Highway sector headed for consolidation; M&A activity seen picking up, says ICRA
The highway sector in the country is poised for a wave of consolidation, mergers and acquisitions given the positive vibes the sector has seen lately due to the pace of implementation, changes in regulatory environment and accelerated investment flows. While developers are seeking to divest some of the projects to cut debt and free up equity for redeployment into new projects, investors are scouting for projects with right valuation. Aided by the regulatory changes, the sentiment has become positive in the sector with new investments triggering consolidation as also mergers and acquisitions, according to Shubham Jain, Sector Head Corporate Ratings, ICRA. Jain told Business Line that sponsors in 17 projects, involving a total cost of ?9,800 crore, have monetised their assets. These include 10 National Highway projects, 4 NH annuity and three State toll road projects. Early investors The interesting aspect of the acquisitions in the road sector made three years ago is that some of the first batch of investors such as Brookfield, Cube Highways, Aberis Infraestructuras and IDFC among others, are considering exiting having made good returns. Among the infrastructure sector, the road projects have been the direct beneficiaries of the policy decision on relaxation of the exit policy for projects awarded before 2009. The hybrid annuity model has seen 27 projects worth ?24,300 crore totalling 1,522 km being awarded by December 2016. Developers have received this model favourably as it has similarities with the EPC mode projects. The BOT mode annuity projects had a number of issues which the developers were forced to contend with. The pace of road project implementation has also gone up to about 16.5-17 km per day as against 14 km per day last year. While NHAI is aiming at 20 km per day, the Ministry of Transport is looking at 40 km per day, Jain explained. About 16 construction companies have a combined business of ?80,000 crore of road construction, with a visibility of projects for 3-3.5 years. With the Budget laying special focus on infrastructure and roads and bridges getting an allocation of ?64,900 crore, more projects will be on offer. A number of completed projects will come up for sale. This time around the buyers will be from operations and maintenance business who will base their purchases on increased returns from the sector. Returns on projects During the 2009-2013, return on roads was below expectation. But better returns would lead to a wave of mergers and acquisitions where specialised investors will come in, he explained. Jain said given the large number of infrastructure projects which are operational or nearing completion there could be churn in the sector. The opportunities in the road sector are highest with over 100 operational national highway projects. With financing traditionally being bank-centric, there is sustained effort to defocus from the banking system by encouraging other investment modes. Jameis Winston Jersey
94 infra projects worth Rs 150 cr and more facing delay, cost overrun: Govt
Big infrastructure projects worth Rs 150 crore and above are running behind schedule and have cost overrun, Parliament was informed today. As many as 1,186 such projects were under the monitoring of the ministry at the end of December 2016, Minister of Statistics and Programme Implementation D V Sadananda Gowda said in a written reply in Lok Sabha. “Of these 1,186 projects, 94 projects are delayed and showing cost overruns. The reasons for delay are project specific,” Gowda said. Ministry of Statistics and Programme Implementation monitors ongoing central sector infrastructure projects costing Rs 150 and above on time and cost overruns. Law and order, delay in land acquisition, geological conditions, delay in environment and forest clearances, rehabilitation and resettlement, local body permissions, utility shifting, contractual issues are among major reasons behind the delay and cost override, he said. At times these factors also result in non-utilisation of funds fully, the minister said this in a response to a query on number of such projects, cost and time overruns and measures taken to avoid them. Nick Martin Jersey
195-km super expressway to link Delhi, Jaipur
