The IDFC-led consortium’s R1,600-crore loan to the Delhi-Gurgaon expressway project could be in jeopardy as its loan agreement does not allow it to substitute DS Construction, the concessionaire for the project. National Highways Authority of India (NHAI), which has been fighting a running battle with DS Construction over the poor management of the expressway, had served a termination notice to DS Construction last year — in case NHAI wins the case, currently in court, the IDFC-led consortium will find it difficult to enforce its rights and bring in another concessionaire. This is vital since the consortium’s loan has been based on the future revenue stream of the expressway project.
IDFC refused to comment on the matter.
NHAI which had, in January this year, backed a proposal to allow IDFC to buy out 74% of the project’s equity — IDFC was to take on the project’s entire debt and buy 74% of DS Construction’s equity for a token R1 –— has now done a U-turn, and said it does not even recognise IDFC as a bona fide lender to the project.
The other four in the lenders’ consortium are Bank of India, PNB, Oriental Bank of Commerce and State Bank of Bikaner and Jaipur.
The project has an interesting history, with an initial loan of R383 crore given by a Hudco-led consortium. In January 2009, however, DS Construction had approached NHAI to substitute this consortium with one led by SBI — the loan component was then raised to R1,275 crore. NHAI’s consent was required, since under such concessions, NHAI agrees to pay most of the debt in case a project is terminated.
NHAI agreed to the change in lenders in September 2009 subject to certain conditions being fulfilled.
It is after this that the problem started. A year later, in October 2010, DS Construction proposed to change the consortium from an SBI-led one to an IDFC-led one – given the growing traffic on the expressway, the consortium felt the receivables could service a much larger loan.
NHAI had reservations about the changeover and did not sign on to the change in lenders. It said the loan amount had to be related to the size of the project. NHAI was reluctant to let the project’s revenues be used to service the larger loan since, under the agreement it had with DS Construction, were the traffic to exceed 1.3 lakh passenger car units per