Welspun Enterprises gains on acquiring BOT project from Essel Group

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Welspun Enterprises rose 2.35% to Rs 50.15 after the company announced its plans to acquire a build-operate-transfer (BOT) toll project from Essel group's company, Mukarba Chowk-Panipat Toll Roads (MCPTRL).

This acquisition through Welspun Infrafacility (the company's subsidiary) is being done by way of harmonious substitution which was recommended by the project lenders and subsequently approved by National Highways Authority of India (NHAI). As on date, MCPTRL had completed ~31% of the 71.1 km long Mukarba Chowk - Panipat Highway (NH-44) project.

The 'harmonious exit' clause was introduced by the NHAI in January of this year. It allows lenders to transfer the stuck project to another construction company if the first one is unable to deliver on time.

The original total project cost was estimated to be Rs 2,122 crore out of which Rs 1,593 crore is the balance to be incurred, to complete the project. All existing lenders to the project have agreed to continue supporting the project; thus the project is fully financially tied up.

The company expects to complete the project by June 2021. As per the concession agreement, the scheduled concession end date is October 2033, extendable up to 3.4 years based on actual average traffic in year 2025.

The current toll revenue for only Haryana section is about Rs 200 crore per annum. Upon achieving CoD (commercial operations date) for both Haryana and Delhi section, the company expects to collect toll of Rs 300 crore per annum.

In December 2019, NHAI had reportedly terminated the work given to Essel Infraprojects to widen NH-44 into 12 lanes, including eight main lanes and four service lanes. The project of widening the highway from Mukarba Chowk in Delhi to Panipat in Haryana has not only missed its April 2019 deadline but only some portion of the work had been reportedly completed. The project was allotted to Essel Infraprojects in 2015 in the public-private partnership (PPP) mode, media reports said. Post NHAI termination notice, the banks, who were the project's financier, had to decide whether the NHAI or some other private company would complete the project, reports concluded.

Welspun Enterprises operated in the infrastructure business.

On a consolidated basis, the company's net profit fell 40% to Rs 26.05 crore despite a 13% rise in net sales to Rs 504.47 crore in Q3 December 2019 over Q3 December 2018.

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