Home/ Companies / News/  Vinci Construction in talks to acquire Indian road concessions

In an indication of a revival of interest in Indian roads sector France’s Vinci Construction is in talks with at least one infrastructure firm to acquire its concession.

“We are looking at acquiring the concessions of those developers who are looking to exit. While we have been present in the engineering, procurement and construction space in India since 2010, we are looking at expanding our portfolio. We are in talks with one or two companies for acquiring their concession," said Thomas Bigueure, head of Vinci Concessions India Pvt. Ltd, the Indian arm of the French firm. He declined to name the firms or the concessions as the talks are underway.

This comes at a time when Indian infrastructure developers, who had earlier bid aggressively for securing road contracts, are now claiming declining viability of highway projects.

GMR Infrastructure Ltd and GVK Power and Infrastructure Ltd walked out of their agreements with National Highways Authority of India (NHAI) earlier this year, the agency that oversees construction and maintenance of roads.

The French construction and concession firm which operates 5,500km of roads in France, with interests in roads, highways, stadiums and airports has been bidding for Indian highway projects in equal partnership with Hindustan Construction Co. Ltd (HCC) but have been unable to secure any such project.

In response to a question about Vinci Construction entering a sector which others have been exiting, Bigueure said, “There is nothing wrong with the projects. We have the appetite. Maybe they bid too high. The kind of aggressive bidding that happened is not sustainable. It is a good opportunity to find the right projects. We are looking at project specific opportunities. There are clearance problems but they are project specific."

A case in point being GMR Infrastructure which won the concession for the 6,000 crore Kishangarh-Udaipur-Ahmedabad highway wherein it agreed to pay a so-called premium payment—the money developers pay NHAI for building a highway and collecting toll from users of 636 crore in the first year. The payout would have increased 5% for the subsequent years over a 26-year period of the premium payment. GMR Infrastructure and GVK Power and Infrastructure walked out of their agreements with NHAI earlier this year.

The distressed infrastructure developers, hit by a funding crunch and high borrowing costs in the face of slowing economic growth, and delays in securing mandatory government approvals have sought easier payment terms. However, this effort has been rejected by India’s law ministry last week with it turned down a proposal by the ministry of road transport and highways for restructuring premium payments.

This also comes in the backdrop of NHAI’s inability to meet the target to build 9,500km of roads set by the ministry of road transport and highways and its own internal target of 3,000km last fiscal. In the fiscal year ending 31 March, the government awarded only around 1,000km of road construction projects, about one-tenth of its target of 9,500km.

In an attempt to ease the anxieties over the road sector, the Economic Survey presented earlier this year said exit routes for promoters need to be eased to allow them to sell equity to raise money for new projects. Vinci Concession India clocked a revenue of €200 million in the last fiscal and is currently involved in active bids for highway projects. Of the global revenue of €38.6 billion, concessions contribute €6 billion with the balance generated from the construction business.

“We have participated in bids along with HCC. We are getting there with our last bid falling short by 10% of the winning bid," said Bigueure.

The French firm also plans to bid for the Goa airport project.

“While partnering with a local partner makes sense to understand a new market, ours is not an exclusive arrangement with HCC," said Bigueure.

India’s infrastructure growth has hit the skids. As many as 103 central government infrastructure projects mainly roads, highways and railways, costing more than 150 crore each have been delayed by 4-20 years, according to data compiled until March by the ministry of statistics and programme implementation. The delays have led to costs rising by about 85%, or about 70,000 crore, over what had been estimated originally for these projects.

This comes at a time when the 12th Five-Year Plan (2012-17) envisages new infrastructure investment of about 56.3 trillion between 2012 and 2017 owing to the urgent need to upgrade India’s shoddy and inadequate roads, ports and utilities to boost flagging economic growth.

The writer is in France as a guest of the French government.

Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Updated: 26 May 2013, 10:46 PM IST
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