MEP Infra to tie up with funds from Singapore or UK for TOT projects

The firm has 10 hybrid annuity projects under its fold, seeks smaller bunching of projects as against first TOT tranche given out by NHAI

Mumbai-based MEP Infrastructure, a leading player in the hybrid annuity space, plans to get into TOT (toll-operate-transfer) operations of highways. For this, it is likely to tie up with a Singapore or UK-based fund.

MEP, which has 10 hybrid annuity projects under its fold, is looking at smaller bunching of projects as against the first TOT tranche given out by the National Highways Authority of India, which had 10 projects. “We will tie up with large funds from Singapore or UK. We expect to finalise the tie-up within two months,” Jayant D Mhaiskar, chairman and managing director, MEP Infra told Business Standard.

Mhaiskar said the partnership could be on a case-to-case basis depending on the expected return on equity of the financial investors. MEP would form a joint venture for the purpose which would have both operation and maintenance (O&M) and equity partnership, he said.

According to him, though TOT was a new model in highways, the concept was present in the form of O&M. The difference was that the contract tenure under TOT was longer at 25 years and projects were bunched together. “Since we already do O&M and toll operation projects, we are quite well poised for TOT. It depends on the cost of finance and who is able to get cheaper funds,” he said.

Mhaiskar said the challenge in TOT model was to sustain growth in revenues over the contract period of 25-30 years and cost of capital. NHAI was providing data on the condition of assets and structures on roads. “The key driver for TOT was the geographical location and revenue generation.”

During in 2017-18, MEP Infra reported 34 per cent jump in revenue at Rs 23.22 billion increased. The company ended the year with balance order book of Rs 72.84 billion in the hybrid annuity space with 10 projects.

Mhaiskar said the company would be evaluating upcoming bids in the HAM space and also in EPC where it is likely to bid for some large state road projects. The company enjoys a unique business mix among infrastructure players, as it has a presence in both in tolling and road construction contracts.

The Union government’s focus on infrastructure is good for the company and initiatives such as Bharatmala provide a lot of opportunity in the HAM (hybrid-annuity model) and EPC (engineering, procurement and construction) space, he said.

The company operates one of the largest operation, maintenance, transfer and tolling (OMT) contracts at the five Mumbai Entry Points for a period of 16 years until 2026.  The company last year started tolling at Delhi entry points for five years. A sum of Rs 12 billion annually is payable to municipal weekly basis.

MEP Infra came into business in December 2002 with a collection of toll at the five Mumbai entry points.