Mumbai-based IRB Infrastructure Developers has approached the National Highways Authority of India (NHAI) for rescheduling premium payments related to two of its stressed projects.
IRB is the first developer to seek the relief package cleared by the government recently for salvaging road projects stressed due to less-than-anticipated toll revenue or delays in clearances. Most developers have not found the package attractive enough.
IRB’s proposal is for two of its projects: Six-laning of the Ahmedabad-Vadodara (102 km) stretch and four-laning of the Tumkur-Chitradurga (114 km) stretch in Karnataka. The combined premium payments for FY15, which the firm wants postponed as per the Rangarajan formula, is R430 crore. While the total value of the Ahmedabad-Vadodara project is R2,226 crore, that of the Tumkur-Chitradurga project is R839 crore.
The projected toll on the Ahmedabad-Vadodara stretch in FY15 is R130 crore, while debt servicing cost is R97 crore and operation and management cost R17 crore. As per the contract, IRB has to pay a premium of R340 crore for FY15. This means if the Rangarajan formula is applied, the project will have a negative value of R488 crore for the year.
As the formula says the deferment cannot be more than 100% of the premium committed, the company has sought to postpone premium payment of Rs 340 crore. In the case of the Tumkur-Chitradurga project, the premium sought to be postponed is Rs 90 crore.
A project, once classified as stressed as per the Rangarajan formula, will be allowed to postpone premium payments to the following year under Article 28 of the Model Concession Agreement. The rescheduled amount will be treated as a “revenue shortfall loan”. Once toll collections pick up and the revenue shortfall is eliminated, the developer will have to pay the premium along with the deferred amounts and interest thereon. The discounting rate in order to ensure that the net present value of the premia doesn't change is determined at 10.75%.
Virendra Mhaiskar, chairman of IRB Infrastructure Developers told FE that the company is hopeful of getting NHAI approval soon for the relief sought.
"On Ahmedabad-Vadodara project, the deferment of premium could be to the tune of Rs 341 for FY15 while on Tumkur-Chitradurga around Rs 90 crore for FY15 of premium will get deferred every year," Mhaiskar said. According to him the debt on the Ahmedabad-Vadodara project will come down by Rs 400-Rs 450 crore with this move as visibility on