INDIA's transport sector, mote notably roads, has attracted private capital (both under PPP model and by institutional investors like pension funds). Read more about key developments in Infrastructure and PPPs in Q2/2021 in India in transport sector in our latest insight.
This is second publication on a 2-part insight series
INDIAN SHIPPING MINISTRY IDENTIFIES SEVEN BERTHS FOR PRIVATISATION
India’s Ministry of Ports, Shipping and Waterways has drawn up a list of seven operational facilities at state-run ports it intends to privatize.
The list comprises of:
A berth at Paradip Port Trust.
A bulk cargo terminal at VO Chidambaranar (VOC) Port Trust that needs to be converted to a container terminal.
A second berth, also at VOC Port Trust.
A berth at Visakhapatnam Port Trust.
A mechanized fertilizer berth at Deendayal Port Trust.
A container terminal at Jawaharlal Nehru Port Trust (JNPT), the process for which has already been initiated; and
A second berth, also at JNPT, that will be meant only for ships on local routes.
The incoming private operators will need to upgrade and expand the existing facilities, the list of projects will attract a cumulative investment of at least INR 25.5Bn (USD 343.4Mn). Of the total investment, the two berths at VOC Port Trust will require a total investment of INR 8.55Bn.
Of the assets identified, JNPT has already started the process to privatise the container terminal. It has appointed SBI Capital Markets as an adviser. The developer needs to invest about INR 8.5Bn to upgrade the facility so the asset can be utilized better.
Earlier in February 2021, Ministry of finance while the presenting the union budget also announced that major ports will shift from managing their own operational services to a model where operations will be managed by a private partner on their behalf.
INDIA TO FORM NEW POLICY TO APPROVE PPP PROJECTS
Indian government will formulate a new policy to appraise and approve public-private partnership (PPP) projects. The current process for approval of PPP projects is long and involves multiple levels of approval.
The new policy will also include revamping the process of approvals for privatizing state-owned assets, including through infrastructure trusts. The aim is to ensure speedy clearance of projects and reap the benefits of the private sector’s efficiencies in financing construction and management of infrastructure.
Healthcare infrastructure incentives
Ministry of Finance announced credit incentives of INR 500Bn (USD 6.7Bn) in an effort to ramp up healthcare infrastructure in tier-two and tier-three towns and cities.
The federal government will provide a guarantee cover of 50% of the loan amount for expanding existing facilities and 75% for new projects. The loans will be for a maximum amount of INR 10Bn and will last for three years. The interest rate will be capped at 7.95%. Without the federal government’s guarantee, the borrower would need to pay about 10% to 12% interest.
RAILWAY AUTHORITY TO SEEK BIDS FOR MUMBAI STATION REDEVELOPMENT
The Indian Railway Stations Development Company (IRSDC) will soon be calling for bids to redevelop a railway station in a suburban area of Mumbai city in a public-private partnership (PPP).
IRSDC will publish a request for proposal for Andheri railway station once it secures certain approvals for the first phase of development. To be developed in two phases, the first phase will cover 2.1 acres at a cost of INR 2.18Bn (USD 29.4Mn). The second phase of 2.21 acres is in the planning stages. The project will be taken up in the design, build, finance, operate and transfer (DBFOT) model.
STATE AUTHORITY SEEKS BIDS FOR INDIA PORT PPP
The maritime authority of Gujarat state in western India is inviting proposals to build a greenfield port in a public-private partnership (PPP). The concession period is 50 years. The project site is 140km from Mumbai city and close to a railway freight corridor, adding that the facility will be designed to handle solid, liquid and container cargo.
The state-run Jawaharlal Nehru Port near Mumbai will reach its optimum operational capacity by 2025 and a greenfield port in neighbouring Gujarat can cater to cargo from the surrounding states. The concession period of 50 years is offered as compared to the usual 30 years as this gives the developer an assurance of a greater return on investment.
THREE FIRMS BID TO TAKE OVER SOUTH INDIA BRIDGE PROJECT
Three of 11 firms that submitted expressions of interest (EOI) for a stressed bridge project (Rajahmundry Godavari Bridge) in southern India have now bid to take over its debt. The three firms are GR Infraprojects, PNC Infratech and Prakash Asphaltings & Toll Highways (India).
A total of 11 firms, predominantly global and local distressed credit managers, had initially shown interest in the stressed asset. The project is 14.48km Rajahmundry Godavari Bridge built by Gammon India for INR 11.1Bn (USD 151.1Mn) in the design, build, finance, operate and transfer (DBFOT) model. It comprises a 4.15km bridge and approach roads totaling 10.3km. The project carries a concession of 25 years.
INDIA AUTHORITY SEEKS CONSULTANT TO PREPARE EXPRESSWAY FEASIBILITY REPORTS
The National Highways Authority of India (NHAI) called for bids from consultants to prepare detailed reports to develop 885km of expressways. The main objective of the assignment is to establish the technical, economical, and financial viability of the projects and prepare reports to upgrade the existing roads to four, six and eight-lane configurations depending on the flow of traffic, according to the request for proposal document.
Along with the feasibility reports, the consultant needs to provide a financial analysis and the preferred mode of implementation as well as cost estimates. Bid documents need to be prepared for both the public-private partnership (PPP) and turnkey formats.
The expressways are divided into three packages: the first is of 415km, the second is 330km and the third is 140km. They are located across the states of Madhya Pradesh, Chhattisgarh, Maharashtra, Rajasthan, Uttar Pradesh, and Bihar. The proposed projects are part of the second phase of the government’s flagship highway construction mission, Bharatmala Pariyojana, which aims to build 65,000km in two phases. In the first phase launched in late 2018, the government set a target to construct 32,800km by 2024.
GREATER NOIDA AUTHORITY APPOINTS CONSULTANT TO PREPARE INFRA BLUEPRINT
The Greater Noida Industrial Development Authority has appointed Rudrabhishek Enterprises Limited (REPL) as a consultant to prepare a master plan to expand Noida city. The master plan till 2041 aims to augment infrastructure as well as address existing gaps in the greater Noida area in Uttar Pradesh state.
While most projects will be developed in the engineering, procurement, and construction (EPC) method, public-private partnerships (PPP) are not ruled out and will also play a part in the overall development. The master plan includes a proposal to develop transport infrastructure, real estate, low-income housing, social infrastructure, and disaster management projects.
JAIPUR DEVELOPMENT AUTHORITY SEEKS CONSULTANT TO PREPARE CITY ROAD REPORT
The development authority for Jaipur city in India’s Rajasthan state called for expressions of interest (EOI) from consulting firms to plan the implementation of a road project.
The route length will be about 50 km and the Jaipur Development Authority is opened to considering all models of procurement, The cost of the project is over INR 25Bn (USD 341Mn).
The aim is to develop the region as a cluster of different economic zones which will be well connected by the project and will also connect to the Delhi-Jaipur highway. The economic zones will be located within a width of 360m along the highway project.
INDIAN AUTHORITY INVITES BIDS FOR USD 100MN HIGHWAY PPP
The National Highways Authority of India (NHAI) has invited bids to develop an INR 7.3Bn (USD 100Mn) highway in Tamil Nadu state. The 20km project involves the construction of a six-lane greenfield highway between Padvekar and Kannigaipair villages in Tiruvallur district in the hybrid annuity model.
The stretch is part of the longer 126km greenfield highway between Chittoor and Thatcher, which has been divided into four packages. The highway will be designed for speeds of up to 100km per hour and is envisaged as an alternative to an existing route that is congested.
MORADABAD AUTHORITY INVITES CONSULTANTS TO DEVELOP INFRA DEVELOPMENT PLAN
Moradabad authority in Uttar Pradesh state called for proposals from consultants to prepare a Vision document and an implementation strategy for its infrastructure. The objective is to improve quality of life, promote development and draw up a blueprint to guide the city’s planned expansion.
