5 August 2011
Update | Sector: Infrastructure
Roads
NHAI: Accelerated pace of project awards; competition intense
Premium received in YTD FY12 at INR12.4b v/s INR3.5b each in FY10/11
Project awards in YTD FY12 stands at 2,114km v/s 5,068km in FY11 and 3,357km in FY10. Project awards in
July 2011 were 1,011km (the fourth highest in a month ever) and in the first week of August 2011 already
stands at 455km. This represents significant acceleration.
Competitive intensity has increased and even for the four large projects awarded (INR24b+), 10-40 bidders
were pre-qualified. A higher than expected premium/lower Viability Gap Funding (VGF) has eased pressure
on NHAI finances.
YTD FY12 annual premium on project awards was INR12.4b, and is up meaningfully, against INR3.5b each
in FY10 and FY11.
2,114km awarded in YTD FY12 v/s 5,068km in FY11, 3,357km in FY10; accelerated pace
National Highway Authority of India's (NHAI) project awards in YTD FY12 stands at 2,114km v/s 5,068km in FY11 and
3,357km in FY10. Project awards in July 2011 were 1,011km (the fourth highest in a month ever) and already stands at
455km in first week of August 2011. This indicates a meaningful acceleration, driven by initiatives such as (i) annual pre-
qualification norms cutting procedural delays (ii) cells developed for land acquisition leading to a bank of ~20,000km in
which critical milestones were achieved (iii) monthly program and project monitoring. In FY12, targeted project awards
are 7,300km. Of the total NHDP length of 50,405km, 25,441km are completed / under implementation and 24,803km
balance to be awarded over next three years, entailing continuous award momentum.
Bid parameters surprise, competitive intensity increases
Competitive intensity has increased, with new players entering the fray, and has eased pressure on NHAI finances, as
80% of the remaining projects are now expected to be awarded on a toll basis. This is surprising as 57% of the remaining
projects are part of Phase 4 (two-laning) entailing poor traffic density. Several local players have joined the fray, leading
to a crowding effect for smaller projects. Even for the four large projects awarded (project size of over INR24b), 10-40
bidders pre-qualified, and thus bidding for even large sized projects continues to be intense.
Funding more comfortable; cumulative annual premium income INR20b
YTD FY12 annual bid premium on project awards stands at INR12.4b, which is up meaningfully compared with INR3.5b
each in FY10 and FY11. There were several instances of projects intended to be awarded on VGF being quoted at an
annual premium. The bid parameters in all 11 project awards were significantly better than NHAI's internal estimates.
NHAI is also testing projects on toll where VGF as per internal calculations are 50-55% of the project cost (cap is 40%).
Increased competition in recent bids eased pressure on funding to an extent. Further, raising incremental resources
through bonds will be an important strategy. In FY12 NHAI will raise INR100b through tax-free bonds and the quantum is
expected to increase going forward. This compares with cumulative market borrowings of INR134b over the past decade.
2,114km awarded in YTD FY12 v/s 5,068km in FY11
2,000
1,500
1,000
1,466 km of project awards
over July-August 2011
Yearly project awards (km)
4,740
3,476
5,083
3,360
1,740
1,234
643
2,112
895
500
0
1,305
671
342
Nalin Bhatt
(NalinBhatt@MotilalOswal.com) +91 22 39825429
Satyam Agarwal
(AgarwalS@MotilalOswal.com) /
Pooja Kachhawa
(Pooja.Kachhawa@MotilalOswal.com)

