The Cabinet Committee on Economic Affairs (CCEA) has further eased exit norms for developers of road projects by allowing them to redeploy the proceeds from such stake sale for cutting debt or investing in power sector projects.
This marks a relaxation in the usage of the proceeds. In May, the government had allowed developers to divest entire equity stake in completed road projects with the condition that such money is to be used for their other incomplete National Highways Authority of India (NHAI) projects.
The exit option freed developers of roads under BOT (build, operate and transfer) projects from mandatory share lock-in. However, this was only applicable where the developers had held the stake for at least two years after completing the road projects.
The CCEA, chaired by the Prime Minister Narendra Modi, amended its earlier approval to allow the concessionaire(s)/developer(s) to use proceeds from the sale of divested equity in any other highway projects, any other power sector projects or to retire debt in any other infra projects. This is in addition to the use of such proceeds for incomplete NHAI projects.
This follows a representation by National Highways Builders Federation (NHBF) that all developers do not have incomplete highways projects, thus they are denied of this relaxation.
Most infrastructure developers, however, carry highly leveraged balance sheets at their holding company level, as they have investment in several parallel infrastructure projects through the special purpose vehicles (SPVs) which are under severe stress. The latest amendment would allow these developers to utilise funds to reduce their existing corporate debt or for investment in any new infrastructure projects that need not alone be highways projects.
As of May 2015 there were 80 such BOT projects awarded prior to 2009 that have been completed and the locked in equity in these projects worked out to approximately Rs 4,500 crore. The government had estimated that once this is unlocked and is re-invested in new projects this could support 1,500 kms of new highways on public private partnership (PPP) mode.
Very few of these project developers tapped to the relaxation after NHAI notified the norms in June. Now the rest of the developers can monetise their completed road assets for cutting debt or investing in other projects.
