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PROJECT INFORMATION MEMORANDUM

Syndication of Term Loan for

Chhapra - Hajipur Expressways Limited

(A Madhucon Group Company)

for
4-Laning of Chhapra Hajipur Section of NH-19/Bihar

June 2010
FINANCIAL ADVISOR & MANDATED ARRANGER

SBI Capital Markets Limited


A State Bank of India Subsidiary

Strictly Private & Confidential

DISCLAIMER
This Project Information Memorandum (PIM) contains proprietary and confidential information regarding
Chhapra-Hajipur Expressways Limited (or the Company). This PIM has been prepared by SBI Capital
Markets Ltd. (SBICAP), on the basis of the information provided by the Company.
There are financial projections presented in this PIM, which have been prepared for the limited purpose of circulation
to the potential lenders to Chhapra-Hajipur Expressways Limited based on the information made available by
Chhapra-Hajipur Expressways Limited. A financial projection presents, to the best of the managements knowledge
and belief, a companys expected position, results of operations and cash flow for the projection period. Financial
projections require the exercise of judgment and are subject to uncertainties concerning the effect that changes in
legislation or economic or other circumstances may have on future events and different people may have different views
about the future. There will usually be differences between the projected and the actual results because events and
circumstances do not occur as expected, and those differences may be material. Under the circumstances, no assurance
can be provided that the assumptions or data upon which these projections have been based are accurate or whether
these business plan projections will actually materialize.
Neither SBICAP nor State Bank of India or any of its associates, nor any of their respective Directors, employees
or advisors make any expressed or implied representation or warranty and no responsibility or liability is accepted by
any of them with respect to the accuracy, completeness or reasonableness of the facts, opinions, estimates, forecasts,
projections, or other information set forth in this PIM, or the underlying assumptions on which they are based and
nothing contained herein is, or shall be relied upon as a promise or representation regarding the historic or current
position or performance of the Company or any future events or performance of the Company. This PIM is divided
into chapters & sub-sections only for the purpose of reading convenience. Any partial reading of this PIM may lead
to inferences, which may be at divergence with the conclusions and opinions based on the entirety of this PIM.
The information set forth in this document is intended solely for the use of potential lenders to Chhapra-Hajipur
Expressways Limited to whom it has been delivered and recipients must undertake such investigations as they see fit
before making any commitment or entering into a contract. SBICAP will not regard any person other than
Chhapra-Hajipur Expressways Limited as its client.

PROJECT INFORMATION MEMORANDUM

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CONTACT INFORMATION - SBICAP


SBI Capital Markets Limited, Hyderabad
3rd Floor Padmaja Landmark
6-3-648 Somajiguda
Hyderabad 500 082 India
Fax: +91 40 2331 6800
1. N. Prakash
Vice President
Project Advisory & Structured Finance
Tel / Fax: +91 40 2331 2891
Mob: +91 99496 55139
Email: n.prakash@sbicaps.com
3. Debashis Rath
Deputy Manager
Project Advisory & Structured Finance
Tel: +91 40 2331 2891
Mob: +91 97018 73000
Email: debashis.rath@sbicaps.com

PROJECT INFORMATION MEMORANDUM

2. K. Srinivas
Assistant Vice President
Project Advisory & Structured Finance
Tel: +91 40 2332 1605
Mob: +91 99899 23294
Email: k.srinivas@sbicaps.com
4. Prasanna Krishnan
Deputy Manager
Project Advisory & Structured Finance
Tel: +91 40 2331 2891
Mob: +91 9000 420134
Email: prasanna.krishnan@sbicaps.com

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Strictly Private & Confidential

TABLE OF CONTENTS
1. INTRODUCTION ..............................................................................................................4
2.
3.
4.
5.

THE COMPANY .................................................................................................................8


SPONSORS PROFILE .....................................................................................................12
PROJECT DESCRIPTION ..............................................................................................23
PROJECT STRUCTURE ..................................................................................................28

6.
7.
8.
9.

PROJECT COST ................................................................................................................47


MEANS OF FINANCE .....................................................................................................50
NATIONAL HIGHWAY AUTHORITY OF INDIA .....................................................53
APPROVALS AND CLEARANCES ................................................................................58

10. FINANCIAL PROJECTIONS..........................................................................................59


10.1 Assumptions ................................................................................................................ 59
10.2 Financial Projections .................................................................................................... 62

11. RISK ANALYSIS & SWOT ANALYSIS ...........................................................................69


11.1 Risk Analysis ............................................................................................................... 69
11.2 SWOT Analysis ............................................................................................................ 73

12. CONCLUSION ..................................................................................................................75


13. ANNEXURE ......................................................................................................................77

