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Highway developer Ashoka Concessions and its private equity partner, SBI Macquarie are sitting on a pipeline of 25 highway projects for which they have qualified.
The company hopes to win at least one or two projects out of this pipeline, this year.
“We expect all these projects to seek bids this year. And, around 70% of these bids are expected to come in the first six months,” said Satish D Parakh, managing director of Ashoka Buildcon, the parent company of Ashoka Concessions.
If Ashoka Concessions expands its portfolio from its current seven projects, it would receive additional funding from its PE partner, SBI Macquarie.
In a deal announced earlier this year, SBI had already committed Rs 800 crore for 34% stake. In addition to this, SBI Macquarie promised to invest Rs 650 crore more if they bag more projects.
SBI Macquarie India Infrastructure Fund which started with more than a $1 billion (Rs corpus around five years back.
The fund has already transferred Rs 240 crore to Ashoka Concessions, and yet another Rs 140 crore is expected to come in this quarter. The balance of funds will come in as per the equity requirement of the projects. Ashoka Concessions has three projects which are currently under construction.
Parikh said that there no immediate plans to monetise more road assets. However, they might look an initial public offer around three to five years later. “We will add another five to six projects to the current portfolio. On an annual basis, we look at 25-30% growth in portfolio,” he said.
The government is looking to seek bids for 7,300 kilometers of road projects this year.
“Many projects are expected to come in this year,” hopes Parikh. However, the company chooses to bid selectively especially because of the quality of projects which have been going down. Last year, as many as ten road projects did not receive any bids. This, Parikh says, is not due to lack of interest from bidders, but some projects are not commercially viable to take a traffic risk on.
Adding to low-viability projects, lower growth in GDP is also taking a toll on traffic growth of road projects. The traffic in the projects owned by Ashoka is growing only at 4-5%, due to a huge fall in traffic of commercial vehicles. “There has been some impact on revenue due to this,” says Parikh.
The projects of GDP growth has come down to 6.5% from 8.5%. This has a direct impact on the growth of traffic on the roads. “There is a two% de-growth seen in traffic as well. This is in addition to the inflation worries,” said Parikh.
However, Parikh hopes that traffic will gradually improve this year as inflation is shown downward trends. This could lead to rate cuts by the Reserve Bank of India, leading to improvement in traffic on the roads.
