Highway Monetisation Programme: Auction national highways soon as investors’ appetite is high, advisors tell NHAI

Technical analysts appointed by National Highways Authority of India (NHAI) to study forthcoming packages of highways under TOT (toll,operate and transfer) have suggested that next projects should be bid out soon as “investors’ appetite is high”.

“The second round of TOT is expected to receive considerable interest from investors much like the first round. There is a good appetite amongst the community for participating in the asset monetisation programme,” said Jagannarayan Padmanabhan, director – transport and logistics, CRISIL infrastructure advisory.

Sources told Moneycontrol that the panel comprising Ernst & Young LLP, CRISIL risk and infrastructure solutions Ltd, Deloitte Touche Tohmatsu India LLP and Mazars Advisory LLP has completed the analysis of third bundle of highway projects even as analysis of second bundle is underway.

“The panel has completed studying package III under TOT… Study of package II is yet to be finalised,” said a person privy to development. “Thus, what NHAI anticipated to bid out as third package will come out first… which should be done in a month’s time”.

The person said that the next package to be bid has seven highways’ stretches totaling up to 566 kilometer.

Thus, NHAI will put on auction about 26 stretches of highways over the next few months. Most of them belong to southern and eastern states.

Package	Total kilometers	Number of stretches involved	States involved
II	566	7	Tamil Nadu, Telangana, Rajasthan and Gujarat
III	479	9	Odisha, West Bengal, Assam and Bihar
IV	658	10	Uttar Pradesh, Bihar and Jharkhand

 

Sources said that the above mentioned packages should collectively fetch about two billion USD. Media reports, however, said that the amount could go up to USD 2.5 billion.

“We expect the broad contours of the bid to be maintained and do not expect any major change. While it may be premature to predict how much can be raised, as said before, we should see considerable interest for the second tranche of road assets under TOT model,” Padmanabhan said.

TOT or Toll-Operate-Transfer is a mechanism adopted by NHAI where the authority puts its operational assets (highway stretches) on auction. The bidder, who submits the highest bid, has to deposit the money (bid amount) upfront with NHAI. The authority thus invests this amount for construction of new highways. Against the money, the bidder acquires the right to operate and maintain the selected highways via toll collections.

NHAI successfully bid out the first package of 648 kilometers in March this year. Against a base price of Rs 6,260 crore, joint venture of Ashoka Buildcon and Macquarie agreed to pay Rs 9,681.5 crore to operate and maintain nine stretches under the first package.

It has been learnt that floor price for the next package is yet to be finalised, which would be done in a couple of days.

“There was some push back on the number under calculations and the Authority was asked to consider additional technicalities before arriving at the final price,” said another source.

The base price could be higher than the price of first package, the source added.

The cabinet committee on economic affairs had given green signal to NHAI in 2016 to raise funds through asset monetisation programme. The authority identified 75 highway projects that could be put up from auction. Of these, 31 (26 + 5 from first package) national highways will be covered after all the above packages are auctioned.