YOG INFRA Q2 2024 insights
INDIA's transport and urban infra sector is set to see a strong revival of road PPPs; primarily driven by TOT and BOT models for such projects. There have been significant changes to the model concession agreement for BOT based road PPP projects in the country, and it remains to be seen how developers will bid for upcoming planned projects in FY2025. There are also notable urban infra PPPs being done at state-level, which can serve as precedent transactions for heathcare and land-value capture.
Read more in our latest insight for the country.
This is second publication on a 2-part insight series on India
APRIL 2024
MACQUARIE SHORT-LISTED IN USD 772 MN INDIAN ROAD AUCTION
Macquarie Group and an investment trust backed by the Canada Pension Plan Investment Board are among the short-listed bidders to buy road assets from India’s quasi-sovereign infrastructure fund. The assets, with an enterprise value of USD 1 Bn, are part of the National Investment & Infrastructure Fund’s roads platform known as Athaang Infrastructure. Athaang’s portfolio consists of five stretches of highways, including toll roads, running a combined 230 kilometers across India.
A World Bank report in 2022 estimated the country needs to spend USD 840 Bn over the next 15 years on urban infrastructure, a key initiative for the government. Investment structures like InvITs are designed to support funding for these costly projects. Macquarie was one of the first private investors in India’s roads, pioneering the purchase of local concessions, allowing the country to expand its transportation system. The firm believes that purpose-built expressway networks will be the next phase in India’s infrastructure development.
NIIF is India’s first major attempt to develop a capital-raising structure on home soil, to tackle a shortfall in infrastructure spending. Investors include Abu Dhabi Investment Authority and Singapore’s Temasek Holdings. The Indian government is the largest shareholder with a 49 % stake. The fund primarily invests in local companies that build power plants, airports and roads, and provides long-tenure loans through its shadow bank unit.
IRB INFRASTRUCTURE TRUST SPVS MAKE USD 731 MN PAYMENT TO NHAI
Special purpose vehicles (SPVs) of IRB Infrastructure Trust have made a payment of INR 6,111 crores (USD 731 Mn) to the National Highways Authority of India (NHAI) for ToT projects.
IRB Lalitpur Lakhnadon Tollway representing TOT (toll operate transfer) 12 project, IRB Kota Tollway and IRB Gwalior Tollway representing TOT 13 bundle, have started tolling with effect from April 2024. The SPVs made an upfront payment of the Concession Fee of INR 6,111 crore (USD 731 Mn) to the NHAI (TOT 12 -INR 4,428 crore (USD 529 Mn), TOT 13 – INR 1,683 crore (USD 201 Mn) and subsequently received the Appointed Dates from NHAI for both projects.
Both the project SPVs have achieved financial closure with an aggregate debt tie-up of INR 4,831 crore (USD 577 Mn). The balance contribution was brought in via an equity contribution of around INR 2,253 crore (USD 269 Mn) by IRB Infra and GIC affiliates in 51:49 ratio through IRB Infrastructure Trust. With tolling operations initiated on the two NHAI TOT projects, the entire TOT portfolio is now operational and yielding revenue. The balance future equity requirement is minuscule, bolstering the capacity to capture forthcoming opportunities in the sector. After completing 13 concessions and handing over them to the nodal agencies, at present, IRB Group’s project portfolio (including Private and Public InvIT) has now 26 road projects that include 18 BOT, 4TOT, and 4 HAM projects.
MAY 2024
NHAI SET TO INCORPORATE WAYSIDE AMENITIES INTO DESIGN OF HIGHWAYS
National Highways Authority of India (NHAI) is set to incorporate wayside amenities into the design of upcoming greenfield access-controlled highways, aiming to elevate the overall travel experience.
These amenities could be used for landing drones, building helipads, and opening retail outlets for selling local handicrafts and fresh farm produce. NHAI is targeting 1,000 wayside amenities over the next five years--one at every 50 km along national highways--against 600 envisioned earlier in partnership with the private sector.
Of these, 800 will be developed under the public-private-partnership (PPP) mode, wherein NHAI will provide the land and all requisite permissions along with supervision while the private player will be responsible for the development, operation, and maintenance of the facility for 15-30 years. Bigger facilities, spread over five acres or more, will be developed as highway villages while those having less than five acres will be developed as highway nests.
Traditionally, oil marketing companies (OMCs) have been providing basic wayside amenities at fuelling stations alongside highways across the country. NHAI began focusing on developing such amenities in 2017, but so far, only 198 wayside amenities (WSAs) have been awarded while 162 are in the bidding stage as these were not conceptualized at the onset of projects, causing land acquisition delays. With wayside amenities now becoming part of the holistic planning of expressways, land acquisition for establishing such amenities will be done along highways.
