Monday, September 6, 2010


NHAI to borrow Rs 5K cr in FY11
(Category: Life Insurance) (Source: DNA, June 12)

Need Rs 2.5 lakh crore by 2030-31;in talks with LIC, SBI to fund projs

The National Highways Authority of India (NHAI) plans to borrow Rs 5000 crore in the current financial year ending March and Rs 15,000-20,000 crore in each of the next seven to eight years to achieve its ambitious target of building over 7,000 km roads a year.
NHAI is in discussions with multilateral funding agencies, insurance companies and state-owned banks for funding the highway projects, J N Singh, member, finance, said.
"We are in discussions with Life Insurance Corp (LIC) and State Bank of India (SBI) for fund raising," Singh, a 1983 batch Indian Administrative officer, said.
"We have asked for $2 billion (Rs 9,385 crore) from World Bank. We have also held discussions with Deutsche Bank and others for fund raising," Singh said.
"They (foreign banks) have a good appetite for Indian infrastructure companies and I don't think they will have any issue with it (funding road projects)," Singh, who recently took over as member finance of NHAI, said.
The highways authority is also eyeing funds from foreign institutional investors, he said.
NHAI will need about Rs 2.5 lakh crore over the next two decades for its projects and the finance head seems to have it all figured out in the plans to raise funds to upgrade India's pot-holed highways.
"We need Rs 2.5 lakh crore by 2030-31. The current source of funding road projects is mainly through central road cess, tax-free bonds and toll collection. Current sourcing is heavily tilted towards the domestic market. Going forward, NHAI expects 20-25% fund raising would be done from foreign investors," he said.
Last week, road transport and highways minister, Kamal Nath was in Hong Kong and Singapore to hold road shows to attract foreign investment in the road sector.
India is in discussions with Singapore's investment firm, Temasek Holdings, for setting up a $2 billion fund for infrastructure projects in India.
Singapore's state-owned investment company has several investment funds dedicated to major global projects.
NHAI is planning to fund its long duration road projects through takeout financing route and is in talks for the same. "India Infrastructure Finance Co Ltd will be doing takeout financing," Singh said.
Takeout financing, a globally accepted practice of releasing long-term funds for financing infrastructure projects, is used to address asset liability mismatch of commercial banks.
The NHAI, which is implementing the National Highway Development Project, is planning to raise Rs 2,000 crore through tax-free bonds this year.
NHAI had raised Rs 1,400 crore last year through tax-free bonds. Singh said the authority is also looking at increasing revenues by outsourcing tolling operations in some of the projects.
NHAI board recently approved a proposal to award toll collection plazas by inviting bids from the private sector. "In the first phase, we will auction toll plazas, which have a collection of over Rs 5,00,000 per day," Singh said adding that the process is likely to increase toll revenue by 15-20%. "We expect toll revenue to touch Rs 1,000 crore this financial year."
Asked about the challenges in achieving the target of building 20 km road a day, Singh sounded optimistic on funds, but said land acquisition continued to be the biggest hurdle the NHAI.
"When we have to build roads, one of the major challenges we have is land acquisition. It is difficult to clear land in a densely populated country like India," Singh said.
Lack of projects in hand also raised eyebrows over the rosy picture shown by Kamal Nath of building 20 km of roads per day from June 1.
"There are large companies coming forward to participate in road development programmes. But we don't have so many projects in the pipeline. (Building) 20 km roads per day in the current financial year is a little too optimistic," Singh said adding that the target was achievable provided projects were in hand.
It is not the lack of resources or financial constraints but paucity of projects which is a deterrent, he said.
For the current fiscal, NHAI has set a target of awarding 12,000 km road projects. NHAI has achieved 22% of this target since April.
"We have target of awarding 12,000 km in 2010-11. Of this, 2,710 km road projects were awarded by May," Singh said.
The official said NHAI was waiting for the dollar-rupee exchange rate to stabilise before deciding on its hedging plan.
"So far, we have not hedged our forex exposure. We will be watching dollar-rupee movement for some time. If the rupee continues to depreciate, we will defer our hedging exposure. We will prefer to hedge our money in October-November," Singh said.
So far this financial year, the Indian currency has fallen 4.52% against the US dollar.
Analysts and various treasurers expect the Indian unit to fall further due to ongoing European debt crisis.

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