PROJECT INFORMATION MEMORANDUM

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LIST OF KEY ABBREVIATIONS


Abbreviations
BOT
CA
CAGR
COD
CIN
CWIP
DER
DBFOT
DSCR
EPC
FME
FY
GDP
GoI
IDC
IE
INR
IRC
IRR
JV
kl
km
LCV
LD
LIA
LIE
MT
MoRT&H
NH
NHAI
NHDP
OD
O&M
PAT
PBDIT
PBT
PDC
PPP
RoW
RBI
ROCE
SBAR
SPV
TNW
TOL

Descriptions
Build Operate Transfer
Concession Agreement
Compounded Annual Growth Rate
Commercial Operations Date
Company Information Number
Capital Work in Progress
Debt to Equity Ratio
Design, Built, Finance, Operate & Transfer
Debt Service Coverage Ratio
Engineering, Procurement & Construction
Force Majeure Event
Financial Year
Gross Domestic Product
Government of India
Interest During Construction
Independent Engineer
Indian Rupee
Indian Roads Congress
Internal Rate of Return
Joint Venture
Kilo Liter
Kilometer
Light Commercial Vehicle
Liquidated Damages
Lenders Insurance Advisor
Lenders Independent Engineer
Metric Tonne
Ministry of Road Transport and Highways
National Highway
National Highways Authority of India
National Highways Development Project
Origin Destination
Operations and Maintenance
Profit After Tax
Profit Before Depreciation Income and Tax
Profit Before Tax
Pre Disbursement Conditions
Public Private Partnership
Right of Way
Reserve Bank of India
Return on Capital Employed
State Bank Advance Rate
Special Purpose Vehicle
Tangible Net Worth
Total Outstanding Liabilities

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1.

INTRODUCTION

The Government of India (GoI) is according top priority to the development of infrastructure in
the country with the main objective of achieving higher average growth in the Gross Domestic
Product (GDP) in the coming years. GoI recognises that the expansion and development of an
efficient road network is one of the pre-requisites for the countrys economic progress. Roads
have emerged as the preferred mode of transport in India and as per the NHAI, about 65% of
freight and 80% of passenger traffic is carried by the roads. Although National Highways
constitute only about 2 per cent of the road network, it carries 40 per cent of the total road traffic.
The road sector, therefore, forms a key input for production processes and adequate provision of
roads and services helps in increasing productivity and lowering production costs.
The growth in goods movement and passenger mobility in India has led to a considerable rise in
vehicle population. The industrial as well as agricultural development and rapid increase in trade
(domestic and external) have led to higher transport demand. In addition, the increase in per capita
income and overall prosperity has led to higher demand from tourism sectors, etc. leading to
increased pressure on transport infrastructure. The growing mismatch between the road
infrastructure and the vehicle population has led to traffic congestion, poor levels of service and
increase in the number of road accidents.
GoI, through the Ministry of Road Transport and Highways (MoRT&H), is working towards
enhancing the traffic carrying capacity and safety levels of the heavily congested National Highway
(NH) sections for efficient transportation of goods as well as passenger traffic. The Road
Transport and Highways Ministry has set for itself a target of achieving 20 km per day. To achieve
this, necessary modifications to project documents and systems & procedures have been made to
attract bidders. MoRT&H had identified certain National Highway stretches for 4-laning on Build,
Operate and Transfer (BOT) basis under National Highway Development Programme (NHDP)
Phase III. These stretches comprising around 12,000 Kms. of roads were to be taken up for
widening from 2-lane to 4-lane standards on BOT basis, based on traffic density, connectivity to
state capitals, and centres of tourist and economic importance. The implementation of these
projects is managed by the National Highways Authority of India (NHAI).
National Highway 19 (NH 19) connects Ghazipur in Uttar Pradesh with Patna in Bihar. It covers
a distance of 240 km, of which 120 km is in Uttar Pradesh and 120 km is in Bihar. This road spans
across the districts of Ghazipur, Bhallia in Uttar Pradesh and Saran, Muzafarpur and Patna in
Bihar. In Bihar it passes through Chhapra, Dighwara and Hajipur and crosses the Ganges to
PROJECT INFORMATION MEMORANDUM

