• Rajasthan

    Cong 99
    BJP 73
    RLM 3
    OTH 24
  • Madhya Pradesh

    Cong 114
    BJP 109
    BSP 2
    OTH 5
  • Chhattisgarh

    Cong 67
    BJP 15
    JCC 7
    OTH 0
  • Telangana

    TRS-AIMIM 95
    TDP-Cong 21
    BJP 1
    OTH 2
  • Mizoram

    MNF 26
    Cong 5
    BJP 1
    OTH 8

* Total Tally Reflects Leads + Wins

PM Narendra Modi has big plans for road building, gives weaker road builders a path to sell more bonds

By: | Published: February 16, 2018 1:47 PM

Indian Prime Minister Narendra Modi has big plans for road building, and part of it includes giving weaker infrastructure contractors greater access to the local bond market.

PM Narendra Modi, PM Modi,  Arun Jaitley, Varun Mehta, Dilip Buildcon Ltd, bonds, road construction companies, ICRA Modi’s government is seeking greater participation from private companies in expanding the nation’s road network, a key government initiative to boost growth.

Indian Prime Minister Narendra Modi has big plans for road building, and part of it includes giving weaker infrastructure contractors greater access to the local bond market. Finance Minister Arun Jaitley’s proposal to lower the investment threshold on rupee bond purchases for investors including pension funds to A from AA is set to benefit local highway developers such as Dilip Buildcon Ltd. and Sadbhav Infrastructure Project Ltd. About 20 percent of road builders with outstanding rupee bonds have single A ratings, according to data compiled by Bloomberg.

“The measure will open up a new source of funding for road construction companies, which are right now dependent on bank loans,” Varun Mehta, chief financial officer at Sadbhav Infrastructure said in a phone interview. “It shifts funding to more sophisticated investors such as pension funds and insurance companies. It will also instill more financial discipline among companies.”

Modi’s government is seeking greater participation from private companies in expanding the nation’s road network, a key government initiative to boost growth. Bonds from road builders may be attractive to insurers and pension funds because of their longer maturities, and offer contractors potentially lower financing costs than bank loans, according to Rajesh Mokashi, managing director at ratings firm CARE.

“There is a huge opportunity for road project funding from the bond markets,” said Mokashi in an interview. “If road projects are structured correctly, there will be enough takers for their bonds.”

The government unveiled plans last October to spend about $108 billion over five years to build almost 84,000 kilometers of roads — that’s more than twice the globe’s circumference — and it is targeting private investments for about 15 percent of the funds. Road companies may sell a record 340 billion rupees ($5.32 billion) of bonds this financial year to March 2018, surpassing 330 billion rupees for the previous period, estimates from ratings firm ICRA show.

“At a time when a lot of road construction companies are finding it difficult to get loans from banks saddled with bad loans, the rating relaxation provides better access to the corporate bond market,” according to Rohan Suryavanshi, head strategy and planning at Dilip Buildcon. “We will continue to look at this market for our fund requirements.”

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition