NHAI’s third TOT bundle may be lapped up by developers

National Highways Authority of India (NHAI) may get a favourable response for its third Toll-Operate-Transfer (TOT) bundle put out for auction.

Also, with a target of 4,500 km during the fiscal, the awarding of contracts will pick pace now, according to experts.

The previous attempt was a damp squib with the highest bid was at a 14% discount.

Earlier this month, NHAI had invited bids from global and domestic private operators with an aim to raise a minimum of Rs 4,995.48 crore.

"While the NHAI borrowing programme is on track, the allocation in the last two Budgets was lower than required, necessitating dependence on other funding avenues. Hence, timely monetisation of mature road assets could plug the shortfall in budgetary allocations," said Rajeshwar Burla, vice president (Corporate Ratings), Icra.

An expert said after lacklustre response to the second bundle, the authorities have valued the third package slightly less than the earlier two attempts.

This has been reiterated even by Icra. Burla said, "Given the subdued response for the second bundle, the ask from NHAI has witnessed some moderation for the third bundle."

According to SBICaps Securities, the estimated concession value has been pegged at Rs 8.8 crore per km as against Rs 9.15 crore per km for the earlier packages.

In the latest round, there are nine road stretches having a total length of 566.27 km as compared to 681 km for nine highways in the initial bundle.

For the ongoing fiscal, the government has earmarked Rs 10,000 crore to be raised through TOT model. Hence, a subsequent TOT bundle is likely after NHAI gets a favourable response for the ongoing package.

The subsequent package may contain eight highway stretches. The initial estimate concession value for the fourth bundle may be around Rs 4,000 crore for about 400 km.

In February 2018, the maiden TOT bid had helped NHAI raise Rs 9,681 crore, about 55% more than the reserve price of Rs 6,258 crore. It was bagged by the joint venture of Macquarie and Ashoka Buildcon. The other three participants included Brookfield, Roadis-NIIF and IRB Infrastructure Developers-Atlantia.

This maiden tender was a bundle of nine highway stretches (648 km in total) in Andhra Pradesh, Gujarat and Odisha.

The subsequent bid floated in August 2018, after several deadline extensions, received three bids in December. All of which were below the reserve price of Rs 5,362 crore. The highest quote of these three by Cube Highways was Rs 4,612 crore, which was 14% less than the reserve price.

Due to this "undesired" response, the bids were scrapped. The second package included eight road assets with a cumulative total of 586.55 km in Rajasthan, Gujarat, Bihar and West Bengal.

For the ongoing fiscal, NHAI has set an all-time high construction target of 4,500 km and 6,000 km of awarding of projects. In order to achieve the goal, there will be a sharp pick-up in awarding of contracts, as the government has taken charge after the elections.

During 2018-19, about 3,320 km of works under NHAI were executed and another 7,480 km were done by Ministry of Road Transport and Highways taking the average construction to 29.6 km per day, also an all-time high.