GMR finally gives up on India's largest highway project

Spanning 555 km, the project was to cost Rs 7,500 cr

GMR Infrastructure has terminated the concession agreement on its Rs 7,500 crore, 555-km highway project connecting Rajasthan and Gujarat, India’s largest.

GMR Infrastructure reached the decision after weeks of discussions with the National Highway Authority of India (NHAI), over getting various statutory clearances for the project.

The company is understood to have walked out of this project after NHAI failed to get the required environmental clearnaces, notification of toll and denotification of land among others for GMR to proceed with the project execution. GMR Infrastructure, in fact had even achieved financial closure for this project and a third of the equity requirement was also ready.

GMR had won the project during September 2011 against stiff global competition. The project was expected to beef up GMR's revenues substantially.

The project was for the six-laning of the 555-km Kishangarh-Udaipur-Ahmedabad stretch, the country’s first expansion of a mega highway. This project was to have been implemented through a design-build-finance-operate-and-transfer model.

This section is a part of the Delhi-Mumbai (Golden Quadrilateral) corridor and goes through the newly announced Delhi-Mumbai Industrial Corridor (DMIC) project, which has very high growth potential for commercial and tourist traffic.

GMR was also in discussions with global and Indian private equity funds to raise equity in the highways business to take this and other projects forward.

The highways business currently accounts for around 10 per cent of GMR's Rs 8,000 crore revenues, and is dwarfed by the flagship airports and power segments.

This decision by GMR comes after the infrastructure developer was forced to give up on the $500 million Male International Airport after operating that asset for nearly three years. GMR is now proceeding legally to claim as much as $800 million as compensation for the same.

GMR which has been weighed under by a debt of as much as Rs 35,000 crore with a gearing of three times, has been advocating an asset light model going forward and had indicated that it will be divesting some of its highways assets to take the first step as part of that strategy.

GMR, prior to the move to give up the biggest highway project, had 10 road assets of which eight are operating and two under construction. GMR's stock gained three per cent on National Stock Exchange to close at Rs 20.55 a share on Monday.