Ministry bid to meet highway target is a boon for infra cos

April 2, 2012

The timing chosen by the Highways Ministry — the last four days of the fiscal just ended — to open bids worth Rs 11,564 crore would end up fattening the order-books of many listed infrastructure companies, apart from helping the ruling UPA-II alliance meet its target of awarding 7,400 km of highways.

“In what may be an unprecedented move, the Highways Ministry and NHAI issued the Letters of Intent (LoI) the very next day after the bids were opened, that too on a Saturday, a Government holiday. The LoIs will help companies book orders, and maybe earn revenues, for fiscal 2011-12 — without raising any eyebrows. Earlier, firms have booked orders without LoIs in hand, but with a disclosure.

The listed companies that gained from the year-ender round of bidding include Larsen & Toubro Infrastructure, Unity Infraprojects, IVRCL and Sadbhav Engineering. Over Rs 7,600 crore of projects, or 65 per cent of total bids opened, were bagged by firms listed on the stock exchanges.

IMPACT ON L&T

With these bids, Larsen and Toubro, the parent firm of the largest beneficiary of these bids, L&T Infrastructure, will inch closer to achieving its order-book guidance of five per cent year-on-year growth. L&T Infra grabbed projects worth Rs 4,500 crore, or 40 per cent of the bids opened in value terms, was the largest gainer from the last four days of bids.

“As on March 30, L&T (parent company) required about Rs 34,340 crore inflows in the fourth quarter of fiscal 2012 to achieve its stated guidance,” an analyst of a brokerage firm tracking L&T told Business Line, requesting anonymity as he is not permitted to speak to media.

In the nine months ended December 2012, L&T had reported inflows of Rs 49,420 crore, which implies flat year-on-year growth. Even before these bids were opened on March 30, L&T had announced orders of Rs 12,090 crore during the fourth quarter of financial 2012, added the analyst.

Due to these bids, order-books of Sadbhav Engineering would increase by Rs 1,102.48 crore, IVRCL Rs 1,617 crore and Unity Infraprojects Rs 438.75 crore.

SPECIAL RELAXATION

These projects, which would help develop 1,100 km of highways, were a part of the Highway Ministry’s award list firmed up early in fiscal 2012. But to ensure that the projects did not spill over to FY 2013, an empowered Group of Ministers (eGoM) stepped in to allow relaxation of a required approval process.

The relaxation ensured that the Ministry could approach the Cabinet Committee of Infrastructure directly for approval, instead of the Public Private Partnership Appraisal Committee (PPPAC). The Highways Ministry made this proposal a day after Mr Pulok Chatterjee asked it to expedite awarding 15 major projects requiring construction of 1,547 km during fiscal 2012.

The mandatory PPPAC approval for these projects had got delayed for months. The Highways Ministry was informed that the nod was getting delayed because the appraisal note had not come in from the Planning Commission, one of the members of the PPPAC. This made the Ministry escalate the issue as it was affecting project targets.

This relaxation has helped the UPA-II Government achieve its target of awarding highway projects of 7,300 km, with the Finance Minister, Mr Pranab Mukherjee, announcing in the Budget that the Government is on track to meet its target of awarding 7,300 km of highways.

The bidding process did follow the annual pre-qualification and e-tendering methodologies, both aimed at removing discretionary powers and increasing competition.

Source: http://www.thehindubusinessline.com

Written by ITW Editor · Filed Under MORTH, NHAI

One comment on “Ministry bid to meet highway target is a boon for infra cos” Post your comment

Krishnendu Chattopadhyay on April 3rd, 2012 6:04 am

It is interesting to note the growth of National Highway at rapid momentum. Still strengthening and widening of many highways are balance and shall be undertaken in due course.

In this massive mandate of NHDP Program State Authorities especially of some states shall have to be more pro active towards land clearance deals. NHAI is requested to develop Special Task Force to provide such assistance for clearance of work front to faster completion of project.

Plenty of examples can be drawn to focus even after signing of contract agreement between NHAI and Concessionaire more than an year land acquisition has not taken place, Appinted Date cannot be freezed. There might be reasons for the same. Still Special Task Force of NHAI, if formed, can resolve to certain extent.

Concessionaire shall always put their effort to start and complete in due time for their own interest. Effort from NHAI and State Authority can pull out the task faster in the interest of Nation