The National Highways Authority of India (NHAI) and IDFC are close to an agreement under which the latter will take over the bedevilled Delhi-Gurgaon expressway project from the current developer DSC. Although the final contours of the deal are still being negotiated, sources told FE that IDFC, the lead banker in the lender consortium, will buy out the project completely. Under the deal, IDFC will likely pay R1 for all the shares of Delhi-Gurgaon Super Connectivity (DSCL), the concessionaire of the Delhi-Gurgaon expressway, and will take over its entire debt of R1,600 crore.
Following the termination notice issued by the NHAI in February 2012 to DSC alleging operational incompetence and raising of loans of R1,275 crore from IDFC without prior approval from the authority, DSC had moved the Delhi High Court challenging the NHAI move. A court-initiated settlement was reached between the two under which DSC is required to construct more toll plazas along the expressway to ease traffic but NHAI remained sceptical of the developer’s ability to run the project.
“IDFC had earlier expressed interest to buy out 74% of the DSCL equity but we asked them to buy out 100%,” an official said. Earlier, IDFC had written to NHAI expressing its intent to buy a 74% stake in the project, a proposal that would have kept 24.8% with DSC, the sole owner of DGSCL right now, and 1.2% with the Jaypee Group. “DSC’s stake would serve no purpose when IDFC will have majority. Our experience has been bad with the present concessionaire and it would be better to get rid of it,” the official added.
An approval from the NHAI board is necessary for the transaction and the board is scheduled to meet on January 30. It might take a while for the deal to materialise, as roads secretary AK Upadhyay is set to retire on January 31 and may leave the matter for his successor to decide.
Separately, the ministry of road transport and highways is seeking Cabinet approval for an easier exit policy for road developers which will allow the concessionaire to make a complete exit immediately after commencement of commercial operations. Under the current policy, the original concessionaire has to keep at least a 26% stake for the entire concession period. Once the new policy is in place, DSC will be able to make a complete exit from the project.
According to observers, if the proposed transaction is approved by the NHAI board, it will be a win-win situation for all three parties — contractor, lenders and NHAI. The lenders’ consortium as of now is led by IDFC and includes PSU banks such as Punjab National Bank and Bank of India.
DGSCL already has huge liability including the Rs 1,600-crore debt that will be taken over by IDFC, and the need for immediate measures to improve the traffic and road conditions will be its responsibility.
If the deal goes through, IDFC will be collecting toll till 2023 to recoup the funds. For NHAI, the salvaging of the project is crucial in sustaining investor interest in public-private partnership projects in the sector.