The simpler exit option for completed highway projects is expected to release Rs 4,000 crore to their developers. This can be used for other infrastructure projects or to retire debt, according to India Ratings and Research.
The Cabinet Committee on Economic Affairs’ approval for road developers to fully exit their equity investment against the previous cap of 76 per cent, for all projects after two years of construction, could provide opportunities in mergers and acquisitions.
Of the 86 completed projects equivalent to 5,200 km as per the National Highways Authority of India, under public private partnership mode, around Rs 4,000 crore of additional residual equity can be released under the proposed divestment scheme.
These funds in turn could be used for investment in other projects. Prior to the current policy direction, the possible equity divestment could have been around Rs 11,000 crore.
According to the agency, these measures to give a boost to weak sponsors in about 20 projects and de-stress and release the equity, in turn help them shore up their balance sheets.
Infrastructure companies in multiple verticals will benefit since the funds released can be used in non-National Highways Authority of India projects and power projects. Cash-strapped developers burdened by a high debt servicing cost will also now be able to use the funds to retire debt.
The move is seen to help in the completion of languishing infrastructure projects and ease some stress in the road sector while attracting investments into the sector.