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Strictly Private & Confidential

terminate at Patna. To cope with the rapidly rising traffic density, a number of 2-lane sections on
NH-19 were identified for widening to 4 lanes on BOT (Annuity) Basis under NHDP Phase III.
One of these sections is a 65 Km stretch from Chhapra to Hajipur section of NH-19 from km
143.200 to km 207.200 (Project Highway) in the state of Bihar.
In February 2010, NHAI had initiated the international competitive bidding (ICB) process inviting
proposals from eligible parties for taking up 4 laning of Chhapra - Hajipur section of NH-19 from
km 143.200 to km 207.200 in the state of Bihar under NHDP Phase III through a Design, Build,
Finance, Operate, Transfer (DBFOT) concession (the Concession) on Annuity basis for a
concession period of 15 years (2.5 years of construction period and 12.5 years of operating period)
(hereinafter referred to as Project).
Madhucon Projects Limited (MPL) emerged as L1 for the Project based on the lowest annuity
that the Company had sought from NHAI in consideration of the grant of Concession. Letter of
Award (LoA) was awarded to MPL on May 13, 2010. As per the LoA, the annuity sought by the

Company is a fixed Rs 130.86 crore per annum and is payable, in arrears, every 6 months from the
COD for an operating period of 12.5 years. The overall Project implementation framework
involves a special purpose vehicle (SPV), promoted by the successful bidder (i.e. MPL); entering
into an agreement (the Concession Agreement) with NHAI, wherein the SPV implement the
Project. Accordingly, an SPV, by the name of Chhapra-Hajipur Expressways Limited, (CHEL or
the Company), has been incorporated by MPL on June 2, 2010. The Concession Agreement is
expected to be executed between CHEL, as the Concessionaire, and NHAI in the month of June,
2010 (within 45 days from the date of LoA).
The draft of the Concession Agreement provided by NHAI (hereinafter referred to as the CA)
requires the Company to initiate and complete 4-laning of the Project Highway within a 910 day
period (Construction Period) starting from the Appointed Date1, operate and maintain the Project
Highway during the concession period of 15 years (construction period of 2.5 years and operating
period of 12.5 years), and, hand over the Project Highway to NHAI on expiry of the Concession
Period. The CA, on execution, will entitle the Company to receive an annuity of Rs 65.43 Crore
every 6 months, in arrears, starting from the date of commencement of commercial operations
(COD) from NHAI.
Appointed Date - The date on which Financial Close is achieved or an earlier date that the Parties may by mutual
consent determine, and shall be deemed to be the date of commencement of the Concession Period. The CA requires
achievement of Financial Close within 180 days from the date of the signing of the CA. For the avoidance of doubt,
every Condition Precedent shall have been satisfied or waived prior to the Appointed Date and in the event all
Conditions Precedent are not satisfied or waived, as the case may be, the Appointed Date shall be deemed to occur
only when each and every Condition Precedent is either satisfied or waived, as the case may be;
1

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MPL, the flagship company of the Hyderabad based Madhucon Group, is engaged in execution of
Infrastructure projects such as construction of National Highways, Fly-overs, Dams, Tunnels,
Aqua ducts, Bridges, Coal Handling plants, etc. MPL is one of Indias leading Engineering,
Procurement and Construction (EPC) and Build, Operate and Transfer (BOT) contractors.
MPL has also led the groups foray into the BOT (Build, Operate and Transfer) Road sector,
Energy Sector, Mining and Real Estate Sector through various SPV (Special Purpose Vehicles).
MPL has, so far, developed more than 710 km of Road as EPC Contractor and is
developing a further 285 km of roads across various states.
MPL is listed on the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Hyderabad
Stock Exchange (HSE) and Luxembourg Stock Exchange. MPL achieved a turnover and PAT of
Rs 1314.93 Crore and Rs 43.22 Crore respectively for FY2010 (provisional). MPLs long term
credit rating was enhanced from LA to LA+ by ICRA in March 2010. ICRA has also assigned a
rating of A1 to the Rs 75 Crore commercial paper programme of MPL. The order book position
of MPL is a healthy Rs 5700 Crore.
To ensure growth in the infrastructure segment, the Madhucon Group is in the process of
recasting its holding structure by vesting the infrastructure assets i.e. the BOT road projects,
thermal power projects and coal mining company in a subsidiary of MPL. The holding company
for the infrastructure assets has been named Madhucon Infra Limited (MIL).
The construction of the Project, to be undertaken by MPL, under fixed price, fixed time EPC
Contract, will begin immediately after Financial Close. The Company proposes to enter into an
EPC contract with MPL by July 2010. The Operations & Maintenance (O&M) responsibility is
proposed to be entrusted to Madhucon Infra Limited (MIL) based on the experience and skills of
the promoter.
The total cost of the Project, estimated at Rs.812.50 Crore, is proposed to be funded through a mix
of Term Loans and Equity in the ratio of 72:28. Equity will consist of Rs 39.00 Crore of equity
capital and Rs 188.50 Crore of interest free unsecured loan from the Promoters. CHEL has
appointed SBI Capital Markets Limited (SBICAP) as its Financial Advisor & Funds Arranger to
undertake a broad due diligence of the Project to assess its debt servicing ability and to assist
CHEL in raising the envisaged debt.
The graphs below provide an overview of the road construction projects executed and under
execution by the Promoter group.
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Road Co
onstruction Projects
P
Exxecuted

