IRB Infrastructure Developers committed the majority of its investments in the current fiscal year to building road capacity under the Build Operate Transfer (BOT) mode in response to the government's desire for private involvement in roads.
According to Anil Yadav, Director of Investor Relations at IRB Infrastructure, the company plans to invest between Rs 10,000 and Rs 12,000 in 2024–25, of which approximately Rs 8,000 crore will go through the BoT route and approximately Rs 4,000 crore will be used to acquire operational highway assets through the Toll Operate Transfer (ToT) mode.
GIC of Singapore is IRB's partner on ToT and BoT initiatives. As a result, IRB's equity investment in these projects is reduced to 51%, with GIC providing the remaining 49%.
During the just ended fiscal year 2023–24, the business made around Rs 20,000 crore in road investments. The National roadways Authority of India (NHAI) monetized two bundles of roadways that it purchased for Rs 6,111 crore.
The business anticipates that BoT will return in force during this fiscal year as lower interest rates will make the Hybrid Annuity Model (HAM) less appealing as the economy grows. 35–40% of the roadway projects granted in the previous fiscal year were to HAM. BoT has been in decline for a number of years, making up fewer than 5% of all prizes. No projects under the BoT were granted last year.
When the highway project is implemented in HAM, the government pays 40% of the construction costs, with the private developer covering the remaining 60%. Over a 15-year period, the government reimburses the developer for the 60% of his initial investment in the project. Interest payments, which are fixed at three percent above bank rate, are also included in the annuity installments. Annuity payouts will decrease together with a decrease in bank rates.
"HAM has a low Internal Rate of Return (IRR) and lower equity requirements (the developer only needs to pay 60% of the project), which may appeal to some, but there are significant risks involved as well," Yadav said.
He said that the modifications made to the Model Concession Agreement (contract document) are another reason the BoT will take notice.
Recent concession agreement changes indicate a move in the right direction toward boosting project bankability and investor trust. These agreements, which have clear stipulations and strong compensation plans, are well-positioned to draw in a wide range of investors, including sovereign wealth funds, and therefore spur economic growth and infrastructure development, Yadav continued.
He claims that this fiscal year, the real reward through this manner may reach 15%, as opposed to the government objective of 10% for highways given through BoT.
A list of 900 km of roadways that will be constructed through the Bridge of Technology (BoT) at an estimated cost of Rs 2.1 trillion has been released by the government. According to the IRB official, the majority of the spans on the list will be given this year.
In 12 Indian states, IRB owns and operates 15,000 lane kilometers of roadways. BoT, HAM, and ToT are used to manage these roadways. There is an IRB InvIT Fund as well.
