“We now have a board-approved policy for securitisation, albeit with restrictions. For instance, we will not allow additional funding of more than 30% of the total project cost. The concessionaire should also demonstrate that he is in a position to service the debt and will not neglect expenses on operation and maintenance,” Singh said. The NHAI’s liability to the lenders and concessionaire, in the event of the project being terminated, however, does not change.
Put simply, if a R100-crore project has a R60-crore bank loan, the concessionaire can go to another bank and get it refinanced so as to get another R30 crore (30% of the R100-crore project cost). NHAI’s obligation on termination of the project, however, will remain the same.
The refinancing issue came to the fore in the case of the Delhi-Gurgaon Expressway where the concessionaire DS Construction got the original loan refinanced twice over, the latest being with an IDFC-led consortium. While the IDFC-led consortium lent R1,600 crore to the project on the basis of the project’s future toll collections, NHAI did not ‘recognise’ the consortium as lenders to the project; so when it looked like the project was going to be terminated — due to the concessionaire’s inability to operate the expressway efficiently — the consortium stood to lose all its money.
Had the consortium been ‘recognised’ by NHAI, it could have, under the agreement, simply substituted DS Construction with another operator and managed the expressway — NHAI would no longer want to terminate the contract and so, its future revenue streams would have been protected.
Though NHAI has recognised IDFC as a lender, Singh said, such financing levels will not be allowed in the future — the IDFC consortium’s R1,600-crore refinancing was a lot higher than the cost of the Delhi-Gurgaon expressway project. “We have recognised IDFC as a lender and we have allowed R1,250 crore of securitisation,” Singh said.
Singh said that even if NHAI’s liability — when a project is terminated — does not go up with each subsequent refinancing as happened in the case of the Delhi-Gurgaon expressway, “we cannot say we don’t have a stake and I can allow an interplay between the banker and the concessionaire and let them do what they want”.
Singh explained that had NHAI in the ‘interest of the public’ decided to expropriate the project, the bankers would have suffered and would hesitate to fund projects in the future. “If banks are reckless, then tomorrow a situation will arise when the concessionaire will not be able to spend on O&M because the debt servicing is so onerous. But in the Gurgaon case, we believed it was a solution that would help all parties”.
On the rescheduling package approved by the Rangarajan Commitee, Singh said projects that involved making two lanes into four lanes would benefit from the premium being deferred. “Developers who are doing 2-4 laning are quite happy and there are around 20-25 projects that have started, where the premium amounts may vary from Rs 8-9 crore to Rs 100 crore. These projects will be better off and should not fall into the NPA category and they will be able to service their debt”, Singh said.
However, where the lanes are being increased from four to six, and where revenue from the toll were already coming in, these developers would find the package less helpful. Singh said developers who had not started construction were in two minds on whether to go ahead. “The major project is GMR’s and the possibility of it starting with this dispensation is somewhat remote. Around 8-9 projects are yet to start and we hope these too will take off unless they are not able to raise equity.”