B
BOT,254.25km
m
EPC,456.41km

Road Co
onstruction Projects
P
under Implem
mentation

EPC,10
04.5Km
BOT,181.45
5Km

BOT-- Projects Executeed on Build, Operrate, Transfer basiis


EPC--Projects Executedd as an EPC conttractor

The charts indicatee MPLs strong


s
cred
dentials in the roadss sector wiith successsful
completio
on of over 710
7 km of road
r
stretch
hes. The tottal value of the compleeted and tho
ose
under exeecution projjects is over Rs 4000 cro
ore.

Strictly Private & Confidential

2.

THE COMPANY

Chhapra-Hajipur Expressways Limited (CHEL / the Company) has been incorporated as the SPV
to undertake the implementation of Four- laning of Chhapra to Hajipur section of NH-19 from
km 143.200 to km 207.200 in the state of Bihar under NHDP Phase III on Design, Build, Finance,
Operate, Transfer (DBFOT) Annuity basis.
Brief Particulars of Chhapra Hajipur Expressways Limited (CHEL)
Name of the Company

Chhapra Hajipur Expressways Limited

Date of Incorporation

June 2, 2010

Constitution

Limited Company

CIN

U45209AP2010PLC068742

Sector

Infrastructure Roads & Highways

Registered Office

Madhucon House, Plot No.1129/A, Road No.36,


Jubilee Hills, Hyderabad - 500033,Andhra Pradesh

Site Location

Chhapra-Hajipur section of NH-19 from km


143.200 to km 207.200 in the state of Bihar

Rs.1.00 crore divided into 10, 00,000shares of Rs 10


each.
Authorized Capital will be suitably enhanced as per the
financing plan of the proposed Project.

Four-laning of Chhapra Hajipur section of NH-19


from km 143.200 to km 207.200 in the state of Bihar
under NHDP Phase III on Design, Build, Finance,
Operate, Transfer (DBFOT) Annuity basis.

Authorized Capital

Project Description

Business Areas of CHEL


As per the Memorandum and Articles of Association of CHEL the Companys main objects are:

To carry on the business, to bid for and secure contracts and execute strengthening of 4laning of Chhapra-Hajipur Section of NH-19 from Km 143.200 to Km 207.200 on
Design, Build, Finance, Operate and Transfer (DBFOT) Annuity basis

To carry on the business of O&M (Operation & Maintenance) contracts relating to the
said road works during the concession period of 15 years and to continue for such other
extension periods from time to time

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Present Arrangement with Banks and Financial Institutions


CHEL, currently, does not have any fund-based and non-fund based limits from any bank or
financial institution.
Existing Operations and Past Financials
CHEL is a special purpose company and has been formed for the purpose of implementation of
the proposed Project and as of now, there are no existing operations or past financials of the
company.
Board of Directors
As per the Memorandum & Articles of Association of CHEL, the number of directors on the
board of the Company shall not be less than 3 (three) and not more than 12 (twelve). The
following persons shall be the first directors of the Company.
Table 4.1
No.

Name

1.

Mr. Nama Seethiah

2.

Mr. Kamma Srinivasa Rao

Board of Directors of CHEL


Designation
Experience
Director

Director

He is a civil engineer with vast experience


in project construction works and has
developed skill to effectively manage large
construction projects. He is presently the
Managing Director of Madhucon Projects
Ltd.
Bachelor in Engineer (Mechanical) with
vast experience in construction works.

3.

Mr. Nama Prithvi Teja

Director

Organization & Management Structure


The Board of Directors of CHEL will be responsible for the direction and management of the
SPV and the Project. The Madhucon Group will depute persons with relevant experience for
execution of the day to day management of the Company. On achievement of COD, the
management team will be further supplemented by the following senior staff to ensure the
successful delivery of the O&M responsibilities.

