Ircon Gets Contract For Vadodara-Halol Road

Indian Railway Construction Corporation (Ircon) has been shortlisted as the engineering, procurement and construction (EPC) contractor for the Vadodara-Halol road project.

The project, estimated to cost about Rs 170 crore, is being promoted by Infrastructure Leasing and Financial Services Ltd (IL&FS).

Ircon is the EPC contractor for two other projects _ widening of the Bangalore-Hosur corridor to six lanes and construction of 100 overbridges in Maharastra. The company has also pitched for the Moradabad bypass project where it has been shortlisted for second round evaluation.

According to sources, the Halol project entails an equity stake by the EPC contractor up to 11 per cent. The Gujarat government will hold equity up to 5 per cent. IL&FS is likely to remain the largest equity holder in the special purpose vehicle created for the purpose.

The state government has adopted the build, own, operate and transfer (BOOT) route for the project in order to improve the bankability of the project. The project will have a concession period of 30 years.

Sources said the project was being funded on a 70:30 debt equity ratio. This means Ircon will have to invest about Rs 5.6 crore as equity in the project.

The debt for the project has not yet been tied up. The project is expected to achieve financial closure sometime during course of the year.

The BOOT structure adopted by the state government is expected to provide physical asset cover to financial institutions.

FIs have shown a reluctance to enter into project financing on a project recourse basis, especially where risks are unknown.

In the Halol project, the FIs are wary that there has been a shortfall in the initial traffic flow estimates because of industrial slowdown.

However, despite the reduced traffic flow, with an annual escalation of a minimum of 10 per cent the project is still expected to generate a minimum internal rate of return of 20 per cent.