The government believes that these amenities could provide business opportunities to investors, developers, operators and retailers, offering estimated returns of 15-30% on average capital investment of INR 1-10 crore. Establishing such facilities will entail an average investment of INR 2 crore (USD 239,555) per hectare and the average size could be around four hectares.
SRINIVAS INSTITUTE OF MEDICAL SCIENCES TO BUILD A 150-BED MULTI-SPECIALITY HOSPITAL AT NEW MANGALORE PORT
Mangaluru (India)-based Srinivas Institute of Medical Sciences and Research Centre has won the bid to operate and maintain the existing 32-bed hospital run by Union government-owned New Mangalore Port Authority and build a 150-bed multi-specialty hospital on port land by offering a revenue share of 3.7%.
Srinivas Institute of Medical Sciences and Research Centre has the exclusive right and license to operate and maintain the existing 32-bed hospital for 2 years and to construct, operate, and maintain the 150-bed multi-specialty hospital on three acres of port land on public-private-partnership (PPP) for 60 years.
The new hospital will be constructed with an investment of INR 107 crores (USD 12 Mn) and is expected to open by September 2026. The hospital will provide health care services to port employees, Central Industrial Security Force (CISF), retired personnel and their dependents as well as non-New Mangalore Port Authority patients residing in the nearby areas of the port. The New Mangalore Port Authority’s 32-bed hospital offers OPD and diagnostic services to its patients (New Mangalore Port Authority beneficiaries). The existing hospital built on 1.3 acres will be handed over to the private investor for operations. It will be returned to the port authority after the new multi-specialty hospital starts operations.
The new 150-bed multi-specialty hospital will offer a wide range of medical services that are not available in the existing port hospital. Srinivas Institute of Medical Sciences and Research Centre, set up by the A Shama Rao Foundation, runs a medical college and medical centre outside Surathkal in Mangaluru. It is affiliated with the Bangaluru-based Rajiv Gandhi University of Health Sciences and is recognized by the Medical Council of India. The project will rationalize the annual medical expenditure incurred on the treatment of port employees. It will also provide healthcare to the nearby population residing within a 5 km radius at Panambur, Baikampadyy, Kulai, Surathkal, etc, and will contribute towards employment of specialists, doctors, pharmacists, nursing staff and other para-medical staff etc. The 12 ports owned by the Union government have started privatizing the hospitals run by them for employees under PPP mode. Mumbai Port Authority was the first to implement the plan, followed by Jawaharlal Nehru Port Authority.
HYDERABAD FIRM TO RUN LEISURE HUB AT VILLIVAKKAM LAKE IN TAMIL NADU UNDER PPP MODEL
Greater Chennai Corporation (GCC) has roped in a Hyderabad-based contractor, Kalyan, to execute a INR 150 Crore (USD 17 Mn) project through a public-private partnership (PPP) model to build a new amusement park at Villivakkam Lake in Tamil Nadu. The new amusement park will feature a bowling alley, boating facilities, eateries, thrill rides, a bird-watching area, and toy trains.
Additionally, the contractor will manage a Singapore-style glass suspension bridge, which was approved for its stability by IIT Madras last year. Under PPP model, the contractor will generate revenue through entry charges and advertisements, while paying a royalty to GCC. GCC hopes to earn revenue through this arrangement.
The 250-meter-long glass suspension bridge, built under the Smart City scheme in 2021 for INR 30 crore (USD 3.5 Mn), has faced delays due to National Green Tribunal cases concerning the lake’s water spread. The bridge, standing 41ft above sea level, offers visitors a panoramic view of the lake and can accommodate up to 50 people at a time.
MG MOTOR, HPCL JOIN HANDS TO ENHANCE EV CHARGING INFRASTRUCTURE
MG Motor India joined hands with Hindustan Petroleum Corporation Ltd (HPCL) to expand EV charging infrastructure across the country. As per the collaboration, MG and HPCL will together install 50kW/60kW DC fast chargers at key locations covering highways and cities across India. The partnership focuses on providing convenience to EV users by increasing the availability of EV chargers during their long-distance and intercity commutes. HPCL's vast network and significant presence in India will ensure that existing and prospective EV users across the country have convenient access to charging solutions.
The company has a nationwide network of over 22,000 fuel stations and is committed to a sustainable future by providing green fuel to customers. Furthermore, HPCL aims to install 5,000 electric vehicle charging stations by December 2024. Through this partnership with MG Motor India, HPCL shall leverage the vehicle base of MG to increase the utilization of its chargers installed across India.
