The government’s move to monetise its road assets seems to have hit the slow track. The National Highways Authority of India (NHAI) is yet to hand over several road projects to the private sector for operation even nearly two months after financial bids for them were opened, people in the know said.
NHAI is yet to decide on the ToT (toll operate transfer) project bundles 9 and 10, they said. The financial bids for these were opened in July.
Earlier, auctions for ToT bundles 6 and 8 were cancelled due to poor response from private operators.
Edelweiss-owned Sekura Roads was the highest bidder (Rs 1,700 crore) for ToT 10, while the government-backed infrastructure fund NIIF had offered the highest bid (Rs 3,011 crore) for ToT 9. However, NHAI has not made any decisions to award these projects, the sources cited earlier said.
“The Internal Valuation Committee of NHAI couldn’t meet yet to decide on offering ToT 9 & 10 bundles,” said one of the sources.
ToT 9 comprises a 73-km stretch of the Allahabad-Varanasi section of national highway 30, while ToT 10 offers the 125-km Gwalior-Shivpuri section of NH-03 in Madhya Pradesh. The last date for bids was April 28. Under the ToT model, the right to operate, maintain and collect toll over 15-30 years on operational national highway assets will be leased against a one-time, upfront concession fee paid to the government.
“The new ToT bundles are offered with a 15-year concession period, which is too short and it should be increased to a minimum of 25 years’ period,” said one of the global infrastructure fund managers which did not participate in the recent ToT auctions.
Both ToT 9 and 10 have a concession period of 15 years.
“Getting a bank finance for the debt payments is not at all easy, which is one of the major challenges for bidding ToT auctions,” he said, adding that the State Bank of India (SBI) was the sole financier for ToT bundles 1, 3 and 5.
Email queries sent to NHAI remained unanswered till as of press time.
Besides a few auctions like ToT 1, ToT bundle 3 and ToT 7, none of the other ToT auctions have seen serious participation from global investors.
“Generally, large investors look to invest at least $100-200 million as equity in a deal. However, current ToTs have EV of around Rs 1,000 to Rs 1,400 crore, with equity component of Rs 300-500 crore ($40 to $70 million),” said Vijay Agrawal, executive director, Equirus Capital. “This is a smaller cheque for large global investors. Hence, it is advisable to increase the value of TOT bundles, which will make meaningful sense for large global investors.”
In March, NHAI had cancelled the sixth and eighth ToT bundles of its asset monetisation plan, as the offers for the assets were below the expectations.
Sekura Roads (Rs 1,107 crore) and Prakash Asphalting & Toll Highways (Rs 1,314 crore) were the highest bidders for NHAI’s auction of ToT bundles 6 & 8.
Canadian institutional investor CDPQ (Indian Highways Concessions Trust) offered a price of about Rs 6,200 crore and won the ToT 7 bundle, where the second bid was offered by Cube in the range of 75-80% lower than the highest bid.
“Return on road assets are getting low year by year. It has come down from 16-18% to 13-15%,” said Agarwal. “However, ToT assets have higher risk of traffic, which increases return expectation for investors.”