Khagaria Purnea Highway Project Limited

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In February 2011, the National Highway Authority of India (NHAI) awarded a 17-year concession (including construction period of 910 days) to Punj Lloyd Infrastructure Limited for the strengthening, improvement,2-laning, operation and maintenance of 140 kms (from KM 270.00 to KM 410.00) of Purnea to Khagaria section of National Highway-31 (NH-31) in the state of Bihar. Under the contract, Punj Lloyd was responsible for the design, construction, finance, operation and maintenance and strengthening and widening of the existing passageway to a 2-lane highway with paved shoulders. The scope would include construction of new pavement, rehabilitation of existing pavement, construction and/or rehabilitation of major and minor bridges, tunnels, viaducts, culverts, road intersections, interchanges, drains, etc.The expansion project, part of National Highway Development Project Phase -III was expected to give significant stimulus to trade and commerce in the entire region. Punj Lloyd Limited established Khagaria Purnea Highway Project Limited, a special purpose vehicle, to implement the project. The SPV won the tender through international competitive bidding, conducted by NHAI, by requesting the lowest fixed annuity of US$ 23.8 million (INR 1120 million @ 47 INR/USD). Under the contract, the SPV was to recover the capital costs and operating costs including returns through fixed semi-annual payment of INR 560mn from NHAI during the term of concession.The SPV had awarded a fixed-price, fixed-time EPC contract to Punj Lloyd Limited. The concession agreement was signed on 6th June 2011. The project attained financial closure on 4th October 2011.The estimated capital cost of the project at the time of financial closure was US$ 158.7 (INR 7548.9 mn @ 47 INR/USD) million. The debt equity ratio of the project was estimated at 83:17. Financing comprised of INR 6268.9mn debt and INR 1190mn sponsor equity. Debt was further split into an INR 4260mn 15-year term loan, USD 36.36mn 8-year term loan and INR 300mn 15-year term loan. The INR 4260mn term loan had a grace period of 6 months and had a repayment schedule of 25 semi-annual instalments. The pricing was floating linked to base rates of then banks. The INR 300mn term loan had a grace period of 7 years and had a repayment schedule of 13 semi-annual instalments. The loan was priced at prime lending rate of 15.75% with negative margin of 2.25%. The US$ 36.36mn term laon had a grace period of 6 months and had a repayment schedule of 11 semi-annual instalments. The USD loan was priced at 420bp above LIBOR. Mandated lead arrangers was State Bank of India with the following participants: L&T Infrastructure Finance Co. Ltd, ICICI Bank, Oriental Bank of Commerce, IIFCL, Indian Overseas Bank, and State Bank of Bikaner & Jaipur Construction on the project began in October 2011 and was expected to be completed by April 2014.