The land acquisition process has started for a new ‘super expressway’ the National Highways Authority of India (NHAI) is building between Delhi and Jaipur that will reduce the distance between the two cities by around 40 km. The new speedway will, however, not originate in Delhi. It will branch out from the Delhi-Gurgaon expressway near the Kherki Daula toll plaza in Gurgaon and pass through seven districts before terminating at the Rajasthan capital. Its total length will be 195 km, as opposed to around 235km that one needs to travel to get to Jaipur from the same point, with a main carriageway of six lanes (three on each side). The road, officials said, will be fully access-controlled. It is, however, unlikely to bring the commuting time between Gurgaon and Jaipur down to 90 minutes, as Union road transport and highways minister Nitin Gadkari had recently said while speaking of this ‘super expressway’ but will still cut by half or more the total commuting time to the Pink City. Officials said the ‘super expressway’ would make the Gurgaon-Jaipur journey possible in 120 minutes, which will be a feat no less remarkable, since at present, the journey takes anywhere between four and five hours, or even more if there is heavy traffic. The earlier plan was for a 226 km greenfield expressway starting near the Indira Gandhi International airport and terminating at Daulatpura in Jaipur. But the route was modified because of the cost factor. The expressway will now terminate at Chandwaji in Jaipur district. The new alignment has brought down its land requirement from 2,800 hectares to 1755.90 hectares. According to documents submitted by the Union environment ministry’s expert appraisal committee (EAC) for infrastructure projects, the ‘super expressway’ is expected to cost of Rs 6,530 crore to build. Its rehabilitation and resettlement cost is also a sizable Rs 5,000 crore as most of the land that needs to be acquired for the project is privately owned. “Land has been identified and the acquisition process has been initiated. There are two sections of the project in Haryana and Rajasthan. The acquisition process has started on the Haryana side,” said Ashok Sharma, project director, NHAI. The ‘super expressway’ will pass through 423 villages in seven districts — Gurgaon, Jhajjar, Rewari, Mahendergarh, Alwar, Sikar and Jaipur. Out of the 1755 hectares that need to be acquired, 360.65 hectares is government land, 1.22 hectares is part of a reserve forest area and 38 hectares are ‘protected forest’ land in Haryana and Rajasthan. Land will be acquired by NHAI. “The land use will be changed to Highway construction from agriculture, forest and settlement. There is no densely populated area along the proposed expressway. It is purely a virgin alignment and connectivity to built-up areas will be provided by underpasses and exit AND entry ramps,” mentions the feasibility report of the project. Ed Dickson Jersey
NITI to lend support in development of 10 big infrastructure projects
NITI Aayog will prepare a list of 10 big infrastructure projects that can be developed under the public private partnership (PPP) mode. The proposal to short list 10 big projects on priority basis was discussed during a meeting of NITI Aayog officials and representatives from various states on March 7, a senior government official said. Infrastructure is a top priority for the government and various efforts are already on to attract more investments into the sector, especially from foreign players. The official said NITI Aayog would identify “ten big infrastructure projects” across sectors which can be developed through the PPP mode. The list would be prepared after taking into consideration the details of such big projects that would be provided by the states in the coming weeks, he added. Further, he said that having a list of big projects would help in extending all possible “developmental support” to the states concerned on a priority basis. According to the official, the specific sectors where such projects can be pursued would be decided after collating information from the states. “NITI Aayog will provide its expertise in advising the states on developing infrastructure, especially big projects. This will also help in streamlining the process and ensure timely completion of big projects,” the official said. The government has allocated Rs 3.95 lakh crore for infrastructure development in the Union Budget 2017-18. In his Budget speech, Finance Minister Arun Jaitley had said the magnitude of investment in the space is bound to spur growth. Infrastructure is the thrust area of the government for efficiency, productivity and quality of life and approach was to spend more on infrastructure development, he had said in February. Bobby Clarke Womens Jersey
Gadkari wants more powers to NHAI, unhappy with project progress
Union Minister Nitin Gadkari on Monday said the National Highways Authority of India (NHAI) should have more powers to fast-track road projects while expressing unhappiness over its overall performance. Gadkari said a proposal to enhance NHAI powers has already been sent to the Cabinet for approval. “We need to move on fast in NHAI. I am not happy with their targets,” the Road Transport and Highways Minister said at an event here. Fast-track projects The decision in this regard has been taken to fast-track projects, he said, adding, “We have to strengthen the power of NHAI and the Board… Our proposal is pending and we are expecting that the Cabinet will enhance the power of the NHAI. That will be useful for road construction.” Stating that even States PWDs were faring better than NHAI, Gadkari said, “This is not done. I am