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The Madhucon Group is professionally managed and employees are qualified and experienced in
various fields for conduct of business as shown in the following table:
Name
of
Management
Personnel

the

Designation

Qualification

Experience

Mr. Nama Seethaiah

Managing Director

Mr. S Vaikuntanathan

Director

Mr. S V Patwardhan

Executive Director

M Tech
LLB

Dr. N Janakiram

Executive Director

M Tech, Ph D

Mr. N. Ramesh

General
(Projects)

Mr. I. Vidya Sagar

Deputy
General M Tech (Civil)
Manager (Coordinator)

Mr. Santosh Kumar

Project Manager

BE (Civil)

16 years of experience

Mr. V.K. Singh

Project Manager BE (Civil)


Coordination
(Site/HO/Consultant)
Deputy
Project BE (Civil)
Manager

20 years of experience

Mr. V.N. Jha


Mr. Hardhan Bhuin

Diploma
in He is a civil engineer with vast
Civil
experience in project construction
Engineering
works and has developed skill to
effectively manage large construction
projects. He is presently the
Managing Director of Madhucon
Projects Ltd.(MPL)
Chartered
Over 25 years experience in banking
Accountant
and investment banking sector and
corporate finance.
& Over 15 years of experience with
various companies across India.

Manager BE (Mech)

Survey Manager

Over 40 years of experience with


various companies across India.
He is having more than 20 years of
experience in project construction
works and has developed skill to
effectively manage large construction
projects.
20 years of experience

20 years of experience

Diploma
in 12 years of experience
Civil
Engineering

The above are supported by a team of experienced and qualified employees. Besides the above,
the company recruits qualified and experienced professionals at various levels to strengthen the
various functional teams as and when required.

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Capital Structure
The capital structure of the CHEL as on May 21, 2010 is as under:
Share Capital

Particulars

Rs.

Authorized Capital

1,000,000 Equity Shares of


Rs 10 each

10,000,000

Issued, Subscribed
& Paid up Capital

5000 Equity Shares of Rs


10 each

50,000

Considering the paid up equity requirement of Rs. 40.20 crore for the Project, the authorized share
capital of Rs. 1.00 crore will be suitably increased and a suitable condition to this effect has also
been suggested in the Term Sheet.

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3.

SPONSORS PROFILE

CHEL is promoted by Madhucon Projects Limited (MPL), the flagship company of the
Hyderabad based Madhucon Group. A snapshot of CHELs holding structure is provided below:
Madhucon Projects Limited (MPL)
85% Subsidiary of MPL
Infrastructure Holding
Company of MPL

Madhucon Infra Limited (MIL)


100% (MIL+MPL)

NHAI

CHEL

SPV to carry out the Project

Concession Awarded
to CHEL

Details of the Promoter and Group Companies


Madhucon group
Madhucon group, promoted by Mr. N. Nageswara Rao, has business interests in Construction of
Highways, Thermal power projects, Dams, Tunnels, Aqua ducts, Bridges, Coal Handling plants
and other civil projects. It is also engaged in the manufacture/production of sugar, and mining of
coal and granite.
The major operating companies forming part of the Madhucon group include;
1. Madhucon Projects Ltd. (MPL) and its subsidiaries
2. Madhucon Granites Ltd. (MGL)
3. Madhucon Sugar and Power Industries Ltd. (MSPIL)
The aggregate turnover, profit and Net worth of the three companies during FY09 was Rs.
1218.67 Crore, Rs. 70.92 Crore and Rs.705.24 Crore respectively.
MPL has also led the groups foray into the BOT (Build, Operate and Transfer) Road sector,
Energy Sector, Mining and Real Estate Sector through various SPV (Special Purpose Vehicles).
Two of the BOT investments of the road sector and mining operations of Pt Madhucon have
started commercial operation. Other two BOT road projects and the Phase I of the power SPV
are expected to start commercial operation by July/August 2010 and February 2011 respectively.
These investments will generate assured and stable cash flows. To ensure focus on the
infrastructure sector, the Group is in the process of recasting its holding structure by vesting the
infrastructure assets namely Madhucon Agra-Jaipur Expressways Limited (MAJEL), TN (DK)
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Expressways Limited, Trichy Thanjavur Expressways Limited, Madurai Tuticorin Expressways


Limited, Simhapuri Energy Private Ltd (power generation) and Pt Madhucon (coal mining) to a
subsidiary of MPL. The holding company for the infrastructure assets has been named Madhucon
Infra Limited (MIL). The company has initiated the process for necessary approvals from
statutory authorities, lenders, etc for the change in the holding structure.
After getting the necessary approvals, Madhucon Infra Limited (MIL) proposes to raise equity of
about Rs 400 Crore by way of private placement and a further Rs 400 Crore by way of IPO.
IDFC- SSKI has been mandated to raise Rs 350 Crore Rs 400 crore by way of private placement
/ pre-IPO placement for the company. The placement is likely to be completed by July 2010.
For the IPO of Rs 400 Crore, the company has mandated IDFC-SSKI, SBI Capital Markets
Limited, Edelweiss Securities and ICICI Securities as Book Running Lead Managers (BRLM).
Canara Bank and Motilal Oswal Financial Services Limited have been appointed as co-lead BRLM.
Amarchand Mangaldas are the legal advisors to the management and AZB Partners are the
advisors to the underwriters. Jones Day is the legal advisor for the foreign offering. The draft
DRHP will be filed on completion of statutory and non-statutory formalities relating to the
transfer of investments from MPL to MIL and due diligence and compliances required by SEBI.
3.1

