Neelmangla-Devihalli NH-4 & NH-48

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In July 2007, the National Highway Authority of India (NHAI) signed a 25 year concession (including 30 month of construction period) with a consortium formed by Lanco Kondapalli Power Private Limited and Lanco Infratech to widen and strengthen the 81.8 km section on National Highway (NH-4 & 48) between Neelmangla and Devihalli in the state of Karnataka. Under the contract, the consortium was responsible for the design, 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 III, was expected to ease traffic congestion and give significant stimulus to trade and commerce in the entire region. The consortium established 'Lanco Devihalli Highways Private Limited', a special purpose vehicle, to implement the project. The concession awarder, National Highways Authority of India (NHAI), invited bids for the four laning the road during Aug 2006. The consortium won the tender through competitive bidding, conducted by NHAI, by requesting the lowest fixed subsidy. Lanco won the tender by requesting US$42.1 million. Apart from this upfront payment by NHAI, under the contract, 'Lanco Devihalli Highways Private Limited' was to recover the capital costs and operating costs including returns through tolling during the term of concession. The concession agreement was signed in July 2007. The project reached financial closure in January 2008 with debt equity ratio of 74:26. The expected capital cost of the project was US$ 147 million. A consortium led by State Bank of India was to provide a debt of US$ 61 million. The consortium of banks was to provide the rupee loan for 15 years and 6 months. Contribution of Lanco Group to the equity was US$ 82 million. Construction on the project began in July 2007 and was expected to be completed by December 2009.