To avoid delay in earning toll revenues, Reliance Infrastructure is eyeing highway projects that involve expansion.
It recently began toll collection on the Hosur-Krishnagiri highway connecting Bangalore to Chennai, where the lanes have to be expanded from four to six. While the company has just begun construction, it has already started collecting toll for the four lanes under operation. "In such projects, revenue visibility is high. You start seeing revenue from day one of operations. It only increases after the project is commissioned," a Reliance Infrastructure spokesperson told Business Standard.
The Hosur project has average daily traffic of 52,000 passenger car units. This is the base volume. With six-laning, the corridor will cater to the growing traffic.
Six-laning of highway projects also has advantages, as the government would have acquired most of the extra land required for the expansion at the time of the four-laning. "Besides, the road has been there and the willingness to pay has sunk in," he said.
With the National Highways Authority of India planning to put 30 such projects for bidding under the fifth phase of the National Highways Development Programme, Reliance Infra is eying more business in this segment. Currently developing 11 road projects worth Rs 12,000 crore, it is eyeing eight to 10 per cent market share in the sector. The company has highway projects spanning 970 km. While four of these are operating, two more are expected to start operations this quarter.
With the highway sector becoming very competitive, a number of companies are bidding for the same project. This has made Reliance Infra look at bigger ones, looking at traffic growth and geographic location. The target is 15-20 per cent yearly return. For instance, the company is planning to bid for a mega road project between Kishangarh, Udaipur and Ahmedabad, the estimated cost being Rs 5,000 crore, in a consortium with IRB Infrastructure. Around a dozen bidders are expected, with financial bids expected this month.