GMR Infrastructure on Tuesdsay said it won a project for widening the 555-km Kishangarh-Udaipur-Ahmedabad highway, from four to six lanes.
Worth around Rs 7,200 crore, this is the biggest project awarded so far by the National Highways Authority of India (NHAI). The Bangalore-based publicly held infrastructure developer won the project through international competitive bidding.
The highway project would be implemented through a public-private partnership model on design, build, finance, operate and transfer (DBFOT) model for a period of 26 years, GMR said in a statement.
The highway section is a part of the Delhi-Mumbai (Golden Quadrilateral) corridor and goes through the newly-announced Delhi-Mumbai Industrial Corridor, which has high growth potential for commercial and tourist traffic.
GMR said it had got the Letter of Award and the concession agreement would be signed soon. Srinivas Bommidala, business chairman of GMR Urban Infrastructure & Highways, said “The project is attractive due to the fact that we shall earn revenue from day one, being a brownfield project.”
The roads business contributes less than 10 per cent to the Rs 6,000-crore top line of GMR Infrastructure, which derives a major part of its revenues from airports and power generation verticals.
According to senior company officials, a clinching factor for them was the amount of premium they projected to pay NHAI a year. GMR will pay a premium of Rs 636 crore for the first year, which will then increase by five per cent every year.
They said the revenue projection for the first year was around Rs 660 crore, expected to grow by 14 per cent year-on-year. “The first three-four years will be bit tight, as immaterial of the revenue we generate, we will have to pay the agreed premium to NHAI. Based on our extensive research on the traffic growth, we are hopeful it will pay out in the long term,” a senior official said.
According to the officials, GMR pipped Larsen & Toubro, Reliance Infra, GVK, NCC and Isolux, among others, for the project. GMR will raise Rs 5,400 crore in debt for this project, keeping the debt-equity ratio at 75:25. Work on the project will start from April 2012, within which GMR Infrastructure should achieve financial closure.
“Various lenders have shown interest in this project and we are looking at an interest rate of 11.5 per cent,” the senior official said.
GMR Infra entered the highways business in 2001 by winning two projects with benchmark annuity offer. It received early completion bonus from NHAI for completing the Tambaram–Tindivanam project ahead of schedule.
Bommidala said, “It is the dawn of a new era in the highways sector, as implementation of mega projects is being taken up under the DBFOT scheme as a precursor to large expressway projects expected to come up in the near future.”
Under the roads vertical, GMR Infra has nine projects covering 730 km. Of this, six covering 421 km are operational and spread equally between toll and annuity-based projects. Of the remaining, which are at the development stage, two are under toll, while the third one is an annuity contract.