With cash in hand, NHAI may skip bond issue in FY13

The Union Budget had allocated Rs 23,000 cr as budgetary support to the Ministry of Road Transport and Highways

Flush with funds, the National Highways Authority of India (NHAI) might not launch tax-free bonds in the current financial year. Last year, NHAI’s bond issue had received an overwhelming response and the highways authority had raised about Rs 10,000 crore.

According to the budget for 2012-13, NHAI has the approval for raising Rs 10,000 crore from the markets this financial year, too.

A senior NHAI official told Business Standard it “will not raise any money till March 31, 2013”. The highways authority would spend over Rs 20,000 crore during the current financial year, of which close to 50 per cent would come from toll collections, the official added.

DEEP POCKET

• NHAI had a major share of Rs 10,000 crore of the Rs 30,000 crore raised from the markets in 2011-12
   
• The approved limit for NHAI this fiscal too is at Rs 10,000 crore, out of the total of Rs 60,000 crore targeted
   
• NHAI to spend over Rs 20,000 crore this fiscal
   
• About Rs 10,000 crore expected to come from toll collections while another Rs 3,000 crore expected from premiums on projects awarded last fiscal
   
• BOT project award significantly slowed down this fiscal: Only close to 1,000 km awarded till October
   
• 4,000 km target of EPC awards might be raised to close-in on the 9,500 km target set by PM Manmohan Singh

 

However, another official pointed out that the decision has not been taken yet.

According to sources, the highways authority is also considering whether to raise the engineering, procurement and construction (EPC) contract award target from the current 4,000 km, as build, operate and transfer (BOT) projects have not evinced good response in the first two quarters of the current financial year. Till October, the NHAI has awarded only about 1,000 km of BOT projects.

“Only if we go for 6,000-7,000 km through EPC will we have to think of raising more money from the market,” said an official.

Prime Minister Manmohan Singh had recently raised the highway project award target for the current financial year from 8,800 km to 9,500 km, which, according to analysts, is difficult to achieve due to the numb response to BOT projects from the construction industry.

The Union Budget had allocated Rs 23,000 crore as a budgetary support to the Ministry of Road Transport and Highways as planned expenditure.

Also, the internal and extra budgetary resources of the ministry are at Rs 10,000 crore, according to the Plan Outlay.

NHAI is expected to get around Rs 3,000 crore as a premium on the 21 projects awarded in the last financial year. This leaves the highways authority with sufficient funds for its current requirements. NHAI had come out with a bond issue in December last year.

The issue was oversubscribed in the high net worth individuals (HNI) and qualified institutional buyers (QIB) category on the first day itself. Although the highways authority proposed to issue Rs 5,000 crore bonds, it ended up raising Rs 10,000 crore with a greenshoe option, as it got oversubscribed to the extent of Rs 25,000 crore despite shaky market conditions. Meanwhile, NHAI’s short-term (three years) 54EC bonds would continue.

Any capital gains from sale of long-term capital assets, such as real estate or gold, can get tax exemption by investing in the 54-EC infrastructure bonds.