Ashoka GVR Mudhol Nipani Roads Limited

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On 1st February 2014, Government of Karnataka (through PWD) awarded a 10-year concession (including a 30-months construction period) to a consortium of Ashoka Buildcon Limited and GVR Infra Projects Limited for the strengthening, improvement,two-laning,operation and maintenance,and tolling of 107.937 kms of existing state highway SH-18, from Mudhol to Maharashtra Border,in Bagalkot district of Karnataka. Under the contract, the consortium was responsible for the design, construction, finance, operation and maintenance,strengthening and widening the existing 2-lane carriageway to 2-lane divided carriageway.The scope included construction of new pavement, rehabilitation of existing pavement, construction and/or rehabilitation of major and minor bridges, culverts, road intersections,interchanges, drains, etc.The expansion project,part of the Karnataka State Highways Improvement Project (KSHIP), was expected to ease traffic congestion and give significant stimulus to trade and commerce in the entire region. The consortium of Ashoka Buildcon Limited (51%) and GVR Infra Projects Limited (49%), established Ashoka GVR Mudhol Nipani Roads Limited (AGNRL),a special purpose vehicle on 3rd March 2014, to implement the project. The SPV won the tender through international competitive bidding, conducted by Karnataka PWD,by requesting the lowest annuity payment. Under the KSHIP annuity concession contracts, it was proposed to avail of The World Bank assistance for an upfront payment of 50 per cent of the construction cost and the remaining payments during the maintenance period of 7-years on annuity basis to be met out of Karnataka state funds. Under this concession, AGNRL was to recover the capital costs and operating costs including returns through an upfront payment of US$ 22.3mn (INR 1360mn) and semi annual payment of US$ 6.5mn (INR 395mn) during the term of operation of concession (7 years). The concession agreement for the project was signed in March 2014. The project attained financial closure in September 2014. The grant/debt/equity ratio of the project was 29/59/12. The estimated capital cost of the project at the time of financial closure was US$ 77.2mn (INR 4712.3mn @61 INR/USD). Apart from the upfront grant of US$ 22.3mn, financing comprised of a 9-year 1-month term loan of US$ 45.9mn (INR 2800mn), and sponsor equity of US$ 9.0mn (INR 552.3mn). The loan was priced at 115 basis points above the base rate. The loan was arranged by HDFC Bank. The project construction was expected to start in March 2014 and was expected to be operational by September 2016.