 "Good flow of national highway projects could turn NHAI score high this year")
During the current quarter, October-December 2014, national highway projects amounting to about Rs 20,000 crore have been tendered. This includes 20% share of previous old projects, or about 800-odd kilometres, which were awarded in FY 2012 but lacked implementation. According to the report, the reason why projects are likely to attract strong bidding interest is two-fold. One, almost 50% of the projects are Engineering, Procurement and Construction (EPC) projects with reasonably average project sizes. Most of the projects tendered in the EPC mode will be backed by NHAI funds. Besides, 8% share of new projects with old projects are going to be bid at significantly higher cost estimates. Compared to FY 2012-2013, which saw about 1,000 kms of annual roads awarded, NHAI's recent tenders have exceeded its combined awards over the past two-and-half years. For the bids opened in October, road developers have hinted at participation from about 5-6 bidders. The bids, which are primarily for the EPC projects, amount to about Rs 5,000-6,000 crores of the combined project costs.
In its report Kotak also suggested that five to six bidders took part in the bids opened in October. The bids were primarily for EPC projects and amounted to a significant Rs 5,000-6,000 crore of the combined project cost. "The large quantum of awards over a limited period in the present environment of limited competition would support pricing. Developers are likely to bid rationally by building in contingencies in bids for delays in implementation, input cost increases and interest rates. They would also be less aggressive in their traffic-growth estimates. Strict conditions from lenders (upfront equity payments) would also lead to rational bidding by developers," the report said.
There is a concentration of projects in Uttar Pradesh and Haryana (combined 40-45% share), followed by eastern states (20%) and a small share (1%) from western states.