Mumbai: In what is possibly the biggest highway project awarded in India, infrastructure firm GMR Group will widen 555km of roads that connect New Delhi with Mumbai at a cost of around Rs 6,000 crore.
The Bangalore-based conglomerate will widen roads to six lanes between Kishangarh and Udaipur in Rajasthan and Ahmedabad in Gujarat, the company said in a statement on Tuesday.
A major portion of the road-widening will be on the 1,428km-long NH-8 that connects the Capital to the country’s financial hub. Some portions of roads connecting Rajasthan and neighbouring Madhya Pradesh are also part of project.
The National Highway Authority of India (NHAI), which awarded the project through competitive bidding, has pegged overall project cost at Rs 6,013.70 crore, of which Rs 626.40 will be spent on land acquisition and related activities. Company’s estimate of project cost can be higher.
The company will finance the project through a 75:25 debt to equity ratio, group financial officer Subba Rao Amarthaluru said.
“The debt portion would be sourced through Indian banks while initially we will be putting equity from our internal accruals,” Amarthaluru said. “We have three years to achieve financial closure.”
GMR said it would execute the project through a design, build, finance, operate and transfer basis.
“This highway section goes through the newly announced Delhi-Mumbai industrial corridor, which has a very high growth potential for commercial and tourist traffic,” the company said in its statement.
This is the group’s first highway project in western India, it said. The huge size of the project will be a challenge to implement, an analyst said.
“It is expected to throw up challenges in execution given its sheer size and need to manage multiple contractors and state agencies,” said S. Vasudevan, an infrastructure expert at consultancy KPMG Advisory Services Pvt. Ltd. “But given GMR’s track record, they should be up to the challenge.”
The GMR Group, which leads consortia that operate Delhi, Hyderabad and Istanbul airports, entered the highways business in 2001. It is now involved in roads projects totalling 3,352km.
Vasudevan said financial closure should not be a problem given the potential cash flows from the project.
“This successful bid is the culmination of a thorough study of the traffic and its growth potential carried out by the company,” said Srinivas Bommidala, business chairman at GMR Urban Infrastructure and Highways. “This particular project is attractive due to the fact that we shall earn revenue from day one, being a brownfield project.”
On 8 September, domestic brokerage Emkay Global Financial Services Ltd said in a note that the group would be unable to internally fund the long-term capital expenditure requirements, though it is adequately funded to meet short-term requirements for the next two years.
A 9 September note by international brokerage Proactive Universal Group too said GMR Infrastructure’s operating cash flows are insufficient to fund the company’s highly capital-intensive infrastructure projects.
On 15 September, the cabinet committee on infrastructure approved implementation of the latest project and said it will reduce the time and cost of travel between Kishangarh and Ahmedabad, which will connect to Vadodara and Mumbai in the west and Delhi in the east.
“It will also increase the employment potential to local labourers for project activities and development of tourism activities and would boost economic activities in the states of Gujarat and Rajasthan,” the roads ministry said in a 15 September statement.