Madhucon Projects Ltd (MPL)

The flagship company of the group is Madhucon Projects Ltd (MPL). MPL was originally
incorporated on 15th March, 1990 in the name of Madhucon Continental Constructions Private
Ltd. It was converted into a Public Limited Company in the year 1995 and the name of the
company has been changed to Madhucon Projects Limited. MPL is listed on the Bombay Stock
Exchange (BSE), National Stock Exchange (NSE), Hyderabad Stock Exchange (HSE) and
Luxembourg Stock Exchange. MPL achieved a turnover and PAT of Rs 1045 Crore and Rs 47
Crore respectively for FY2009. The company as on 31.03.2009 had a Tangible Networth of
Rs.548.46 Crore. MPL achieved a turnover and PAT of Rs 1314.93 Crore and Rs 43.22 Crore
respectively for FY2010 (provisional).
MPL is engaged in execution of Infrastructure projects such as construction of National
Highways, Fly-overs, thermal power projects, Dams, Tunnels, Aqua ducts, Bridges, Coal Handling
plants, etc. MPL is one of Indias leading Engineering, Procurement and Construction (EPC)
and Build, Operate and Transfer (BOT) contractors.

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3.1.1 Share Holding Pattern


The share holding pattern of Madhucon Projects Limited (MPL) as on December, 2009 is as
follows:
Particulars
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Individuals / Hindu Undivided Family
Bodies Corporate
Sub-Total
(2) Foreign
Total Shareholding of Promoter & Promoter Group (a)
(B) Public Shareholding
(1) Institutions
Mutual Funds / UTI
Foreign Institutional Investors
Sub-Total
(2) Non-Institutions
Bodies Corporate
Individuals
NRIs/OCBs
Sub-Total
Total Public Shareholding (b)
Total (A)+(B)
(C) Shares held by Custodians and against which Depository
Receipts have been issued (c)
Total (a)+(b)+(c)

PROJECT INFORMATION MEMORANDUM

No. of Shares

%age
shareholding

30,087,600
12,461,438
42,549,038
42,549,038

40.77%
16.89%
57.66%
57.66%

9,139,387
9,324,815
18,464,202

12.38%
12.64%
25.02%

6,462,694
4,915,001
343,605
11,721,300
30,185,502
72,734,540

8.76%
6.66%
0.47%
15.88%
40.90%
98.56%

1,060,400
73,794,940

1.44%
100%

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3.1.2 Major Road Projects of MPL


MPL has executed/executing around 997 km of 4/6 laning on National Highways in the last 15 years. The major road projects executed by MPL are as
under:
Sl.

Name

of

the Assignment

No Company
Executing

Brief Particular of the Project

awarded by

Length in Current Status

Value

km

the Project

the

(Rs Crore)

Project
1.

Madhucon Agra-

57.305

The project achieved

NHAI/BOT

The consortium of MPL (85%) along with SREI International Finance

Projects

Limited (15%) won the bid to execute the project, on BOT basis, for

COD in May 2009 and

Expressways

improvement, operation and maintenance, rehabilitation and strengthening of

the toll collections are

Limited (MAJEL)

existing 2-Lane road and widening to 4 lane Divided Highway of Km 63 to

in line with original

Km 120 of NH-11 (Bharatpur - Mahua section) in the state of Rajasthan.

assessment.

Jaipur

The CA was signed on

13th

327.39

October 2005. The Concession is valid for 25

years from the appointed date (13th December 2005) i.e. till 13th December
2030.
2.

TN (DK)
Expressways

NHAI/BOT

TN (DK) Expressways Limited was incorporated as a SPV by MPL &

Projects

associates (99.9%) and SREI International Finance Limited (0.1%)

achieved

Consortium for Design, Construction, Development, Finance Operation and

November 2009 and

Maintenance of Km (305.6 373.725) for the stretch Karur Bypass to

the toll collections are

Dindigul and improvement, operation and maintenance of Km (292.6

in line with original

305.6) for the entire stretch of Karur Bypass on NH-7 in the state of Tamil

assessment.

Limited

68.125

The

project
COD

road

381.06

in

Nadu.
3.

