Ashok Piramal Group, SNC-Lavalin, IDFC fund in JV for roads

Written by fe Bureau | Mumbai | Updated: Nov 30 2011, 09:17am hrs
Real estate developer Ashok Piramal Group or APG will partner with India Infrastructure Fund or IIF and Canadian engineering and construction company SNC-Lavalin to develop, construct, own and operate roads under the Indian governments public-private partnership. APG will own 51% stake in the new company, Piramal Roads Infra Private Ltd or PRIL, while the rest will be shared between IIF, a subsidiary of Indias largest lender to such projects IDFC Ltd, with 39% and the Canadian company at 10%, the company said.

The venture is part of APGs plan to pursue opportunities in the infrastructure sector and is now developing a road in MP. The group has been focussed on growth and has been looking to diversify from its existing business, says Rajeev Piramal, vice chairman, APG.

Infrastructure sector is offering enormous opportunities and the roads and highways sector particularly suits our capabilities and appetite well.

Together with APG and SNC-Lavalin, we believe that we have put in place the foundations for an aggressive and profitable growth in the Indian roads and BOT business, said Aditya Aggarwal, MD, IIF.

"We hope to have a portfolio of projects in excess of $1 billion over the next 3 to 4 years."

IIF is building seven roads with other investments in energy, ports and urban infrastructure sector. SNC-Lavalin, a global engineering and construction group, has been active in the infrastructure sector in India for more than a half century, said a company statement.

Analysts say roads and highways are the only segment showing some momentum as proposals to build power plants, ports, airports and urban infrastructure are mired with delays in regulatory approvals, high cost of debt and shortage of capital after volatile stock market.

"Roads and highways is always a competitive sector," says Manish Kayal, infrastructure analyst at domestic brokerage Centrum Broking Pvt Ltd. "Till date, in FY2012, 3,000 kilometres of road and highway projects have been awarded by NHAI (National Highway Authority of India)." According to him, fresh contracts to build 4,300 kilometres roads will be awarded by the National Highways Authority of India by fiscal ended March 2012. No other segment is offering such orders," he added.

According to a report released on Nov 23 by domestic brokerage PINC Research, NHAI had called for eight bids at the end of September, of which one project Lucknow-Sultanpur was awarded to Essar-Atlanta JV in October. Of the remaining seven projects, NHAI opened four bids last week and grossed up premium of Rs 250 crore. "This suggests competitive pressure has not eased out," the report said. NHAI has got premium bids of Rs 1,890 crore this fiscal year until last week. "It is likely to surpass their Rs 2,200 crore target premium for this year".