The equity Internal Rate of Return (IRR) of the first bundle of highways being auctioned under the Toll-Operate-Transfer (TOT) model would range between 12% and 13%, a Crisil Research’s report has said.
The equity Internal Rate of Return (IRR) of the first bundle of highways being auctioned under the Toll-Operate-Transfer (TOT) model would range between 12% and 13%, a Crisil Research’s report has said.
The IRR has been arrived on the basis of National Highways Authority of India’s (NHAI) initial estimated concession value.
The first TOT bundle has nine operational highway projects in Andhra Pradesh, Odisha and Gujarat.
Of the nine projects, six are from Andhra Pradesh (National Highway 5) and balance three in Gujarat (National Highways 8A and 8B). The ones in the southern state are – Siddhantham-Gunduglanu (71.95-kms), Diwancheruvu-Siddhantham (49.04-km), Annavaram- Diwancheruvu (70.98-km), Ankapalli-Annavaram (88.53-km), Icchapuram-Narasannapeta (96.70-km) and Puintola-Icchapuram (64.40-km). The three projects from the western state are – Bamanbore-Garamore (71.94-km), Garamore-Samakhiyali (51.46-km) and Porbandar-Jetpur (115.64-km).
The government is likely to earn a minimum of Rs 6,258 crore from the 680.64-km of highways having a concession period of 30 years.
Under TOT model, an upfront payment will be paid to NHAI against awarding operation and maintenance rights to the private company.
“A cluster of manufacturing industries and ports in Vishakhapatnam, Kakinada, Kandla and Mundra are expected to be the drivers of transportation demand. The economic corridor in the east coast is also expected to improve traffic potential in Andhra Pradesh,” read Crisil’s report released on Tuesday.
“But the highway stretches in Gujarat are more attractive than those in Andhra Pradesh because of the presence of industrial clusters and consumption centres in the periphery,” said Prasad Koparkar, Senior Director of Crisil Research.
However, the report adds that the key risks to the bundle are the impact of Goods and Services Tax and alternate routes. Crisil’s director Binaifer Jehani said, “The four-laning of Gundugolanu-Kovur Road in Andhra Pradesh would divert considerable freight traffic from Gundugolanu to Diwancheruvu.”
The risk factors includes latent defects and severe economic slowdown, which are difficult to anticipate, can increase the maintenance cost and substantially reduce traffic.
Bid for awarding first TOT contract is scheduled to open on January 10.
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