TOT bidding delayed for second time as investors seek more clarity

The National Highways Authority of India (NHAI) has pinned hopes on the Toll-Operate-Transfer (TOT) model to fund Bharatmala project, but having burnt fingers with earlier toll models, developers are treading cautiously with the new one.

The bid submission for the first bundle of TOT projects has been delayed again due to a long list of queries from potential bidders.

The initial bid submission in early January was revised to February 8 and has now been pushed to February 22.

Under the TOT model, tolled highways operated for over two years by NHAI will be auctioned for an upfront payment to investors, who will collect the toll and operate the road asset for a specified duration.

Given the huge payment requirement, only a few Indian players are willing to take up the initial bundle of TOT projects, which has opened a window for foreign investors to enter the scene.

The government aims to earn a minimum of Rs 6,258 crore from the first bundle of projects that involves 680.64-km of highways with concession period of 30 years.

However, not all the companies participating in the pre-bid meetings will end up submitting a quote.

Since the auction notice was floated in early October 2017, there already have been over 1,000 queries from the interested firms.

For example, though engineering conglomerate Larsen & Toubro has been part of the meetings, it does not intend to go into the fray for the initial bundle of nine road assets in Gujarat, Andhra Pradesh and Odisha. L&T's whole-time director and chief financial officer R Shankar Raman had told DNA Money that the contract was one-sided, favoured the government, had no mention of non-compete clause, and the first bundle had projects from different geographies instead of one state.

"The government has to look at it as a partnership and not as an opportunity to put assets on the block… They (government) seem to be in a hurry to show that 5 or 7 roads have been put on TOT," Shankar Raman had said.

Among the foreign players which have shown interest are PSP Investments (Canadian Pension Fund), Brookfield, Cube Highways and Infrastructure, Abu Dhabi Investment Authority, Macquarie, etc. While the domestic players include IRB Infrastructure Developers, Ashoka Builcon, IL&FS Transportation Networks, Tata Realty and Infrastructure, GMR Group, etc.

IRB Infrastructure Developers had said it was in talks with "large foreign players" that includes companies or funds for a TOT bid.

"There are too many issues with this bid. Firstly, the amount to be monetised is large, secondly, very less time has been provided for the participants to evaluate the projects along with getting clarifications on various subjects. Thirdly, it seems there's never ending list of queries coming up during the pre-bid stage apart from some firms dropping out," said an analyst.

Domestic road developers have already shared a long list of suggestions to NHAI for incorporating changes to the bid document, however, almost all of them are yet to be included.

"Unless amendments are made, there will be only a handful of participants left. However, this is the first package of TOT, which may eventually get be fine-tuned for the participation of more and more companies; after all Bharatmala Project's implementation is a lot dependent from the monetisation of road assets," another analyst said.

"All the queries have been addressed around a week ago. It has already been 3-4 months since the bid was floated, we don't see any further deadline extension," said an industry player.

TOLL WOES

• The initial bid submission in early January was revised to February 8 and has now been pushed to February 22
   
• Given the huge payment requirement, only few Indian players are willing to take up the initial bundle of TOT projects