Tepid India highway auction sees Cube emerge top bidder

26 December 2018 - 12:00 am UTC

I Squared Capital-backed Cube Highways emerged the highest bidder in the second auction of operational highways in India that saw lukewarm response from investors. 

Cube bid INR 46.12bn (USD 659m) for the 30-year toll-operate-transfer (TOT) concession of eight highways totaling 586.55km, a source said. The bid was 14% less than the base price set at INR 53.62bn (USD 767m).

Adani Transport Ltd in partnership with Madhya Pradesh-based Prakash Asphalting and Toll Highways placed a bid of INR 36.75bn, while Mumbai-based IRB Infrastructure Developers put in a bid of INR 27.18bn, the source added.

National Highways Authority of India (NHAI) may opt for rebidding as all the three bids were below the base price, another source said. However, a final decision will be made in consultation with the Roads and Highways ministry, the source added.

The response to the second highway auction is in sharp contrast to the first one that saw euphoric bidding from global infrastructure funds.

Macquarie Group won the first auction in February by bidding 1.5 times the reserve price of USD 1bn and nearly 28% more than the second bidder (Brookfield).

As reported, the latest auction was expected to see muted bids as the highways on offer are badly maintained and in the poorer states of the country, which limits traffic and toll growth.

The eight ​​​​​​highways are spread across the states of Rajasthan, Gujarat, Bihar and West Bengal.

In the initial stages Brookfield Asset Management, Global Infrastructure Partners through its subsidiary Highway Concessions One Pvt Ltd, PSP Investments-owned ROADIS and Tata Realty and Infrastructure had taken part in pre-bid meetings but opted out later, according to official documents.  

Still, it is “surprising” that all the bids were below the base price, a banker said. High interest rates and tight liquidity may have also played a dampener for the bids, he added.

“It may have been that the authorities got a little carried away after the success of the first auction,” the banker said.

According to local media reports, Roads and Highways minister Nitin Gadkari had expected bids in excess of INR 100bn (USD 1.4bn) in the second round.

Deloitte is advising the NHAI on the latest auction.

Asset recycling has become a cornerstone policy of the Narendra Modi administration’s plan to raise money to modernize India’s creaking infrastructure.

The Roads and Highways Ministry has identified 105 operational highways for auction under the TOT model and aims to raise as much as INR 1.25trn through this route.


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