Highways regulator to recognise IDFC as a limited-rights lender

The National Highways Authority of India (NHAI) is set to recognise IDFC as a lender to the Delhi-Gurgaon expressway project, but with only limited rights, as the government does not recognise it as an official lender. The change in stance by NHAI is an about-turn as the roads ministry had earlier informed the Prime Minister's Office that the ministry and NHAI did not classify the infrastructure financier as a lender.

NHAI and the roads ministry had thus not recognised IDFC as a lender because a change of lenders by Delhi-Gurgaon Super Connectivity Ltd (DGSCL) had not been approved. DGSCL had in 2010 replaced its authorised lender, State Bank of India (SBI), with an IDFC-led consortium, which has an exposure of Rs 1,600-crore in the project.

As part of the proposition to be considered a lender with limited rights , IDFC will have to move one of its toll gates from the Delhi side and make the entry to Gurgaon toll free. This would provide relief to more than 250,000 vehicles passing through the toll gates.

"We are looking to permit them (as a lender with limited rights), if they agree to various demands, including removing the first toll plaza from Delhi. We feel the public-sector banks in the consortium should not suffer badly. Various discussions are currently on and issues like a lender running a project are being discussed," a senior NHAI official told Business Standard.

If IDFC agrees to the terms, NHAI would recognise it as lender with limited rights and not a senior lender. This would bind IDFC to the concession agreement that DS Construction had signed with the government. DGSCL, a special purpose vehicle (SPV) set up to undertake the landmark project, was initially funded by a consortium led by Hudco, which was later replaced by SBI. The SPV then raised loans from IDFC and, in violation of its concession agreement, did not inform the government.

The IDFC-led consortium includes Punjab National Bank, Oriental Bank of Commerce and State Bank of Bikaner and Jaipur. If NHAI had terminated the project, these lenders would have had to incur a combined loss of Rs 1,400 crore from the project, as the highways authority would refunded only Rs 175-200 crore. This prompted IDFC to start negotiations with the government.

ON-TRACK, OFF-TRACK

• Jul 2009: DGSCL seeks NHAI's permission to change lenders from Hudco to an SBI-led consortium. NHAI approves the change of banks and approves Rs 1,275-crore in debt
• Sep 2010: DGSCL raises money from an IDFC-led consortium; NHAI is unaware of this and does not approve the loan
• Dec 2011: NHAI issues preliminary termination notice to DGSCL; IDFC moves Delhi HC for a stay
• Feb 2012: NHAI learns the amount raised from the IDFC-led consortium is Rs 1,600 crore, and not Rs 1,275 crore; sends final termination notice
• Jan 2013: NHAI backs a proposal to allow IDFC to buy out 74% of the project's equity; backs down later and sends notice asking to reply within 15 days why the contract should not be terminated; DGSCL challenges notice in Delhi HC and gets a stay on decision
• Jan 2014: IDFC informs Delhi HC it needs time till Jan-end to try and reach an out-of-court settlement

Earlier this week, IDFC told the Delhi High court, where the infrastructure financier had challenged a termination notice issued by NHAI, that it would seek time until January 27 to strike a deal with NHAI and the road transport & highways ministry. NHAI officials also said the lenders could appoint a new operator to run the operations and management of the toll plaza, with permission from the ministry and the NHAI board.

The Delhi-Gurgaon Expressway was considered a landmark project, as it was the first time the government had received a premium from the operator and did not have to pay anything for construction. NHAI had awarded the build-operate-transfer project to Jaypee DSC Ltd in 2002, but Jaypee Group exited the project in 2004. The project was completed in 2008 and the company (now called DGSCL) owns the rights to operate the expressway and collect toll till 2028.