The consultant will need to identify projects of importance that can be developed with private sector participation as well as project structures, institutional arrangements, and resources. The focus is on developing civic and transport infrastructure and the consultant needs to list projects that it proposes to develop in a public-private partnership (PPP) as well as the engineering, procurement, and construction (EPC) model.
Prospective bidders will need to have expertise in areas such as urban design, heritage tourism, solar energy, urban transport and water supply and sewage, among other segments.
INDIAN PORT PREPARES TENDERS FOR CARGO TERMINAL PPPS
India’s Deendayal Port Trust is planning to shortly call for bids to develop three liquid cargo jetties in public-private partnerships. This is the second time the port in Gujarat state, on India's east coast, is offering the jetties for privatization. The process, first initiated in 2020, was cancelled midway due to an internal issue.
The procurement will be a two-stage process with a request for qualification (RFQ) followed by a request for proposal (RFP). The Deendayal Port currently has six operational oil jetties with a collective annual capacity of 12 million metric tonnes. The construction of a seventh is underway.
The tender in 2020 called for concessionaires to develop the three jetties with capabilities to handle all types of liquid cargo such as vegetable oils, ammonia, liquefied petroleum gas (LPG) and phosphoric acid. The berths were to be designed for vessels of up to 80,000 deadweight tonnage (DWT) and up to 13-meter draught.
INDIAN HIGHWAY DEVELOPER IN TALKS TO SELL THREE PROJECTS
India's HG Infra Engineering expects to close a transaction to sell three of its highway projects in 2021. The infrastructure developer is in talks with foreign financial investors that are looking to ramp up their presence in India’s roads sector.
The projects – Gurgaon-Sohna, Rewari Ateli Mandi and Narnaul Bypass – are all in advanced stages of construction and are scheduled for provisional completion by December 2021. It has also started discussions for a fourth project – Rewari Bypass 4 – which is about 28% complete.
The four projects were all awarded in the hybrid annuity model for a total value of INR 26.6Bn (USD 363.2Mn) of which the first three have achieved over 60% progress. Foreign financial investors have shown interest in buying hybrid projects because of the annuities that are guaranteed by the Indian government. Developers have also bid for these projects since their introduction in 2015 as it does not require them to take traffic risk.
HSBC AND SMBC FINANCE INDIA TOLL ROAD PROJECT
An INR 5.5Bn (USD 75Mn) toll road project in India has reached financial close after receiving a term loan of INR 2.6Bn from HSBC and Sumitomo Mitsui Banking Corporation. The project was awarded in 2020 to a consortium formed by Malaysian developer Sunway Construction Group and India's RNS Infrastructure. Sunway Construction owns 60%, while RNS holds the rest.
The 31km project, located in the southern state of Tamil Nadu, will connect the towns of Meensurutti and Chidambaram. It will have a concession period of 17 years, including a two-year construction period, and it will be developed under the hybrid annuity model (HAM). The Meensurutti-Chidambaram project will receive a fixed annuity benchmarked at the Reserve Bank of India's Bank Rate + 3%.
This is the second HAM project in India developed by a consortium between Sunway Construction and RNS Infrastructure. In May 2020, the two were awarded a 37km toll road project with a total cost of USD 125Mn connecting the towns of Thorapalli and Jittandahalli, also in Tamil Nadu state.
INDIA'S JMC PROJECTS IN TALKS TO SELL HIGHWAY PROJECT
Mumbai-based infrastructure developer JMC Projects is in talks to sell an 89km highway project and expects to receive a non-binding offer in the next two to three months.
The project – Vindhyachal Expressway – is a special purpose vehicle set up in 2012 to develop a four-lane highway connecting the towns of Rewa and Hanumana in Madhya Pradesh state. Awarded in the design, build, finance, operate and transfer (DBFOT) model, it was built at a cost of INR 6.96Bn (USD 94.7Mn) and carries a concession of 30 years that began in January 2012. JMC is also restructuring debt for two of its projects – the Kurukshetra and Wainganga expressways – which it expects to complete in the next two months. The former is a joint venture with Kolkata-based Bharat Road Network, which holds 49%.
