IRB Infrastructure, India’s second largest build-operate-transfer (BOT) road developer which collects toll on the Mumbai-Pune Expressway, has started construction of its largest project – widening of the Ahmedabad-Vadodara highway.
Virendra Mhaiskar, chairman and managing director, IRB, told DNA Money that work for converting the 100-km highway from two lanes to six started last month.
The company is infusing Rs1,500 crore as equity in the project, whose total cost is Rs4,880 crore.
Of this, Rs3,500 crore is engineering, procurement and construction (EPC) and balance is the interest payment during construction and part of the premium payment to National Highways Authority of India (NHAI) during the first three years.
The company would pay premium to NHAI from 2013, while it would start collecting toll from 2015 when the project would be completed. IRB will pay a premium of Rs309 crore in the first year, which will increase 5% annually.
The company is expecting over Rs500 crore revenues in the first year of operations (fiscal 2015 end), but after shelling out premium to NHAI and interest cost on `3,500 crore, very little will be left for the company, said an analyst.
The project has started in a difficult environment where two big developers GMR and GVK walked out of mega contracts of NHAI citing clearance delays. NHAI has claimed the operators walked out because they were unable to arrange funds. Mhaiskar said the Ahmedabad-Vadodara project too is a challenging one and will start earning revenues for the company only after 4-5 years of operations.
“The project started after a year’s delay and we struggled hard to put all the data points required for successful implementation,” he said.