expecting at least ?10,000-crore worth of road construction from the NHAI. He further said that project delays were due to the “system” as there were so many committees to take decisions and eventually the projects suffer. “It is because of the system. Everywhere there are committees. You have to go to a particular committee for BOT (build-operate-transfer), then if there is no response then you have to go to another committee for EPC (engineering, procurement and construction),” he said. Enhancing the power of NHAI will help fast-track clearances to highway projects at a time when the government has fixed a target of building 40 km of roads a day. The move is aimed at empowering the NHAI board to clear all highway projects on its own instead of seeking clearances at various levels. The NHAI board at present proposes a highway project which is cleared by the Ministry of Road Transport and Highways (MoRTH) before Cabinet approval if the project amount is less than ?1,000 crore. For projects over ?1,000 crore, MoRTH forwards it to the Finance Ministry before Cabinet nod. The 11-member NHAI board consists of seven full-time members including the chairman besides four part-time members. The country has an ambitious highways construction target of 40-km a day. The current rate of construction is about 22 km a day. The government had awarded 9,655 km of highways construction until February out of a target of 25,000 km. It has also raised its construction target to 15,000 km as against 6,000 km constructed last year. Out of this, 6,467-km highway projects constructed till February. Rating agency ICRA has recently said that NHAI is likely to miss the target for awarding and execution of road projects by a “wide margin”. “Although the pace of execution increased by 17 per cent during the 8 months of FY 2017 (April-November) to 5.82 km/day from 4.96 km/day, during 8 months of FY 2016; it is just 27 per cent of target execution of 21.92 km/day. Chad Kelly Womens Jersey
Govt confident of meeting aggressive infra targets even without private investments
India’s infrastructure development is set to accelerate and meet global benchmarks even if the private sector is not in a hurry to grab the vast investment opportunities that are opening up, top cabinet ministers said at the Economic Times India Infra Summit 2017. The government is confident of meeting aggressive targets and wants private investment in infrastructure but it has enough resources and access to financing to implement projects, minister of road transport, highways and shipping Nitin Gadkari told the gathering of industrialists, chief executives and corporate leaders in NewDelhi on Thursday. “Our sector is moving and you all are welcome to participate. But don’t misunderstand me we don’t have any problems in investing. NHAI (National Highways Authority of India) is ‘AAA’ rated and investors want to invest in it. Our toll income is more than Rs 10,000 crore a year,” he said. “We already have a lot of offers from investors… We have 101 projects which we can monetise and get Rs 1.2 lakh crore.” He said the government will give the highest priority to local investors and contractors. Railway minister Suresh Prabhu said the government had inherited challenges as no investments were made by its predecessors in capacity building or improving services. “We have a huge historic backlog in which not only we have not invested, we have hardly done anything in the railways,” Prabhu said. The government expects a big pickup in investments. Urban development minister Venkaiah Naidu said investment of Rs 2.25 lakh crore is expected under the smart city mission, of which the central and the state governments would offer about Rs 1 lakh crore while the private sector is expected to bring in about a quarter of the total, Naidu said, adding that the smart city concept was not elitist and would benefit everyone. “The Smart City Mission is intended to be a game changer in respect of planning, execution and resource mobilisation,” Naidu said. India needs “political mainstreaming of the urban agenda” as population growth in cities has overtaken that in villages and better solutions are needed, Naidu told a diverse audience at the summit. Between 2001 and 2011, population rose by 91 million in urban areas as against 86 million in villages. In the next 15 years, about 250 million more people are expected to be added to cities. “The need of the hour is for political mainstreaming of urban agenda. We need to intensify political and public discourse about urban challenges so that meaningful solutions emerge,” Naidu said, admitting myriad challenges that Indian cities faced and illustrating how a government initiative like developing 100 smart cities across the country could elevate quality of life. BOOSTING RAIL SERVICES Prabhu said the government was working to bring rail services on a par with global standards. “We are trying to work on a holistic, all-pervasive plan of changing railways, not just creating