National Highways Authority of India, the state-run agency overseeing road building, plans to raise 130 billion rupees ($2.3 billion) this fiscal year selling bonds as the nation steps up construction to support economic growth.
NHAI aims to raise 100 billion rupees by January selling income tax-free bonds and the remainder from notes that exempt investors from capital gains tax, J.N. Singh, its finance chief, said in a June 5 interview in New Delhi. The government yesterday set a goal of building 9,500 kilometers (5,903 miles) of roads in the year ending in March.
The agency will use part of the money to purchase land required for widening existing highways, Singh said. In March, the government allowed NHAI and other state-run entities to raise 600 billion rupees this year through bonds as India seeks to improve an infrastructure ranked below Kazakhstan and Guatemala by the World Economic Forum.
“Road sector is one area where projects are being bid out at regular intervals,” Singh said. “That activity will continue and there’s no cause for pessimism.”
Prime Minister Manmohan Singh yesterday pledged to revive growth in the economy as he outlined port, rail and road projects and a push to expand power generation capacity. India’s gross domestic product expanded 5.3 percent in the quarter ended March 31, the slowest pace in nine years.
NHAI, based in New Delhi, raised 100 billion rupees selling 10-year and 15-year tax-exempt bonds last financial year, according to data compiled by Bloomberg. Its 8.2 percent bond maturing in 2022 traded at a yield of 7.84 percent yesterday, according to BSE Ltd. prices.
The agency also sold 20 billion rupees of bonds that offered investors tax exemption from capital gains, NHAI’s Singh said. For similar notes this year, NHAI will pay a coupon of 6 percent, same as in the previous period, he said.
NHAI may also use part of this year’s bond sales to give financial assistance as the nation’s flagging economic growth may hurt road builders’ ability to tie-up funds, Singh said.
“The aggressiveness in bidding we saw last year may not be seen this time around,” Singh said. Also, the projects set for award are in routes where traffic is relatively low, he said.
Competition among builders such as GMR Infrastructure Ltd. (GMRI) and Larsen & Toubro Ltd. (LT) helped the agency win payments, or premiums, of 30 billion rupees for projects it awarded last year. Winning bidders get to collect tolls for as long as 30 years before transferring the highways to the state. Toll fees are decided by NHAI.
Last year the nation built an average 4.5 kilometers of roads a day against a target of 20 kilometers, according to a PricewaterhouseCoopers LLP. study. The national highway system, a predominately two-lane network linking major cities, carries 65 percent of India’s freight and 80 percent of passenger traffic.
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