L&T Krishnagiri Thopur Toll Road Limited

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In October 2005, National Highways Authority of India (NHAI) awarded a 20 year concession contract to India’s Larsen and Toubro Limited (L&T) to upgrade, operate and maintain the 62 Km stretch on National Highway number seven (NH-7), between Krishnagiri and Thopurghat, in Tamil Nadu State. Under the contract, L&T was required to design, finance and widen the existing four-lane road to a six lane divided highway. In addition, the project included the construction of one railway overbridge, one major bridge across Ponniyar River, 11 minor bridges, five flyovers, 15 underpasses, 28 km service roads, rest areas, bus stops and a toll plaza near the Thopurghat check post. The 20 year concession term included the construction period of 30 months. The Krishnagiri Thopurghat toll road project, awarded under National Highway Development Program – Phase II, formed the critical link between the two major districts of Krishangiri and Dharmapuri. The road expansion was expected to ease traffic congestion and give significant stimulus to trade and commerce in the entire region. The concession agreement between NHAI and L&T Krishnagiri Thopur Toll Road Limited (L&T-KTTRPL) was signed in January 2006. L&T -KTTRPL, a wholly owned subsidiary of L&T, was created to implement the project. L&T won the international competitive tender, conducted by NHAI, by offering to make an upfront payment of US$ 31 million for the right to collect tolls during the term of the concession. According to the tender documents, NHAI would pay up to 40 percent of the capital costs as grant to the concessionaire, subject to competitive bidding. However, in high traffic density corridors like this one that are very profitable, the bidders usually offered an upfront payment to NHAI instead of seeking a grant. The total capital cost of the project was estimated at US$ 82 million. The project reached financial closure in May 2006. SBI Capital was the lead arranger of the debt that had a 14 year tenor. Construction work on the project began in June 2006 and was expected to be completed by December 2008.

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