Easy exit rules for highway projects to release Rs 4,000 crore: India Ratings

Mumbai: Easier exit options for operational highway projects will release Rs.4,000 crore in capital for their developers, which in turn can be used to fund other infrastructure projects or to retire debt, said India Ratings and Research, a Fitch group company in a report on Monday.

The Cabinet Committee on Economic Affairs (CCEA) last week allowed road developers to fully exit their equity investment in all operational projects after two years of completion irrespective of the year in which the project was awarded. Earlier, the exit norms allowed road developers to fully divest their operational projects, which were awarded pre-2009, after operating them for two years.

The change in rules would provide road sector infrastructure companies with opportunities in mergers and acquisitions, said India Ratings in its report.

The research and ratings firm estimates that out of the 86 completed road projects, equivalent to 5,200km, about Rs.4,000 crore of additional residual equity can be released under this proposed divestment scheme. Investors may evince interest selectively on projects with strong year-on-year traffic and revenue growth, said India Ratings.

Traffic in road projects grew in the range of 5-6% in 2014-15 compared with a decline in 2013-14 and is expected to continue to rise in the current fiscal year on account of increased economic activity, said India Ratings.

“Ind-Ra expects these measures to give a boost to weak sponsors in about 20 projects. This could de-stress and release the equity, helping them to shore up their balance sheets.,” said the ratings and research firm.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.