Amit Srivastava

amit.srivastava@karvy.com
+91-22-22895029
November 10, 2010
India Research
Institutional Equities
INFRASTRUCTURE
SECTOR UPDATE
Road sector on a path to 20km/day
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We recently hosted an 'Investor Conference' with Mr. Kamal Nath (Minister of
Road Transport and Highways) in Delhi with an objective to facilitate in-depth
communication between the government and investors about the road sector.
The conference was focused towards the issues like government's perspective
on road sector development, reason for delay in awarding of orders, bottlenecks
in execution of projects, funding of the projects, differences with state
governments.
Key takeaways:
The government is focused toward its target of constructing 7,000km/year
(with a run rate of 20km/day) of highways. About 60% of these projects
would be BOT toll projects, 25% as annuity projects and the remaining
15% would be developed as EPC contracts.
The government has planned to award 9,000-9,500km for FY11 in which
~4,000km has been already awarded and 5000km-5500km is due for
awarding in next four months. Post awarding of all these projects the WIP
of road projects would increase to around 18,000-19,000km from 14,000
km which will lead towards the path for construction of 20km/day in FY12.
Delay in awarding of projects if any was due to shortage of manpower at
NHAI and request from banks to staggered awarding of projects.
The government has undertaken various measures to streamline its policy
framework in the model concession agreement and it would continue to do
the same in future.
Land acquisition has been the major cause of delay and cost over runs in
the past. NHAI has set up a special land acquisition units at the state level
to quickly resolve issues of land. .
Concern of unviable project is due to conservative approach of forecast
for traffic at 5% rate. Over the last one year, strong auto growth is indicative
of the strong traffic potential.
The government has planned to set-up ~$50bn infra debt fund (not specific
to road sector) which should take off in next three months. This fund will
be used for refinancing of bank loans or direct investment in physical
infrastructure projects through PPP route. This will increase the interest
of banks in financing the long term projects and speed up the financial
closure of the projects.
November 10, 2010
Road Sector
Institutional Equities
2
Total Length (Km) Already 4-Laned (Km) U/Imp Balance
GQ 5,846 5801 45 0
NS -EW Ph. I & II 7,300 5258 1567 475
NHDP Ph III 12,109 1851 5353 4,905
NHDP Ph IV 14,799 176 177 14,446
NHDP Ph V 6,500 302 2015 4,183
NHDP Ph VI 1,000 1,000
NHDP Ph VII 700 43 657
SARDP-NE 388 113 275
Port Connectivity 380 290 90 0
Others 965 923 28 14
NHDP Total 49,987 14,601 9,431 25,955
ROAD SECTOR ANNEXURE:
Opportunity in Road Sector:
Funding of road projects till 2030:
Uses of fund Rs bn Sources of fund Rs bn
Project construction 3380 Cess funds 3606
Payment to annuity 2076 External assistance (grant and Loan) 98
Interest on borrowed funds 783 Net surplus from toll revenue 1174
Repayment of Borrowing 1888 Negative grant 33
Total expenditure 8127 Budgetary support 14
Addl. budgetary support 393
Share of private sector 2113
Borrowings 1919
Total Funds 9351
Mega Highway projects
State Project KM
Andhra Pradesh Six laning of Ichapuram-Srikakulam-Vishakhapatnam-
Rajahnundri 436
Ori ssa Bahargora-Sambalpur 370
Rajasthan and Gujarat Six laning of Kishangarh-Udaipur-Ahmedabad 557
Punjab/Haryana Six laning of Jullunder-Jind 350
Maharashtra Four laning of Gujarat-Maharashtra border-Dhule- 485
Madhya Pradesh Four laning of Gwalior-Shivpur-Biaora-Dewas 450
Maharashtra Four laning of Indapur-Goa/Maharashtra border 390
Gujarat Four laning of Ahmedabad-Bamanbore-Samakhili 425
Gujarat Six/four/two lanes with paved shoulders of Bhavnagar- 445
Total 3908
Source: NHAI & Karvy Institutional Research
Source: NHAI & Karvy Institutional Research
Source: NHAI & Karvy Institutional Research
November 10, 2010
Road Sector
Institutional Equities
3
3280
925
1200
6732
1710
1230
624
2950
4000
9500
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
Y
T
D

S
e
p
'
1
0
F
Y
1
1
E
Projects award trend (Kms):
Project execution (Kms):
Rate (km/day):
412
1350
2355
754
645
1620
2148
2716
2544
0
500
1000
1500
2000
2500
3000
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 YTD
Sep'10
-
5
10
15
20
25
30
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
Y
T
D

S
e
p
'
1
0
Execution rate Awarding
Source: NHAI & Karvy Institutional Research
Source: NHAI & Karvy Institutional Research
Source: NHAI & Karvy Institutional Research
Hemindra Hazari
(Head of Research)
hemindra.hazari@karvy.com
For further enquiries please contact:
research@karvy.com
Tel: +91-22-22895000
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