New Delhi: Engineering, procurement and construction company Punj Lloyd Ltd, which has interests in construction for the oil and gas, thermal power and civil infrastructure industries, wants to increase its highways portfolio in India, company chairman Atul Punj said.
The company is looking to participate in projects covering 2,000-3,000km over the next six months, Punj said.
Highway contractors, especially those that focus on just construction as opposed to holding equity stakes in projects, have long complained against regulations that prevent the offloading of such holdings before a specified period. Analysts say the lock-in varies across contracts, but typically developers are required to maintain some equity in the project through the entire concession period.
Highway plans: Punj Lloyd chairman Atul Punj. Rajkumar / Mint
“It is a question of optimum use of capital,” Punj said. Punj Lloyd was initially looking at holding equity only during the construction period but might at some point look to retain investments, he said.
“As a group, we had built some 12,000km of highways in the early days of the national highway development programme and the Golden Quadrilateral,” said the group’s director, corporate, Luv Chhabra. The golden quadrilateral refers to a 5,846km network of highways connecting the four metropolitan cities—Delhi, Mumbai, Chennai and Kolkata.
Chhabra said the company found it couldn’t compete when smaller players entered the market, bidding for short stretches, leading to the decision to reduce its exposure to highway building. “Now is the time to re-enter,” Chhabra said, with highways and road transport minister Kamal Nath talking about offering longer stretches to contractors.
Chhabra, however, said the company was only looking to take equity in projects as the potential construction partner of a consortium until it had enough capital to justify holding on to highways as investments.
“Given a chance, they would all like to do that (exit their stake after the construction period),” said Amrit Pandurangi, who heads the infrastructure and transport practice for consulting firm PricewaterhouseCoopers. Pandurangi said operating a highway, while profitable, could be seen as tedious by some construction companies, which were forced into becoming developers because of changes in regulations.