Macquarie, Italy’s Atlantia, Brookfield look to bid for India’s toll road assets

Photo: Pradeep Gaur/Mint

Macquarie Group, Canada’s Brookfield Asset Management Inc. and Italy’s infrastructure investment firm Atlantia SpA are looking to bid for the second round of auction for toll-operate-transfer rights (TOT) of public road projects, said two people aware of the development. The three companies are in the process of conducting due diligence on the assets, which have been put up for auction by the National Highways Authority of India (NHAI), said the people cited above, requesting anonymity.

“The investors are currently undertaking due diligence of the assets, which is expected to go on till mid-October,” said the first person cited above.

NHAI, in August, invited private firms to participate in the second round of TOT auction for eight stretches of operational toll roads totaling 586.55km across Rajasthan, Gujarat, Bihar and West Bengal. The base bidding price was set at ₹ 5,362 crore and the concession period was 30 years. The last date to submit bids is 5 November.

The first auction of TOT projects, which was held in February, included five highways in Andhra Pradesh and four in Gujarat, totalling 700km. Macquarie won the auction with its ₹ 9,681 crore bid against the initial estimated concession value (or base price) of ₹ 6,258 crore.

According to the second person, the spread of the assets in the second bundle can lead to management difficulties for the operator. The request for proposal document on the NHAI website said the second bundle includes three projects in West Bengal, two in Rajasthan and one each in Gujarat-Rajasthan and Bihar.

Spokespersons at Macquarie and Brookfield declined to comment. Atlantia did not respond to an e-mailed query.

Under the TOT model, a concessionaire pays an upfront fee to buy the right to operate and earn from the toll roads for a fixed period of time. The model concession agreement provides traffic variations, road expansion and other risks that concessionaires may face. In 2016, the Cabinet Committee on Economic Affairs (CCEA) had given NHAI the green signal to monetize operational highways under the TOT model by tapping private capital to invest in roads.

According to infrastructure experts, the bidders are likely to be “less aggressive” in the second round of auction, having gained some experience from the first round.

“The first auction saw aggressive bidding, which is unlikely in the second round. This is primarily due to two reasons. First, bidders have realized that these projects will keep coming up for auction and, hence, it is better to factor in the associated risks while bidding. Second, the road assets are scattered, which can lead to operational challenges for some operators,” said Sandeep Upadhyay, managing director, infrastructure, Centrum Capital Ltd.

He said the companies, which are involved in engineering, procurement and construction, and hybrid annuity model projects in the regions where the roads have come up for auction, will be better placed at mobilizing resources and gaining operational efficiencies. NHAI has identified 75 operational highways, which will qualify for the TOT model. The new round of auctions is a continuation of this monetization programme. The government has set a target of raising ₹ 2 trillion through this route over the next five years.

This article was first published on livemint.com

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
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