The ambitious Rs 1-trillion railway station redevelopment plan is set to take a fresh turn. RITES, the public sector undertaking (PSU) of Indian Railways, is likely to acquire around 25 per cent stake in Indian Railway Stations Development Corporation (IRSDC), nodal agency for the redevelopment projects.
RITES, which is likely to have an initial public offering (IPO) on June 20, 21 and 22, according to sources, has already set aside Rs 2.5 billion for this acquisition. The RITES’ interest is coming at a time when IRSDC has lined up plans to raise about Rs 40 billion from the markets for upgrading at least 50 stations in the initial phase.
The government is planning to rebuild at least 600 stations and has approached other railway PSUs, too, to take a stake.
“We were approached to participate in equity for station development projects, where IRSDC is evolving a better model for investment. We, in principle, approved Rs 2.5 billion for this in the March board meeting,” said Rajeev Mehrotra, chairman and managing director of RITES.
IRSDC was a subsidiary of Ircon International till September 2017. That month, Rail Land Development Authority bought one per cent stake from Ircon for about Rs 4 million, that converted IRSDC into an equal joint venture with a share of 50 per cent each. If RITES and any other company join the party, it could bring a change in the business plan of the company.
“We are sorting out the remaining issues like a business plan to take around 25 per cent stake in IRSDC. We have, in principle, agreed for this and they have about 600 stations on offer,” Mehrotra said.
However, other companies are yet to come out with any plans to join IRSDC. After this tepid response from public players, the government decided to redevelop the stations under an engineering, procurement and construction (EPC) model, through IRSDC.
Moreover, to speed up raising of funds from the markets, Railways is likely to enter into a build-operate-transfer (BoT) annuity model deal with IRSDC.
Through the model, Railways will give a letter of comfort, based on which IRSDC will raise money from the markets, with a five-year payment moratorium period. The railways is likely to soon approach the Union Cabinet in this regard.
According to the new plan, Indian Railways will offer 20 per cent of the overall redeveloped area for residential purposes. The remaining 80 per cent area will be utilised commercially.
According to sources, real estate majors such as Tata Group, Shapoorji Pallonji, Ahluwalia Construction, IL&FS and Bharti Realty are in the race in bidding for the Anand Vihar, Bijwasan and Chandigarh stations.
About 25 companies have shown interest for Anand Vihar, while 11 players each have submitted Expression of Interest for Chandigarh and Bijwasan.
These three stations together are likely to see investment of Rs 7 billion.