Delhi-Gurgaon Expressway set to break even in first year

Around 50 days after it began commercial operations, the heavy flow of traffic on the 27.7-km Delhi-Gurgaon Expressway has surpassed the expectations of all, including DS Constructions, the concessionaire.

In addition to the 50,000 users who have been issued smart tags at a discount (50 per cent for passenger cars and 34 per cent for commercial vehicles), some 120,000 vehicles use the expressway every day, company executives say. This is 20 per cent more than what the company had anticipated.

This, analysts said, could help the Rs 950-crore project break even in the first year of operations, though company officials refused to share financial details.

Eighty per cent traffic on the road comprises cars, which are charged Rs 16. The rest are commercial vehicles, which pay Rs 114 on an average. It is estimated that the expressway's annual revenue will be around Rs 150 crore.

Experts say the maintenance cost of such a project works out to around 15 per cent of the revenue "" Rs 22.5 crore in this case. The project has been financed with a debt of Rs 560 crore which, according to analysts, carries an interest rate of around 11 per cent, the amount coming to Rs 61.6 crore.

The outgo of around Rs 84 crore on interest and maintenance will leave the company with a handsome profit before depreciation and tax. "The revenue generation from the project is very much in line with our expectation," said DS Constructions Director Manhat Narula.

In comparison, Noida Toll Bridge Company Ltd, the concessionaire for the Delhi-Noida toll bridge, which was built at an initial capital cost of Rs 408 crore, took three years to break even and that too after debt restructuring.

In the case of the Gurgaon-Delhi Expressway, the numbers can only improve in the days to come. The company expects the traffic on the expressway to grow 7.5 per cent per annum. A rise in tariffs is also on the cards. A company executive said they had no role in the revision of tariffs. The toll rates are revised by the government of India using a formula based on the wholesale price index (WPI).

Shailesh Kanani, infrastructure analyst, Angel Stock Broking, said: "All companies in the industry have an internal rate of return of 15-18 per cent during the concession period."

The Delhi-Gurgaon Expressway is part of the Golden Quadrilateral project, which has been given highest priority by the central government. DS Constructions has also undertaken other major road projects like the Raipur-Aurangabad highway and the Gwalior-Jhansi highway.