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Small operators and contractors, compared to large players, have gained market share in the EPC segment. There were typically 15-20 bidders for each EPC bid against five to six bidders for each tender for the build-operate-transfer (BOT) segment.
UBS in its report said given balance sheet issues for a large swathe of the industry and the reluctance of some large companies to bid for BOT projects, it was not surprising that smaller operators such as IRCON, TRIL and Uniquest Infra have gained market share in the EPC segment. Smaller contractors like GR Infra and Dilip Buildcon have gained a larger share of the EPC market and this could keep competition fierce in this segment.
Some of the projects included the 132-km Parwanoo-Solan by GR Infra (Rs 860 crore), 39-km Ghaaghara Bridge-Vaaaran by Dilip Buildcon (Rs 750 crore), 139-km Jodhpur-Pokaran by GR Infra (Rs 270 crore), 52-km Sitarganj-Tanakpu by HG Infra Engineering (Rs 240 crore).
NHAI, which has awarded 3,000 km of roads in 2014-15, is pursuing its plan to award 5,600 km of road projects in 2015-16.
PwC Partner, Leader (Infrastructure), Manish Agarwal told Business Standard, “While EPC contracts have picked up as expected, the pace needs to increase further. Larger players have still not returned in a big way, partly due to their continued financial stress, and partly due to concerns on project readiness and dispute resolution mechanisms continuing to persist. Many large players had shifted focus overseas during the slowdown. Five to six bidders for BOT projects is a good number, any more would be worrying. However, the financiability of toll roads, given the current financial stress in the banking system, remains to be seen. The Hybrid Annuity contract could bring back investors in a big way.”
Further, IL&FS Transportation Networks Ltd’s Executive Director Mukund Sapre said many of these EPC-turned-concessionaires are finding it hard to raise the requisite equity for the BOT projects as well, leave alone tie up debts. Not only would EPC projects contribute towards improving their cash flows, the reduced responsibilities on them (as compared to BOT) would also help improve their performance on ground. This was one of the prime reason the government decided to push EPC projects.
“'We are, therefore, seeing only the BOT veterans with a healthy operational portfolio participating in BOT bids. This explains the relatively lower participation in BOT bids compared to EPC ones. It is more of a voluntary strategic shift rather than a move forced by the hurdles in the system,” said Sapre.