The developer has been invested in its road projects over the last few years – INR 8.3Bn in the year through March 2020, INR 7.5Bn the year prior and INR 7Bn in 2018 - to service debt due to lower-than-expected traffic.
INDIAN INFRA DEVELOPER SADBHAV TO RAISE DEBT FINANCING
Indian developer Sadbhav Infrastructure Project will raise debt of INR 5.5Bn (USD 73Mn) from two investors. Australia's AMP Capital has partnered with Allianz Global Investors for the issuance of non-convertible debentures, with each providing one-half of the total agreed financing to Sadbhav.
The proceeds will be used to repay existing debt and part-fund the completion of road projects that were awarded to Sadbhav in the hybrid annuity model. The Nashik-headquartered developer has nine hybrid projects, of which three are operational and six are under construction. The investors will be repaid from the sale of the projects once their construction is complete.
Sadbhav has an agreement with road infrastructure trust IndInfravit - which is backed by Canada Pension Plan Investment Board (CPPIB) - to sell them its projects once they are built and turn operational. The road trust holds the right of the first offer to acquire all of Sadbhav’s projects in future. The arrangement is part of the terms of a contract in 2019 when Sadbhav sold nine road projects to the trust for INR 66.1Bn.
GUJARAT AUTHORITY SEEKS CONSULTANT FOR LIGHT RAIL STUDIES
The metro rail authority in India's Gujarat state called for proposals from consultants to prepare a detailed report for four light rail projects to be built in a public-private partnership (PPP).
The Gujarat Metro Rail Corporation plans to introduce light rail to the cities of Vadodara, Rajkot, Bhavnagar and Jamnagar, India’s Metro Policy - crafted in 2017 - encourages private sector investments in metro projects by making PPP a mandatory component in order to avail federal assistance.
The DPR shall include all requisite studies, including:
· Market study
· Demand assessment
· Conceptual plans conforming to rules and regulations and recommendations for the development mechanism to be followed.
The project development proposed shall be with utmost consideration for the ecology of the existing surroundings.
The GMRC intends to select the Consultant through an open competitive bidding in accordance with the procedure set out herein.
OLA CABS TO DEVELOP INDIA EV CHARGING NETWORK
Softbank-backed ridesharing company Ola Cabs plans to develop more than 100,000 electric vehicle (EV) charging points for two-wheelers in India. The Ola Hypercharge Network, spread across 400 cities, will the largest two-wheeler be charging network in the world.
The Bengaluru-based company will set up more than 5,000 charging points across 100 cities in the first year. They will be deployed in locations such as city centers, business districts, malls, IT parks, office complexes and cafes.
Ola and its partners plan to spend a total of USD 2Bn over the next five years to develop the project. Ola Cabs is one of India's primary ride hailing companies and is also involved in vehicle-for-hire and food delivery businesses. Apart from India, it is present in Australia, New Zealand, and the UK.
INDIA APPROVES USD 1.9BN BENGALURU METRO PROJECT
The Indian government in April 2021 approved a 58.19km metro rail project in Bengaluru city, estimated to cost INR 147.88Bn (USD 1.9Bn). While construction will be financed through loans obtained from the Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA), the railway stations are proposed to be built in a public-private partnership (PPP).
The project, split into two corridors, will have 30 stations in all and is set to serve almost 2 million commuters per day. The stations are proposed to have multimodal facilities such as bus bays, taxi stands, motorcycle pools and pedestrian walkways and bridges. The routes will traverse through the densest corridors in the technology capital, which is dotted with major technology parks that house global companies.
As per India’s Metro Rail Policy, 2017, it is recommended that every project has some form of PPP.
INDIAN INFRA DEBT FUND TO RAISE USD 500M
Infrastructure debt fund (IDF) India Infradebt plans to raise USD 500Mn via bonds in 2021 to refinance infrastructure projects. The funds will be raised from the domestic market. The ICICI Bank-backed company had assets under management of about USD 2Bn at the end of the year through March 2021.