Trichy

of

NHAI/BOT

Trichy Thanjavur Expressways Limited was incorporated as a SPV by MPL

PROJECT INFORMATION MEMORANDUM

Page 15

55.75

As on date 96% of the

390

Strictly Private & Confidential


Thanjavur

Projects

Expressways

for Execution and Maintenance of 4 - Lanes of Trichy Thanjavur Section,

work

Km (80.00 135.750) on NH- 67 in the state of Tamil Nadu on BOT Basis.

completed. The COD

Limited

is

fully

is expected in June,
2010.

4.

Madurai -

NHAI/BOT

Madurai Tuticorin Expressways Limited was incorporated as a SPV by

Tuticorin

Projects

MPL & Associates - SREI & Associates Consortium for Execution and

work is completed and

Expressways

Maintenance of 4 - Lanes of Madurai Tuticorin Section, Km (138.8 264.5)

the COD is expected

Limited

on NH- 45 B in the state of Tamil Nadu on Build Operate Transfer (BOT)

in July, 2010.

125.7

As on date 97% of the

920

Basis.
5.

MPL

NHAI/EPC

Strengthening of Vijayawada to Eluru road section of NH-5 (Km 3.40 to Km

71.6

Completed

325.65

57.22

Completed

161.90

59.2

Completed

162.00

93

Completed

146.31

48

Completed

124.70

Contract with 75.00 including 4-laning from Km 3.40 to Km 13.00 and construction of
IWM
6.

MPL

Bypass for Eluru town in Andhra Pradesh

GMR

EPC Widening and Rehabilitation of the existing 2-lane highway from Tada to

Contract
7.

MPL

GMR

Nellore (Km 54.38 to km 111.60) of NH-5 section in Andhra Pradesh


/EPC Strengthening of the existing 2-lane highway from Tuni to Anakapalli (Km

Contract

300.00 to Km 359.20) and widening to 4-lane dual carriageway of NH-5 in


Andhra Pradesh

8.

MPL

GMR /EPC Strengthening and widening to 4-lane of NH-45 from Tambaram to


Contract/
Tindivanam (Km 28.00 to Km 121.00) in Tamil Nadu
Expressways
& Highways

9.

MPL

NHAI/EPC

Rehabilitation and Upgrading of 4/6 lane divided carriageway for package

Contract/

(KU-5) from Chittorgarh Mangalwar from Km 220.00 to Km 172.00 of

PROJECT INFORMATION MEMORANDUM

Page 16

Strictly Private & Confidential


Expressways

NH 76 in Rajasthan.

& Highways
10.

MPL

MPRDC/EPC State Highway14 & State Highway27: Six State Highway Corridors
Contract

102.41

Completed

62.45

153.80

Completed

96.32

40

Under Implementation

318.78

24.5

Under Implementation

273.80

40

Under Implementation

388.23

Agar-Sarangpur & Susner-Khilchipur Road of Package 04, Madhya Pradesh.


The
Project is funded by Asian Development Bank.

11.

MPL

MPRDC/EPC State Highway23: Project Road No.8, Guna Fatehpur Paron: 65.80 kms
Contract

State Highway14: Project Road No.10, BioraMaksudangarh-Siroj: 88.00


kms
(funded by Asian Development Bank)

12.
13.
14.

MPL
MPL
MPL

NHAI/EPC

National Highway28:Lucknow Muzaffarpur, Km 440 to Km 480 in the

Contract

State of Bihar (funded by World Bank)

NHAI/EPC

4 lane National Highway 37: Nagaon to Dharamtul from km 255.00 to km

Contract

230.50 on East West Corridor, Assam.

NHAI/EPC

National Highways NH-57 between Jhanjapur to Dharbanga section, Bihar.

Contract
Total (km)

PROJECT INFORMATION MEMORANDUM

996.61

Page 17

Strictly Private & Confidential

3.1.3 Financials of MPL


MPL achieved a turnover and PAT of Rs 1314.93 Crore and Rs 43.22 Crore respectively for
FY2010 (provisional). The tangible networth of the company as on March 31, 2010 was about Rs.
576.00 Crore. The financial highlights of MPL for the previous five years are furnished below:
(Rs Crore)

Particulars

2006

2007

2008

2009

Audited

2010
Unaudited

Total Income

349.54

531.52

737.99

1044.53

1314.93

PBDT

56.72

84.29

10347

116.48

120.59

Depreciation

19.13

25.30

33.94

43.34

44.85

PBT

37.58

58.99

69.53

73.13

68.14

Provision for Tax

4.32

17.42

2228.34

26.24

24.90

PAT

33.26

41.57

47.25

46.90

43.22

Dividend

1.69

2.21

2.21

2.95

--

Net Cash Accruals

50.70

64.66

7897.2

90.24

88.07

Net Fixed Assets

113.38

195.56

247.99

288.41

289.38

1.29

231.12

299.69

372.75

461.69

Net Current Assets

401.81

229.96

153.31

207.16

--

Total Assets

516.49

656.65

700.99

868.32

--

Tangible Net worth

409.53

447.91

50480

548.46

--

Total debt

103.42

201.16

196.20

319.86

--

Total Liabilities

516.49

656.65

700.99

868.32

--

EBIDTA (%)