Infrastructure
Pace of project award encouraging
2,114km awarded in YTD FY12 v/s 5,068km in FY11, 3,357km in FY10 (km)
Project awards in July 2011
were 1,011km (the fourth
highest in a month) and in
the first week of August 2011
awards were 455km,
indicating meaningful
acceleration. This was
driven by structural
initiatives.
2,000
1,500
1,000
500
0
1,466 km of project awards
over July-August 2011
Source: NHAI
Project awards in YTD FY12; competitive intensity increases
Project
State
Length
(km)
Large projects (project cost INR24b+)
Kishangarh-Udaipur-Ahmedabad
Rajasthan/Gujarat
Ahmedabad-Vadodara
Shivpuri-Dewas
Beawar-Pali-Pindwara
Small/ medium projects
Kota-Jhalawar
Nagpur- Wainganga Bridge
Jabalpur-Lakhanadone
Aurang- Saraipally- Orissa Border
Hospet-Bellary-KNT/AP Border
Jabalpur-Katani-Rewa
Gwalior-Shivpuri
Total
Gujarat
Madhya Pradesh
Rajasthan
Rajasthan
Maharashtra
Madhya Pradesh
Chhatisgarh
Karnataka
Madhya Pradesh
Madhya Pradesh
556
195
330
244
90
45
74
150
95
210
125
2,114
V
V
VI
III
III
III
VI
VI
VI
VI
VI
GMR
IRB
GVK
LNT
KTG
JMC
Gannon Dunkerly
BSCPL Infrastructure
PFC
Soma Tollway Ltd
Essel Infraprojects
Phase
Company
Project
cost (INR b)
54
32
28
24
5
5
10
12
9
19
11
209
Pre-qualified
bidders (nos)
10
18
40
14
41
28
40
22
28
40
15
Source: NHAI/MOSL
Several local players have joined the fray, leading to crowding for small projects. Even for the four large projects awarded
(project size INR24b+), 10-40 bidders pre-qualified, thus bidding for larger projects is also intense.
So far the highest premium bid to NHAI is INR6.3b p.a., offered by GMR for the Kishangarh-Udaipur-Ahmedabad project,
while NHAI estimate/bidding floor was INR3b.
August 2011
2

Infrastructure
Bid parameters surprise, competitive intensity increases
A] Projects expected on VGF, but awarded on an annual premium (INR m)
Project
Company
Project
cost
12,320
9,000
28,150
NHAI
expectation
VGF (%)
Aurang- Saraipally- Orissa Border BSCPL Infra
Hospet-Bellary-KNT/AP Border
PFC
Shivpuri-Dewas
GVK
31
36
15
L1 bidder
offered
Premium
290
180
660
B] Projects in which annual premium bid is higher than expectations (INR m)
The bid parameters in all 11
project awards were better
than NHAI's internal
estimates. NHAI is also
testing projects on toll
where Viability Gap
Funding as per the internal
calculations are 50-55% of
the project cost (cap is 40%)
Project
Company
Project
cost
53,870
13,900
NHAI
expectation
Premium
2,890
340
L1 bidder
offered
Premium
6,360
1,260
Kishangarh-Udaipur-Ahmedabad
Dhankuni to Kharagpur
GMR
Ashoka Buildcon
C] Projects where annuity payments (semi annual) are lower than expectations (INR m)
Project
Company
Project
cost
6,600
6,000
NHAI
expectation
Annuity
Khagaria to Purnea
Tindivanam-Krishnagiri
Punj Lloyd
718.4
670
L1 bidder
offered
Annuity
560
400
D] Projects in which VGF is below expectations (INR m)
Project
Company
Project
cost
Patna Bakhtiarpur
Jabalpur-Katani-Rewa
BSC & C JV india
Soma tollway Ltd
5,700
18,950
NHAI
expectation
VGF (%)
24
48
L1 bidder
offered
VGF (%)
19.8
17
Several new players enter the fray
FY11 market share (km)
Isolux-Soma
Cons, 9%
Reliance
Infra, 11%
KMC-BSCPL
Cons, 9%
OSE
8%
YTD FY12 market share (km)
Gannon
Dunkerley
& Co 5%
JMC
3%
Keti
Constn 6%
PFC
7%
Transstroy -
OJSC cons
22%
GMR
39%
Lanco
Infratech,
13%
Ashoka
Buildcon
13%
BSCPL
Infra
10%
Madhucon
15%
IRB
13%
LNT
17%
In YTD FY12 GVK and GMR corner the highest market share in the road sector
Source: NHAI
August 2011
3