infrastructure in a manner that will conform to the global standards to live up to the expectations of people. But unfortunately, it will take time,” he said. The railways was raising financial resources on an unprecedented scale and at the lowest coupon rates, he said. “We are raising these resources and putting them where required,” he said. Revenue from freight and passenger fares have been under serious threat and despite that the government has made reforms in the freight sector by reducing prices, executing long-term contracts and offering discounts. Indian Railways is also trying to raise revenue by introducing new services for passengers. It’s emphasising infrastructure investment, which is leading to more traffic, Prabhu said. A plan to save Rs 41,000 crore in 10 years by reducing energy costs has been prepared. Salaries and pensions are big costs over which the government does not have any control but the railways is conducting human resource audits that will improve productivity in the future. The railway dedicated freight corridor will be operational by the end of 2020 and that will ease freight traffic. The railways is also working on the development of stations. Prabhu said the government will bar the manufacture of conventional coaches from April 1 and focus on those with much better features and technology. Jamal Adams Jersey
Electronic Tags for Toll Collection at National Highways
The National Highways Authority of India (NHAI) has incorporated Indian Highway Management Company Limited (IHMCL) to expedite the implementation of Electronic Fee Collection (EFC). Minister of State for Road Transport and Highways Shri Pon. Radhakrishnan said in a written reply to a question in Lok Sabha today that National Payments Corporation of India (NPCI) has been engaged to work as Central Clearing House (CCH) to implement inter-operability so that several banks could participate in the EFC programme. As on 03.03.2017, the participating banks are SBI, KVB, ICICI, AXIS, IDFC and Equitas SF Bank. As on 03rd March 2017, total 3,47,200 electronic tags have been issued for fee collection on National Highways. The Road users are being encouraged to use electronic means for payment of user fees for seamless travel through fee plazas. Government has also notified the use of pre-paid payment instruments vide Notification G.S.R 1114 (E) dated 02nd December, .2016 for collection of user fee from road users. This is to permit road users to opt for available cashless modes of payment. NHAI has facilitated the Concessionaire and Contractor to use POS machines for collection of user fees through credit & debit card. Since, FASTag is not mandatory for payment of user fees for use of National Highways; therefore, no target/deadline has been fixed. Malachi Richardson Authentic Jersey
Total 6,604 KM National Highway Constructed till February, 2017
The target of construction of National Highways is 15,000 km, of which 6,604 km have been completed till Feb in the current financial year 2016-17, the Minister of State for Road Transport and Highways Pon. Radhakrishnan said in a written reply to a question in Lok Sabha today. The slow speed of construction of National Highways(NHs) are mainly due to land acquisition, utility shifting, non-availability of Soil/Aggregates, Poor performance of contractors, Environment/ Forest/Wildlife Clearance, ROB & RUB issue with Railways, Public agitation for additional facilities, Arbitration/contractual disputes with contractors etc. There is a well-established mechanism for monitoring and testing of quality of construction and development of work of National Highways (NHs) by engaging a Consultancy firm of International and National repute for every project to ensure quality construction. They supervise, monitor and conduct tests as per procedures laid down in various codes published by Indian Road Congress, manuals & MoRT&H specifications for Road and Bridge works and National Highway Authority India Quality Manuals etc. Apart from this, field units and Quality Division of Ministry, NHAI and State PWD also conduct inspection at various project sites regularly to monitor the quality of work. Quality Auditors are also engaged from time to time for conducting Quality Audits of the project work. On observation of any violation, action against the defaulter is taken as per provision in the agreement. The Ministry has empaneled National Level Project Monitors for monitoring of critical and languishing National Highways projects all over the country. Brice Butler Womens Jersey
Land around govt infrastruture may cost more
