Road Asset Monetisation: NHAI’s Fifth ToT Bundle Comprising 160-km Of Roads Likely To Have Fetched Rs 3,362 Crore

Adani Enterprises and construction firm DP Jain & Co emerged as the highest bidder for two bundles of highways in the National Highways Authority of India’s (NHAI’s) fifth bundle of roads auctioned through toll-operate-transfer (TOT) mechanism.

Under the fifth round of TOT, NHAI offered a 20-year lease period for two bundles with a total length of 159.5 km. The last date for submission of the bids for both the bundles was 18 January. Both toll roads are located in Gujarat. The first bundle size is 53.6 km and the second is 105 km.

Adani Enterprises and construction firm DP Jain & Co emerged as the highest bidder for two bundles of highways in the National Highways Authority of India’s (NHAI’s) fifth bundle of roads auctioned through toll-operate-transfer (TOT) mechanism.

Under the fifth round of TOT, NHAI offered a 20-year lease period for two bundles with a total length of 159.5 km. The last date for submission of the bids for both the bundles was 18 January. Both toll roads are located in Gujarat. The first bundle size is 53.6 km and the second is 105 km.

At least half a dozen firms, including Canadian institutional investor CDPQ and Singapore-based Cube Highways, had submitted bids to take on the long-term lease around 160-km highway stretch offered by NHAI against upfront payment through the toll-operate-transfer (TOT) route.

Among the domestic firms which have submitted technical as well as financial bids are IRB Infrastructure, Adani, Prakash Asphalting & Toll Highways (PATH) and the Nagpur-based D P Jain.

Adani Enterprises won the first bundle with a financial bid of rs 1,011 crore, beating Cube Highways (Rs 345 crore), DP Jain and Co. (Rs 603 crore) IRB Infra ( Rs 518.4 crore), Prakash Asphaltings & Toll Highways (India) Ltd ( rs 555.55 crore) and a special purpose vehicle by Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ, Rs 646 crore).

The second bundle was won by DP Jain & Co. for Rs 1,251 crore, beating bids by Adani Enterprises ( Rs 944 crore), Cube Highways (Rs 182 crore), IRB Infra (Rs 408.6 crore), Prakash Asphaltings & Toll Highways (India) Ltd (Rs 535.10 crore) and CDPQ (Rs 1,043 crore).

TOT model was developed with the aim to encourage private participation in the highways sector.

Under the TOT model, concessionaire pay a one-time concession fee upfront (lump sum), which then enables the concessionaire to operate and toll the project stretch for the pre-determined 30 year concession period. This model is applicable to EPC and BOT (Annuity) highway projects, which have completed at least 2 years since the date of completion.

The model seeks to address the risks associated with such a long concession contract and there are multiple provisions in the model concession agreement, which are designed to take care of eventualities like roadway expansion, high toll traffic variation to ensure that concessionaires are not exposed to undue risks.

NHAI’s first public-funded highway asset monetisation programme through the TOT model fetched the authority Rs 9,681 crore — 1.5 times higher than the base price set by it in 2018. None of the bidders matched up the floor price of Rs 5,632 for 586.55-km length in the second bundle, forcing NHAI to abandon the plan.

Cube Highways quoted just a little above the IECV to emerge as the highest bidder for the third bundle. NHAI had received upfront payment of Rs 5,011 crore from Singapore-based toll roads platform Cube Highways and Infrastructure which won its third tranche of highway projects under toll-operate-transfer (TOT) mode.

TOT 3 bundle (566 Km in length) comprised of nine toll plazas in the state of UP, Jharkhand, Bihar and Tamil Nadu.

In June 2019, NHAI had invited bids for the third bundle of toll-operate-transfer (TOT) auctions for nine highway stretches totalling 566.27 km in a four-lane configuration across Uttar Pradesh, Bihar, Jharkhand, and Tamil Nadu.

The National Highways Authority of India (NHAI) had invited bids for the fourth round of toll-operate-transfer (TOT) auctions to raise Rs 2,140 crore, with a total of seven road stretches having a cumulative length of 341.46 km.

The road stretches in TOT-4 are spread across Jammu & Kashmir, Punjab, Haryana, Rajasthan and Madhya Pradesh. NHAI had initially planned TOT-4 as a Rs 4,150 crore covering over 400 km but subsequently downsized the package, reducing the initial estimated concession value (IECV)—the base price of the bid—to Rs 2,165 crore. The concession period of the bundle has was also reduced to 20 years. The fourth round of ToT was finally abandonded

The Union Cabinet in 2016 had authorised NHAI to monetise public-funded National Highway projects. 75 operational NH projects totalling 4500 km and completed under public funding had been identified for potential monetisation using the Toll-Operate-Transfer (TOT) model TOT Model.

In April last year (2018), NHAI signed a 30-year concession agreement with Macquarie Infrastructure and Real Assets (MIRA), world’s largest infrastructure fund manager, to monetise a bundle of nine fully operational highways involving 648 km in Andhra Pradesh and Gujarat.

This was the first concession agreement signed under the Toll-Operate-Transfer (TOT) model. MIRA by making an upfront payment of Rs 9,681.50 crores in return for maintenance of the highways and the 30-year toll collection rights.

As against the NHAI concession value of 6,258 crores MIRA bid Rs 9,681.50 crores representing a premium of 55 per cent. It was also 30 per cent higher than the next highest bid. NIIF also participated in the bid.

Buoyed by the huge over-subscription of the maiden bundle of 9 highway projects under TOT model, the government went in for monetisation of the second tranche of road projects totalling 586 kilometres of national highways in Rajasthan, Gujarat, West Bengal and Bihar.

The base bid price was set at Rs 5,362 crores with the winning bidder receiving a concession period of 30 years. The second bundle, however, was cancelled last year after the response was muted and the bids were below the base price.

In the Budget for 2020-21, the NHAI has been given permission to monetise 12 such bundles covering over 6,000 km which is expected to mobilise around Rs 60,000 crore till 2024.