38 crore in 2012-13. Finance costs during the year stood at Rs 595 crore.
Despite the challenging environment, Raju stated in NCC’s annual report that the company registered a 9 per cent rise in topline last year due to a reduction in establishment expenses and improvement in project execution and collections.
In the current financial year, NCC reported a 71 per cent decline in its net profit to Rs 5.8 crore for the first quarter as compared with a profit of Rs 20.33 crore in the corresponding quarter last year.