Oriental Nagpur Betul Highway Private Limited

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In May 2010, the National Highway Authority of India (NHAI) awarded a 20-year concession (including construction period of 42 months) to Oriental Structural Engineers Private Limited (OSEPL) for the strengthening, improvement,4-laning,operation and maintenance of 176.3 kms of Nagpur to Betul section of National Highway-69 (NH-69) in the states of Madhya Pradesh (120kms from Betul to Madhya Pradesh/Maharashtra border) and Maharashtra (56.3kms from Madhya Pradesh/Maharashtra to Nagpur). Under the contract,OSEPL was responsible for the design, construction, finance, operation and maintenance and strengthening and widening of the existing passageway to a 4-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 -IV was expected to give significant stimulus to trade and commerce in the entire region. Oriental Structural Engineers Private Limited established Oriental Nagpur Betul Highway Private 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$ 123.7 million (INR 5816 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 2908mn from NHAI during the term of concession.The concession agreement should have been signed within 60 days (i.e. July 2010), but this time period had been exceeded. The CBI (Central Beaureau of Investigation) had earlier registered a case of criminal conspiracy for NHAI allegedly favouring OSEPL in award of the four-laning contract for this Nagpur-Betul stretch.The investigators had claimed that they had found several e-mails that were exchanged between the OSEPL owners and these NHAI officials.The Nagpur-Betul highway project had began courting controversy even before the CBI entered the picture. NHAI disqualified L&T, one of the 13 companies that had participated in the tender, saying that its request for qualification (RFQ) document was not serially numbered. The company filed a writ petition before the Delhi High Court challenging the disqualification but later withdrew it. In its petition, the company had said that the ground on which it was disqualified was “…an incorrect observation and was very easily rectifiable.” Eventually, however, the NHAI had gone ahead with signing of concession agreement. The project attained financial closure on 12th September 2011.The estimated capital cost of the project at the time of financial closure was US$ 747.9 (INR 35150mn @ 47 INR/USD) million. The debt equity ratio of the project was estimated at 79:21. Financing comprised of INR 27900mn debt and INR 7250mn sponsor equity. The INR 27900mn term loan had a grace period of 4years 6months and had a repayment schedule of 43 quarterly instalments. The pricing was at the base rates of then banks.Mandated lead arrangers were Axis Bank (6350mn), Bank of India (5000mn), Indian Overseas Bank (5000mn). The other particpating banks were IIFCL (4800mn),Oriental Bank of Commerce (3000mn),State Bank of Hyderabad (2000mn),State Bank of Mysore (750mn),UCO Bank (1000mn). Construction on the project began in February 2011 and was expected to be completed by August 2014.