Home >News >India >Covid-19 hits NHAI's $1 billion TOT asset monetisation plans
As part of its asset monetisation plan, NHAI has been selling bundles of operating road projects under the toll-operate-transfer (TOT) model. (Photo: Mint)
As part of its asset monetisation plan, NHAI has been selling bundles of operating road projects under the toll-operate-transfer (TOT) model. (Photo: Mint)

Covid-19 hits NHAI's $1 billion TOT asset monetisation plans

  • Last October, NHAI invited bids for TOT4, with initial estimated concession value of 4,170 crore
  • The TOT3 sale process is also stuck as the lockdown has hit debt market, affecting the bidder's ability to raise funds

Mumbai: The covid-19 pandemic and the resultant nationwide lockdown have hit National Highways Authority of India's (NHAI) plans to monetise almost $1 billion by selling toll rights as buyers look to wait out the period of uncertainty, said three people aware of the development, on the condition of anonymity.

This delay in asset monetisation could stretch NHAI's balance sheet, given that it has suffered loss of revenue as toll collection was suspended till 20 April and as traffic on roads is expected to be thin till things return to normal.

India has been under a lockdown since 25 March which is expected to last till 17 May, as of now.

On 15 April, credit rating agency ICRA had said NHAI could lose as much as 1,181 crore in toll revenue due to the lockdown.

As part of its asset monetisation plan, NHAI has been selling bundles of operating road projects under the toll-operate-transfer (TOT) model. Under the model, long-term concessions for collecting toll revenues are auctioned to the highest bidder.

In October 2019, the NHAI had invited bids for its fourth bundle of road assets - TOT4. The initial estimated concession value was set at 4,170 crore for seven stretches totalling around 401 km, spread across Jammu & Kashmir, Punjab, Haryana, Rajasthan and Madhya Pradesh and Maharashtra. The size of the package was reduced to around 2,000 crore to make it more palatable for investors.

However, with low investor interest, the auction has has been postponed many times, with bid submission deadline now extended till 15 May.

But even this deadline is likely to be pushed back, said one of the people cited above.

"Investors have asked NHAI to postpone the bids further as they want to see how toll collections revive when the lockdown gets lifted. In the current circumstances it will be difficult for investors to bid for these assets," the person said.

In an email response to Mint's queries, NHAI said while it is yet to take a call on the bid deadline, an extension is likely.

"The decision for extending the deadline of TOT-4 beyond 15th May 2020 has not yet been taken. It is likely to be postponed due to uncertainties of traffic volume," NHAI said.

While the sale of TOT4 bundle is yet to take off, the sale process for TOT3 bundle, worth 5,011 crore, which saw private equity owned roads platform Cube Highways emerge as the successful bidder in December, has also been stuck due to the pandemic.

The deal, which was envisaged to be completed by April, has been held up as the lockdown has ravaged the debt market, thus affecting Cube Highways's efforts to raise financing for the deal at attractive interest rates, said another person cited above.

The buyer has requested NHAI to extend the transaction timelines given the current market situation, he added.

"The Concessionaire (Cube Highways) has given a intimation of occurrence of Force Majeure Event due to covid-19 and has also intimated that the period for fulfilling the conditions precedent set out in Article 4.1 of The Concession Agreement (that inter alia includes Financial Closure and payment of Concession Fees) stands extended by a period equal in length to the duration of the Force Majeure Event," NHAI told Mint.

Cube Highways's request is being considered as per the provisions of the concession agreement, it added.

The TOT3 bundle comprises nine stretches of roads, totaling 566.27 km across Uttar Pradesh, Jharkhand, Bihar, and Tamil Nadu.

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