IRB Infrastructure Developers has committed most of its planned investments for 2024-25 towards expanding road capacity through the Build-Operate-Transfer (BOT) model of public-private partnership. The company plans to invest INR 10,000-12,000 crore, with around INR 8,000 crore expected from BOT projects. It is also targeting INR 4,000 crore from acquiring highway assets through Toll-Operate-Transfer deals. This focus on BOT comes as the government pushes greater private participation in developing highways. IRB currently owns and operates 15,000 lane km of roads across 12 states through various PPP models including BOT, HAM and TOT.
IRB Infrastructure Developers has committed the largest share of its investments for the current financial year towards adding road capacity through the Build-Operate-Transfer (BOT) model. This comes as the government pushes for greater private participation in highways.
The company plans to invest INR 10,000-12,000 crore in 2024-25, of which around INR 8,000 crore will be through the BOT route. It also aims to acquire operational highway assets worth INR 4,000 crore through the Toll-Operate-Transfer (TOT) mode.
Singapore's GIC is IRB's partner for TOT and BOT projects, contributing 49% equity while IRB brings the remaining 51%.
In 2023-24, IRB had invested around INR 20,000 crore in roads, including acquiring two highway bundles monetised by the National Highways Authority of India (NHAI) for INR 6,111 crore.
The company believes BOT projects will see a major resurgence this year as interest rates decline, making the Hybrid Annuity Model (HAM) less attractive. HAM accounted for 35-40% of highway awards last year. In contrast, BOT awards have languished at under 5% in recent years, with no projects awarded last year.
Under HAM, the government pays 40% of construction costs upfront and the remaining 60% is paid back to the developer over 15 years via annuity payments carrying a fixed 3% interest. When the bank rate goes down, the annuity payments also reduce.
While HAM seems appealing for lower equity needs, BOT offers higher returns despite larger risks, according to IRB Director Investor Relations Anil Yadav. Recent changes in concession agreements also enhance investor confidence and project viability. With streamlined clauses and robust compensation mechanisms, these agreements are set to attract a diverse pool of investors, including sovereign wealth funds.
Yadav expects actual BOT awards this year could touch 15% of highways against the 10% government target. The government has identified 900 km of highways worth INR 2.1 trillion for BOT development, most of which may be awarded this year.
IRB owns and manages 15,000 lane km of roads across 12 states. These roads are being managed through BOT, HAM and TOT. It also has an IRB InvIT Fund.
In conclusion, with recent policy changes making concession agreements more investor-friendly and lowering interest rates diminishing HAM's appeal, IRB Infrastructure is betting that BOT projects will see a major resurgence this year. If actual BOT awards meet targets, it will indicate greater willingness by both the government and private players to utilize this model for boosting India's infrastructure development through public-private cooperation.
Advertisement
Facebook
Whatsapp
