Highway builders could get to exit projects early, easing fund crunch
The move is part of a series of measures being planned by the government to ease the funds crunch in the sector and revive investor interest.
Under the norms in place since November 2009, developers must hold at least 26% of equity up to 2 years after the COD. Moreover, developers of build-operate-transfer (BOT) projects awarded before 2009 do not have the option to exit completely.
According to an official, the ministry of road transport and highways has circulated a Cabinet note proposing these amendments to ease exit by developers. This, he said, is in recognition of the fact that in many cases, developers are over-leveraged and are not in a position to access bank finances due to lack of equity capital.
However, the relaxation will come with a rider — the National Highways Authority of India board will decide whether the company seeking exit is critical enough for the project to deny exit.
Experts say once the exit policy is amended, highway projects will not only attract investors but will also help the market position of developer companies.
Banks have turned wary of roads sector due to the long project durations, “unsecured” nature of advances and huge regulatory
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