JUNE 2024
FIRST RICE SILOS UNDER PPP MODE TO BE OPERATIONAL IN Q3 2024
India’s first silos for storing rice built under the private-public-partnership (PPP) model with the Food Corporation of India (FCI) are expected to be commissioned in Q3-2024. Two rice silos with a combined capacity of 25,000 tonnes have been built by the National Commodity Management Services Limited (NCML) at Buxar and Kaimur (Bihar) under the design-build-finance-operate-transfer (DBFOT) model.
This is part of the government’s pilot project to set up steel silos for rice to prevent the cereals wastage during storage. FCI will store food grain for 30 years while the private entity operates the silos. FCI will pay a storage charge of around Rs 100/tonne per month. Silos are considered sub-mandi yards, which allows the farmers to bring in their produce for procurement and reduces transportation costs. Silos ensures high-speed transportation of bulk grain and eliminates bag handling, and spillage minimizes labor requirements, and with efficient fumigation ensures almost zero infestation.
Though the country has silos for storing wheat, it is for the first time that a project for rice silos has been commissioned under PPP model. Currently, 1.3 Mn tonnes (MT) of silos for wheat storage have been constructed by private entities including Adani Agri Logistics, KCC Infrastructure, and NCML for FCI and 1.1 MT of wheat silos are at various stages of construction. NCML will also complete the construction of five wheat silos in Bhatu and Sonepat (Haryana), Amritsar and Batala (Punjab), and Basti (Uttar Pradesh) with a 50,000-tonne capacity each for FCI in the current fiscal. NCML will be investing around INR 650 crore (USD 77 Mn) for construction of the seven silos.
In addition, under a new ‘hub and spoke’ model approved by the food ministry in 2020, 3.5 MT silo projects are being awarded to private entities. This is part of a broader INR 8,400-crore (USD 1 Bn) project to build wheat silos with 9.5 MT of capacity during the next three-four years under the PPP mode. These silos will be spread over 249 locations across Punjab, Haryana, Madhya Pradesh, Uttar Pradesh, Rajasthan, Gujarat, Maharashtra, Bihar, West Bengal, Jammu, Uttarakhand and Kerala.
FCI stores around 40- 60 MT of food grain at any given point of time. Currently, FCI and state agencies have grain storage capacities of 33.7 MT and 37.6 MT respectively. In 2005, under a pilot project to modernize storage infrastructure, the construction of 0.5 MT of storage capacity under the build, own and operate (BOO) model was carried out by Adani Agri Logistics.
MMRDA INKS USD 101 MN URBAN INFRA FINANCING PACT WITH GERMAN DEVELOPMENT BANK KFW
The Mumbai Metropolitan Region Development Authority (MMRDA) has signed a major agreement with the German state-owned development bank KfW, securing over INR 850 crore (USD 105 Mn) to enhance urban infrastructure development in the Mumbai Metropolitan Region (MMR). In addition to the significant loan from KfW, MMRDA will contribute approximately INR 365 crore (USD 43 Mn) from its own resources, bringing the total funding for these sustainability projects to around INR 1,215 crore (USD 145 Mn)
The funds will be used for different sustainable development projects, such as creating green corridors, implementing advanced solid waste management systems, establishing recycling and re-use facilities, and promoting renewable energy solutions. These initiatives are designed to tackle urgent environmental issues and enhance the living standards of people in the busy metropolitan area. The comprehensive development will be executed under the government’s MMR Urban Infrastructure Amenities Project. The initiative highlights MMRDA’s commitment to fostering sustainable urban growth and enhancing the environmental resilience of Mumbai and its surrounding areas.
This new financing arrangement builds on the strong partnership between MMRDA and KfW. Previously, KfW had granted in-principal approval for two loans totaling over EUR 545 Mn(approximately INR 4,767 crore) to support key mass transit projects in Mumbai. These loans are designated for the development of Metro Line 4, connecting Wadala in central Mumbai to Kasarvadavli in Thane, and Metro Line 4A, which extends from Kasarvadavli to Gaimukh in Thane.
Together, these fully elevated lines span 34.82 km and include 32 stations, significantly easing daily commutes for millions and contributing to a cleaner, less congested city. The EUR 545 Mn (USD 593 Mn) loan from KfW is the highest financing ever sanctioned to any Indian entity, underscoring the critical importance and scale of these infrastructure projects. The collaboration with KfW has moved forward as MMRDA has floated the necessary tenders with approvals from its financial partners.
MMRDA, the Maharashtra government body responsible for the infrastructure development of the Mumbai Metropolitan Region, is currently engaged in an extensive overhaul of the city’s public transportation system. This includes the construction of 14 different metro line projects, covering a total length of 337 km. This effort represents the longest metro network being developed simultaneously by a single development agency anywhere in the world. Through these efforts, MMRDA is not only improving Mumbai’s urban infrastructure but also establishing a standard for sustainable and comprehensive urban development on a global level. The collaboration with KfW signifies a major stride towards accomplishing these ambitious goals, ensuring a revamped urban environment for the Mumbai Metropolitan Region.
