Ashoka Highways – Bhandara Road Project (NH-6)

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In January 2008, the National Highway Authority of India (NHAI) signed a 20 year concession (including construction period of 30 months) with India’s Ashoka Buildcon to widen and strengthen the 86 km section on National Highway (NH-6) in the state of Maharashtra. Under the contract, Ashoka Buildcon was responsible for the design, construction, finance, operation and maintenance and widening of the existing two-lane highway to a four-lane highway with paved shoulders. The expansion project, part of National Highway Development Project Phase - IIIA, was expected to ease traffic congestion and give significant stimulus to trade and commerce in the entire region. The consortium established Ashoka Highways Bhandara Limited, a special purpose vehicle, to implement the project. Ashika Buildcon won the tender through competitive bidding, conducted by NHAI, by requesting the lowest fixed subsidy of US$ 2.34 million. Under the contract, Ashoka Highways Bhandara Limited was to recover the capital costs and operating costs including returns through tolling during the term of concession. The concession agreement was signed in January 2008. The project was expected to attain its financial closure by August 2008 but it finally reached financial closure in March 2009. The debt equity ratio of the project was 50:50. The estimated capital cost of the project at the time of signing of concession agreement was US$ 109 million. Whereas the capital cost at the time of financial closure was US$ 176 million. The change in the project cost was due to an initial estimate of NHAI on lower side and subsequent design changes to the project. IDFC solely arranged US$ 88 million loan to finance the project. Whereas the promoters equity was to the extent of another US$ 88 million. Construction on the project began in January 2008 and was expected to be completed by June 2010.