About 30% of the fund’s portfolio is in the roads sector and 60% in renewable energy, The maximum potential for refinancing projects also lies in the clean energy sector.
Infrastructure debt funds in India were envisaged as an alternative to bank loans for long-gestation infrastructure projects. As per the regulations of the country’s central bank, IDFs can only invest in assets that have been operational for at least a year. Refinancing opportunities currently available in roads and highways amount to about USD 1.3Bn,
India Infradebt primarily raises funds from the domestic market by issuing non-convertible debentures with a maturity of more than five years. Investors include prominent insurance companies, provident funds, pension, and debt mutual funds. India Infradebt is 42.3%-owned by private lender ICICI Bank. Bank of Baroda has a 41% stake, Citicorp Finance India owns a 10% interest, while state-owned Life Insurance Corporation of India holds 6.7%
INDIAN CORPORATION TO SELL UP TO 74% OF RAILWAY PROJECT
An Indian state railway corporation will sell up to a 74% stake in a special purpose vehicle (SPV) to develop an elevated railway project. Of the total equity requirement of INR 15Bn (USD 200Mn), the Haryana Rail Infrastructure Development Corporation (HRIDC) has already received INR 4.99Bn for a 33.3% stake from three investors.
The Haryana state and federal governments currently own the remaining 66.7%, having jointly invested INR 10Bn. The total cost of INR 56.18Bn for the 121km railway line project is also being funded upfront with a loan of INR 33.33Bn from the Asian Infrastructure Investment Bank (AIIB).
INDIA ROADS AUTHORITY TO LAUNCH INFRASTRUCTURE TRUST
The National Highways Authority of India (NHAI) has filed a draft offer document with the market regulator for a road infrastructure investment trust. The document was filed with the Securities and Exchange Board of India (SEBI), NHAI is seeking to raise INR 51Bn (USD 695.48Mn).
The trust will be listed on the Bombay Stock Exchange and the National Stock Exchange. An infrastructure investment trust is similar to mutual funds in that it pools sums of money from investors to buy into operating infrastructure projects which provide a steady yield.
The road infrastructure trust is part of NHAI’s strategy to gather funds from its operational road projects, some of which will be placed into the trust.
It has also been selling toll concessions to financial investors in the toll, operate, transfer (TOT) model to generate resources to finance new construction. In January 2021, state-owned Power Grid Corporation of India filed a draft document for its transmission infrastructure trust aiming to raise about INR 80Bn.
While Power Grid is planning an initial public offering, NHAI’s trust will be privately placed.
INDIAN AIRPORT RAISES USD 444M DEBT.
India's Delhi International Airport Limited (DIAL) has raised debt of INR 32.57Bn (USD 444Mn) to part-finance outstanding dues as well as for expansion. DIAL, a subsidiary of GMR Airports Limited, completed the issuance of non-convertible debentures (NCD) to Cliffton Limited,
The proceeds will be used to refinance outstanding debt of around USD 289Mn, due in the fiscal year ending March 2022, and to also partly fund the expansion of Phase 3A of New Delhi's Indira Gandhi International (IGI) Airport. DIAL will use up to USD 165Mn for the expansion of the IGI Airport from the proceeds,
MUMBAI AUTHORITY SEEKS CONSULTANT FOR CABLE RAILWAY PPP
The Mumbai Metropolitan Region Development Authority (MMRDA) is seeking to appoint a consultant to prepare a project report for a cable railway system, to be built in a public-private partnership (PPP). The scope of work of the project - which is also called funicular railway - includes preparing tender documents, bid process management and assistance after the project is awarded.
It will be built at Matheran, a hill station that is more than 80km from Mumbai. A 20km existing railway line currently provides connectivity to the hill station, the line is narrow-gauge and only toy rains can be operated on it. The services are suspended during the monsoon season..
List of key transactions - Transport - India
Source: Inframation, YOG INFRA analysis
ABOUT YOG INFRA
YOG INFRA is an infrastructure focused financial advisory firm committed to support sustainable economic growth driven through infrastructure development. We have our offices in Singapore and India.