PM GATISHAKTI: EIGHT INFRA PROJECTS WORTH USD 1.55 BN UNDER ASSSESSMENT
The Network Planning Group is taking an evaluation of eight infrastructure projects worth INR 18,000 crore (USD 2.15 Bn) from railways and National Industrial Corridor Development Corporation (NICDC). Two projects pertain to the railways and six to NICDC.
The 2 projects from railways are:
Manmad to Jalgaon, involved an estimated investment of INR 2,594 crore (USD 310.74 Mn).
Bhusawal to Burhanpur, involves investments of INR 3,285 crore (USD 393.52 Mn).
The 4 projects from NICDC pertain to the development of integrated manufacturing clusters with an estimated investment of INR 8,175 crore (USD 979.31Mn) are as follows:
Agra in Uttar Pradesh
Prayagraj in Uttar Pradesh
Hisar in Haryana
Gaya in Bihar
Two projects from NICDC involve development with an estimated investment of INR 5,367 crore (USD 642.93 Mn).
Oravakal Industrial Area in Kurnool district
Kopparthy Industrial Area in YSR Kadapa district of Andhra Pradesh, with an estimated investment of INR 5,367 crore (USD 642.93Mn).
CUBE HIGHWAYS PLANS MULTIPLE PARTNERSHIPS FOR INDIA ROAD PROJECTS
Cube Highways and Infrastructure is partnering with multiple developers to participate in India’s greenfield road projects. The Singapore-based investor is in talks with regional as well as nationally strong players, its first potential partnership was earlier this year with a Hyderabad-based developer, a company with strong execution capabilities, particularly in southern India. They did not identify the company. While local companies have been bidding on their own for projects since 2015 - when the government introduced the hybrid annuity model - its shift now to the build, operate, transfer (BOT) method, which requires more equity investments, is necessitating partnerships with financial investors.
The government aims to tender BOT projects worth more than INR 2 Trn (USD 25.2 Bn) by March 2026, with an average contract size of more than INR 15 Bn (USD 179.69 Mn). In comparison, the average size of hybrid projects which have accounted for about 60% of the contracts in the past decade, is worth about a third of that amount.
The planned BOT pipeline would require equity capital of about INR 600 Bn, considering a 70:30 debt-to-equity ratio. The collective profitability of the top 10 Indian developers at less than INR 100 Bn (USD 7.18 Bn). A developer will be able to flip three hybrid contracts with the same amount that will be needed for a single BOT project. Apart from Cube, other financial investors are also evaluating potential partnerships. Over the past three to four months, developers too have indicated their willingness to collaborate with investors to tie up funds for the greenfield projects. Such alliances are likely to result in pre-construction acquisition deals, with an investor likely to fund developers to take over their assets once built and operational.
Cube Highways is backed by I Squared Capital, a wholly-owned subsidiary of the Abu Dhabi Investment Authority, International Finance Corporation, and a consortium of Japanese investors including Mitsubishi Corporation, Japan Overseas Infrastructure Investment Corporation for Transport and Urban Development, East Nippon Expressway Company and Japan Expressway Company International.
NHAI TO OFFER 15 ROAD PROJECTS WORTH USD 5.2 BN UNDER BOT MODE IN FY25
The National Highways Authority of India (NHAI) plans to offer 15 road projects worth INR 44,000 crore (USD 5.2 Bn) covering 900 km, for bids under the build-operate-transfer (BOT) mode in FY25. This initiative could mark the revival of public-private partnership projects in highway development. To attract private sector investment, the government amended the model concession agreement, making it more appealing. These 15 projects are part of a larger government plan to offer 53 projects worth over INR 2.2 lakh crore (USD 23 Bn), covering 5,200 km, under the BOT mode over the next three to five years.
In the BOT mode, the successful bidder is responsible for constructing, operating, and maintaining the highway, and recovers their investment through toll rights over a specified concession period. This model, which experienced aggressive bidding until 2014, declined due to project delays and financial stress among developers and banks after the NDA government took charge.
In 2023-24, only one out of 176 awarded projects were in the BOT mode, with the remainder using engineering procurement construction or hybrid annuity models. No projects have been awarded so far in the current fiscal year due to the election model code of conduct, which was in place until earlier this month.
Recent changes to the BOT model include construction support to concessionaires to ensure timely completion and longer tolling periods to offset losses from competing roads. The amended model concession agreement also clarifies compensation terms for force majeure events and provides for a termination payment during the construction period if 40% of the project is completed. These adjustments aim to reduce risks and make BOT projects more attractive to private investors.
List of key transactions - Transport and Urban Infra - India Q2 2024
Source: YOG INFRA analysis
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