A road or a flyover can change the landscape. Residents along the EM Bypass know it better than anybody else. Land prices soared in these areas with land owners making hefty profits. Now they may have to share a part of their profits with the government. The new Kamalgazi flyover on the southern fringes of the city connecting the Southern Bypass going to Baruipur is a case in point. The flyover itself has led to a spurt in development activities along this Bypass running parallel to NSC Bose Road with a host of housing projects, schools coming up in the area. The Mamata Banerjee government is mulling a direct levy — betterment fee — on landowners who are selling large plots around government infrastructure for big-ticket commercial projects. State municipal affairs department proposes the fee amount to be half of the land appreciation cost. The appreciation is the price difference of land when a government project is announced and when it is completed. The result is obvious. Land owners if asked to shell out “betterment fee” will factor in the levy while selling out the land to a developer, and developer will quickly pass it on to the consumer, pinching his pockets further. “Residents in specific areas have benefited from several infrastructure projects — a flyover, a road, widening of the existing road. Land prices have appreciated in these areas. Landowners should share a part of their profit with the government because the land prices wouldn’t have gone up without the development projects. But we are not going to levy the charge on each and every one. We will begin with those who have sold large parcels of land to real estate or other commercial projects,” said state municipal affairs minister Firhad Hakim. The proposal is part of the draft West Bengal Town and Country (Planning and Development) Amendment Bill, 2017, likely to be tabled in the assembly this week. Once the bill is passed, the government will frame the rules identifying the designated areas across the state where people at large have benefited from government infrastructure projects, road project, housing project or a re-housing scheme. “It goes without saying that residents in the upcoming smart cities will have to shell out the proposed betterment fee for the amenities on offer from the government side,” a state official said. The proposal is not unique for Bengal. The Maharashtra government is also planning an impact fee on landowners in areas designated as benefit zones in Mumbai. Some others are considering models that will allow the government to share the benefits of asset price rise due to an infrastructure project. The options include an impact fee to be levied on the landowners; an infrastructure fund where a certain share of the financial gains that a landowner has made exclusively due to the infrastructure project will be deposited; or a chargeable floor space index (FSI) based on transit-oriented development (TOD) charges. Dansby Swanson Authentic Jersey
UK,UAE-based funds keen on Indian infra projects through NIIF
National Infrastructure Investment Fund (NIIF) is in discussion with investors to raise money for key infrastructure projects and is in the process of finalising two of them in a month’s time. “We have shortlisted investors. Seven memorandum of understandings (MoU) has been signed as of now…investors are doing due diligence before committing,” a source in know of the matter told Moneycontrol. While the official did not spell out the name of global investors, he said that a UK-based firm has shown keen interest in investing in renewable energy sector in India. “It should be finalised in a month,” the source said, adding that United Arab Emirates (UAE)-based sovereign fund has also shown firm interest in investing in India’s road projects. It is also in an advanced stage of discussion. Besides, renewable energy and road projects, some investors have shown interest in funding other sectors including airports and ports, the source said. The government hopes to raise at least Rs 1,000 crore by the end of the month, another official in know of the development said. As per the latest Budget estimates, the government has lowered the allocation for NIIF to Rs 1,000 crore in the revised estimates from Rs 4,000 crore during 2016-17. The budgeted estimated for financial year 2017-18 has also been kept at Rs 1,000 crore. “It (Rs 1,000 crore) has been fixed keeping in view the expected inflows. We can always ramp it up later during the year if we see more interest from global investors,” the official explained. The allocation for 2016-17 was revised, based in the investment that the government expected to come in, the official further said. In 2015, the Centre had set up NIIF—a quasi-sovereign wealth fund—for funding commercially viable greenfield, brownfield and stalled projects. The corpus of the Fund is proposed to be Rs 40,000 crore, where the government would invest 49% or an amount equivalent to nearly Rs 20,000 crore. NIIF will raise third party capital for the remaining Rs.20,000 crore from long term international investors, such as sovereign wealth funds, insurance, pension funds and endowments among others. The fund has been set up as a fund of funds structure with an aim to generate risk adjusted returns for its investors, along with promoting infrastructure development and technology through investments. Will Lutz Authentic Jersey