Bharat Road Network will focus on hybrid annuity model and toll-operate-transfer projects
Srei Infrastructure Finance Ltd’s soon-to-be-listed road business arm Bharat Road Network Ltd (BRNL) will shift its focus on hybrid annuity model (HAM) and toll-operate-transfer (TOT) projects.
Presently, BRNL has a portfolio of six projects, valued at around Rs 6,700 crore, all of which are BOT.
“The promoters had invested a huge amount of money. Out of the six projects that we own, five are complete and giving yield, sixth project is under-construction,” said Brahm Dutt, chairman of BRNL.
In the last couple of years, the Ministry of Road Transport and Highways and National Highways Authority of India have changed their strategy to bid out highway projects more under engineering, procurement and construction (EPC) and HAM models. In line with this, the company is evolving its strategy.
Besides BOT, HAM and upcoming TOT projects, under which the government will monetize road assets through leasing them to either public funds or to developers for toll collection, the company is also bullish on stressed assets.
“In terms of growth, what we have been saying is that there is a huge spend that is going to happen in the infrastructure sector. We see a lot of growth opportunities going forward. For us we have four different and very specific opportunities to look for,” said managing director Bajrang Kumar Choudhary.
There are a lot of (BOT) assets in the market today, particularly from the banking industry, which are stressed and up for acquisition. Hence, the company’s focus will also now be on mid- and large-sized BOT, HAM and TOT projects.
“We are not an EPC company and we don’t do physical execution of the project, but yes, we do look after project management, quality control, design, operation and maintenance and tolling,” said Choudhary.
According to the company representatives, HAM model is similar to BOT or public-private partnership (PPP) model. While under PPP, up to 40% of the grant was given by the government, whereas under HAM, 40% of the project is completely financed by the authority. The other difference is that while the toll is collected directly by the developer under BOT, for HAM projects, it is collected by the government and then passed on as equated monthly installments to the road developer.
When asked why BRNL didn’t bid for HAM projects in the last one year, one of the representation replied, “We had five to six projects to complete. Now, five projects are ready and sixth should be ready in March 2018. Thus, we will start bidding for HAM projects too.”
BRNL’s priority is national highways, but are also open for certain state highways as well.
In the next couple of years, the company is targeting at an order book in the range of Rs 4,000 crore to Rs 5,000 crore.
“Order book is not our compulsion” when it comes to bidding and company directors mentioned that financial discipline will be maintained to ensure lenders aren’t hesitant in funding the project.
For these plans, “What we want is a further infusion of money into the company. This is what our initial public offering (IPO) is all about,” added Dutt on Wednesday. The company wants to unlock the value and put it into expensive projects.
The road and highways BOT company will be launching its IPO to offload 34.90% stake and raise around Rs 600 crore, with a price band of Rs 195-Rs 205 per share. The issue will open on September 6 and close on September 8.
The proceeds from the IPO will be utilised for advancing subordinate debt in the form of an interest-free unsecured loan to Solapur Tollways Private Ltd (STPL) apart from the acquisition of sub-debt of STPL, Kurukshetra Expressway Private Ltd and Mahakaleshwar Tollways Private Ltd and for general corporate purposes.
...& ANALYSIS
- MoRTH and NHAI are now bidding more highway projects under EPC and HAM models
- In line with this, the company is evolving its strategy; it is also bullish on stressed assets
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