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R-Infra looks for business in troubled road projects

Katya B Naidu  |  Mumbai 

Lalit Jalan

To buy licences from successful bidders who have failed to execute work.

is planning to buy out licences to build road projects from which had bagged these through the bidding route but are then unable to proceed.

A number of have bagged such projects through competitive bidding organised by the National Highways Authority of India (NHAI). However, some of these projects were got by offering a huge premium to the government, after which either financial closure couldn’t be achieved or the company just finds it too much and wants to exit. Many such distressed projects are out there in the market, looking for buyers.

"There are many proposals that bankers are bringing to us. We are taking a look," Lalit Jalan, director of R-Infra, told Business Standard. "These projects will come at a cheaper price to us. One way to make these viable is to improve the revenue, compliance and all those aspects. But I can't change the capital cost or the terms of The only upside is in getting these for a throwaway price." 

This, the company says, has become an opportunity to increase their portfolio of road projects. Due to increased competition, the company is finding it tough to win new projects. Recently, a consortium of R-Infra and lost their bid for a mega road project.

On an average, every road project has around 20 bidders. Almost every winning bid involves a premium, wherein a developer offers money to the government for a project, as opposed to taking viability gap funding, which is paid by the government. The amount of money paid depends on the bidder's calculation of the traffic growth expected.

Jalan feels the amounts offered in some recent bids were very aggressive (meaning, unrealistic) and taking an extremely positive outlook. "With some of these bids, I wonder if any of them would ever achieve break even," he said.

The company has four operational road projects. Six more would start generating revenue in the current financial year. It is, in all, developing 11 road projects, with a total length of 970 km. 

First Published: Wed, August 17 2011. 00:53 IST