Infra firms will benefit from new norms for highway projects

The Centre’s move to ease exit norms for highway projects taken up under BOT (build-operate-transfer) mode will benefit several infrastructure companies, industry experts said.

The companies will also benefit from the Government’s decision to have a one-year deadline for litigations. Most companies have payment-related issues, counter claims etc — all these tend to get delayed due to the adjudication process.

R Balaramai Reddy, Group Chief Financial Officer of IVRCL, told

BusinessLine that the company’s two projects in Tamil Nadu — Salem and Kumarapalayam — will benefit from the new norms. “This enables us to fully exit the project having entered into an agreement with TRIL, a Tata group entity,” said Reddy. “The move to tighten arbitration norms with the provision to conclude the process within one year would provide a big boost to infra companies. Payments often get struck with various Government and non-government entities.”

More flexibility T Adi Babu, Chief Operating Officer, Finance, Lanco Infratech, said the flexibility to sell the road projects and reinvest in other infra segments would benefit companies with a diversified portfolio. It eases up equity for redeployment. However, he said, subdued investor sentiment continues to be a matter of concern, leading to delays in stake divestment process.

Under the Model Concession Agreement, a developer is allowed to divest 100 per cent divestment after two years. For projects which had come up before 2009, developers were allowed to divest up to 74 per cent stake. This was later changed but with a clause that it has be reinvested in road projects. This has also been changed now so that the developer has flexibility to re-invest, or even sell to bring down debt.

The changes announced by the Cabinet Committee on Economic Affairs is seen to help a number of companies with a portfolio of road projects such as IVRCL, NCC, Madhucon Projects, Ramky Infra among others.

YD Murthy, Executive Vice President, Finance, NCC, said, “The Government move would help monetise and churn completed projects. Earlier, we were allowed to reinvest in highway projects only, but now, this allows infra companies to re-invest in other infra sector projects such as power.

“We are in the process of examining how we could benefit from the move. NCC has a road project in Western Uttar Pradesh and we might consider this under the new facilities announced.”