Road toll management company MEP Infrastructure Developers Ltd is in talks with South Korean, Chinese and Japanese infrastructure companies to form joint ventures to bid for road projects under the hybrid annuity model (HAM) in India, managing director Jayant Mhaiskar said.
Under HAM, the government commits up to 40% of the project cost over a period and hands the project to the developer, who funds the balance with debt and equity, and is paid annuity income in installments.
MEP Infra has, over the past year, won six HAM projects along with the Indian unit of its Spanish joint venture partner Sanjose India Infrastructure and Construction Pvt. Ltd. In the upcoming HAM projects, it plans to form ventures with other overseas firms that can help with capital.
“Under the new bids that will come up (for HAM), we are spoilt for choice as we have Chinese, Korean, and Japanese construction firms wanting to partner with us. We have multiple companies showing interest,” Mhaiskar told Mint last Thursday.
The company is also in talks with two large overseas funds to form a joint venture to bid for projects under the new toll-operate-transfer (TOT) model, where the government plans to auction operating toll-based projects through international competitive bidding.
“On the TOT side, we have been talking to two large overseas funds to form a JV to bid for projects,” Mhaiskar said.
Under the TOT model approved last year, toll highways operated by the National Highways Authority of India (NHAI) for over two years will be leased out to entities which will collect toll and operate the project for a specified duration, in return for a fee. The money raised will be used to invest in developing more highways.
“Operating projects in different geographies is not a concern; we have the wherewithal. As far as capital is concerned, that is one important aspect to consider when you bid for projects. Under TOT or HAM, we need a certain amount of capital,” he said.
The partnership with overseas infrastructure companies will give MEP a foot in the door of the Indian roads market, Mhaiskar said.
Last year, Spanish infrastructure firm Abertis Infraestructuras SA agreed to buy two operational toll road assets in South India from Macquarie Group Ltd to enter the high-growth Indian infrastructure market.
Since taking charge in 2014, the Narendra Modi-led National Democratic Alliance (NDA) government has put infrastructure development on top of its agenda.
Last fiscal, the government could not meet its target of awarding 25,000km of road projects. As a result, there is a large pipeline of road projects to be awarded under the HAM and engineering, procurement and construction (EPC) models this fiscal. MEP itself is planning to bid for about 6,500km of road projects under HAM.
MEP Infrastructure is largely into two areas of business—toll collection and operation-maintenance-transfer (OMT) of roads. It operates over 30 toll plazas on national highways.
Mhaiskar said the company expects to file its draft red herring prospectus (DRHP) for its planned infrastructure investment trust (InvIT) listing by August. InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects.
MEP is planning to transfer two-three of its HAM projects to the trust and deleverage about half of the company’s Rs2,400 crore of debt.
Source: Mint