Infrastructure
Funding more comfortable; cumulative annual premium income INR20b
Projects awarded on annual premium (INR m)
Length (km)
FY10
Chengapalli to Coimbatore Bypass
Indore-Jhabua-Gujrat/MP (approved length 168km)
Hyderabad-Yadgiri (approved length 30km)
Godhra-Gujarat/MP Border
Rohtak-Panipat
Kandla Mundra Port
Rohtak-Bawal (HR)
Pune-Satara
Samakhiali-Gandhidham
Indore-Dewas (approved length 55km)
55
155
36
87
81
71
83
140
56
45
Project cost
8,530
11,750
3,880
7,860
8,070
9,540
6,500
17,250
8,050
3,250
84,680
83
5,930
9,090
3,590
8,280
4,800
8,390
5,350
9,430
4,790
1,396
61,046
5,300
32,000
53,870
12,320
9,000
28,150
10,550
151,190
Premium
360
230
120
80
450
420
120
910
580
240
3,510
490
10
20
230
310
140
670
340
10
1,260
3,480
40
3,100
6,360
290
180
1,809
660
12,439
Source: NHAI
In YTD FY12 the
annual bid premium on
project awards was
INR12.4b, up meaningfully
from INR3.5b each in FY10
and FY11. Competitive
intensity in recent bids
eased pressure on funding,
to a certain extent
Total
FY11
Deoli-Kota
Sambalpur-Baragarh-Chattisgarh/Orrisa Border
88
Belgaum-Khanpur
82
Laning Jetpur-Somnath section of NH8D (approved length 127.6km) 123
Belgaum-Dharwad
80
Chitradurga -Tumkur Bypass
114
Six Laning of Hosur-Krishnagiri
Panvel - Indrapur
Four-laning Ludhiana-Talwandi section
Six-laning Dhankuni-Kharagpur
Total
FY12
Kota-Jhalawar
Ahmedabad-Vadodara
Kishangarh-Udaipur-Ahmedabad
Aurang- Saraipally- Orissa Border
Hospet-Bellary-KNT/AP Border
Shivpuri-Dewas
Gwalior-Shivpuri
Total
60
84
78
111
88
195
556
150
95
330
125
August 2011
4

Infrastructure
Annual pre-qualification framework to ease project award
NHAI initiated an exercise to pre-approve bidders on technical criteria to do away with
evaluation of criteria for each project award. On 8 March 2011 NHAI invited applications
from players to assess their request for annual pre-qualification (RFAQ), to be valid until
December 2011. The initiative was intended to cut the time taken in project awards from
the stage of RFQ (request for qualification) to RFP (request for proposal) and final award
of the project. This could shorten the period (from qualification to award) from 4-6 months
to 3-4 months, saving 1-2 months. NHAI received applications from 114 players of which
101 were given a RFAQ limit, being the maximum size of a project the companies can bid
for.
Ten companies have qualified to bid for projects in excess of INR50b (limits differ for
different players). The companies included five foreign companies. Among Indian
companies, only L&T IDPL featured in top five with annual RFAQ of INR98b. GMR
Infrastructure, Reliance Infrastructure, IL&FS Transportation and Lanco Infratech are
the other four Indian companies that are part of the top 10 pre-qualified to bid for projects
above INR50b. The companies, as per the project cost laid out by NHAI for projects to be
awarded in FY12, will qualify for all projects (~7,500km of road project awards).
Annual pre-qualification for single project (INR b)
Applicant
Above INR75b
Plus Expressways Berhad
Leighton Contractors (India) Pvt Ltd
L&T Infrastructure Development Projects Ltd
Macquarie SBI Infrastructure Investment Pte ltd
Tril Roads P Ltd & Autostrade Indian Infra Dev P Ltd
INR50b to INR75b
GMR Infrastructure ltd
Reliance Infrastructure Ltd
Isolux Corsan Concessions India Pvt Ltd
IL&FS Transportation networks Ltd
Lanco Infratech Ltd
114
100
98
92
79
RFAQ
Applicant
INR25b to INR50b
IRB Infrastructure developers
NCC Infrastructure holdings ltd
IVRCL Asset Holdings Ltd
Salini costuttori SPA
HCC concessions
Jhon laing investments Mauritius
Navayuga Engineering co ltd
Shapoor ji pallonji roads pvt ltd
DSC Ltd
Gayatri projects
Soma tollways ltd
Punj Lloyd
Madhucon projects
Galfar engineering & contracting SAOG
Note: Shaded entities are foreign players
41
40
33
33
32
31
31
31
30
30
29
27
26
25
Source: NHAI
RFAQ
70
53
55
51
51
NHAI’s FY12 project awards
A. Distribution based on project length in kms
km wise
< 50
50-100
100-150
150-200
>200
Total
Projects
(no)
2
18
27
7
6
60
Km
67
1,340
3,378
1,168
2,040
7,993
% of
total km
0.8
16.8
42.3
14.6
25.5
100.0
B. Distribution based on project cost in INR b
Project
(INR)
<5b
5b-10b
10b-15b
15b-20b
20b-25b
25b
Total
Projects
(no)
12
24
14
5
2
3
60
Cost
(INR b)
26
199
179
88
45
109
646
% of
total cost
4.0
30.8
27.7
13.6
7.0
16.9
100.0
Source: NHAI
45% of the projects to be awarded fall under INR10-24b
August 2011
5

Infrastructure
Key sector trends
Status of NHDP programme ( as on April 2011,km)
Phase
Phase I
Phase II
Port Connectivity
Total
5,846
7,300
1,763
12,109
14,799
6,500
1,000
700
388
50,405
Completed
5,824
5,683
1,252
2,294
0
596
0
0
0
15,649
Under
Implementation
22
1,038
491
5,805
765
1,918
0
41
112
10,192
To be
Awarded
0
421
20
4,010
14,034
3,986
1,000
659
276
24,406
Source: NHAI
% completed
100
78
71
19
0
9
0
0
0
24,406km of project award
are expected to be awarded
over the next three years
Phase III
Phase IV
Phase V
Phase VI
Phase VII
SARDP NE
Total
Yearly project completion (km)
2,693
2,351
1,682
1,318
2,205
Yearly project awards (km)
4,740
3,476
3,360
2,112
1,234
643
5,083
1,579
1,740
753
480
262
391
635
895
1,305
671
342
In YTD FY12 the pace of project awards has accelerated, given a target of 7,990km for FY12
Source: NHAI
Positive changes for concession agreement… regulatory framework in place
Over the past few years, the concession agreement framework for road project awards
has evolved, as major recommendations of the BK Chaturvedi committee reports were
accepted. Bidding for road projects moved from grant-based bidding to revenue-sharing
and now to annual premium, with fixed escalation. Additionally, if average daily traffic of
PCUs (passenger car units) exceeds the designed capacity then the NHAI may initiate
a DPR (detailed project report) for expansion of the project to assess the cost for expansion
and allow concessionaire equity IRR of 16% (assuming DER of 70:30) or extension of
the concession period (restricted to five years). This compares with possibilities to
termination of the concession agreement earlier. The exit clause for a 100% exit route to
the project developer after two years of CoD has also been changed. The current
requirement is that the lead concessionaire has at least 51% in an SPV, which is allowed
to be reduced to 33% within first three years of commencing operations and to 26% over
rest of the concession term.
August 2011
6

Infrastructure
NOTES
August 2011
7

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