20.06%

18.44%

16.25%

13.69%

11.13%

PAT (%)

9.52%

7.82%

6.40%

4.49%

3.39%

Debt equity ratio

0.25

0.45

0.39%

0.58

--

TOL / TNW

0.79

1.20

2.49

1.51

--

Current Assets

628.88

581.60

708.62

714.98

--

Current Liabilities

227.07

351.63

555.30

507.81

--

2.76

1.65

1.28

1.40

--

Investments

Current Ratio

MPLs long term credit rating was enhanced from LA to LA+ by ICRA in March 2010. ICRA has
also assigned a rating of A1 to the Rs. 75 Crore commercial paper programme of MPL. The order
book position of MPL is a healthy Rs. 5700 crore as on May 31, 2010.

PROJECT INFORMATION MEMORANDUM

Page 18

Strictly Private & Confidential

3.1.4 Associate / Subsidiary Companies of MPL / MIL


MPL has also led the groups foray into the BOT (Build, Operate and Transfer) Road sector,
Energy Sector, Mining and Real Estate Sector through various SPV (Special Purpose Vehicles).
The status of each of the projects is presented below:
a) Simhapuri Energy Private Limited
SEPL, the SPV for energy sector, envisages the development of a coastal based power plant with
an aggregate capacity of 1890 MW (2x135 MW + 2X150 MW + 2x660 MW) to be implemented in
four phases near Krishnapatnam in the Nellore District of Andhra Pradesh. While Phase I and
Phase II are under implementation, Phases III and IV (2x660 MW) are at planning stage.
Phase I:
The Company is currently implementing Phase I of the project consisting of 2x135 MW power
plant. The Project cost has been estimated at Rs 1336.50 Crore and is being funded by equity of
Rs 334.10 Crore and term loan of Rs 1002.40 Crore. The project is scheduled to be operational in
February 2011.
Phase II:
The scope of this report covers the Phase II of the project of 300 MW. The cost of the project is
estimated at Rs. 1605.88 Crore, to be funded by equity contribution of Rs. 401.47 Crore and
balance by term loan of Rs. 1,204.41 Crore. The financial tie-up for the Phase II is underway and
is likely to be completed by June 2010. The projected is expected to be completed by July 2012.
b) PT Madhucon Indonesia
MPL had set up a wholly owned subsidiary in the name of Pt Madhucon Indonesia, a limited
liability company under the Indonesian Laws. Pt Madhucon has a mining license for 8660 hectares
in South Sumatra. All the clearances have been obtained and the initial production has
commenced. The mine has started operations is expected to export about 6,00,000 MT by March
2011 and which will be scaled up gradually. The estimated reserves of the mine are about 900
Million MT.
Pt Madhucon has been granted another coal mining contract to excavate and export coal in 3188
Hectares of land in East Kalimantan, Indonesia. The said Coal mines are estimated to have 250
Million MT of Coal Reserves.

PROJECT INFORMATION MEMORANDUM

Page 19

Strictly Private & Confidential

Pt Madhucon also has a third mine of 4000 hectares is in East Kalimantan which is also licensed in
its name The exploration work is in progress and the company is hopeful of obtaining all the
licenses within 6 months.
c) Nama Hotels Private Limited
MPL, as the developer, has incorporated Nama Hotels Private Limited (NHPL), on December 24,
2007 as an SPV for vesting the assets of the 4 Star Hotel awarded to it by Andhra Pradesh
Housing Board. The 4- Star Hotel (Project) will consist of 14 floors, developed within an area of
2.62 acres with the total built up area of 5,76,169 Sft and having 436 rooms (including 72 service
apartments), 2 banquet halls, 5 conference rooms, specialty restaurant, 24 hour coffee shop, Spa,
Gym etc.
The Project has achieved Financial Closure with the debt tie up of Rs 252.7 Crore on 31st July,
2009. The COD of the project is expected in March, 2012.
3.2

Madhucon Granites Limited (MGL)

MGL is a 100% Export Oriented Unit, with registered office at Khammam, Andhra Pradesh,
India. It is a supplier of an exquisite array of fine granite of varied colours and designs. MGL is a
top player with respect to production and dispatches. MGL owns quarries spanning over 2400
acres of abundant granite deposits. The mines of MGL are spread across five states in the country.
MGL is equipped with mining, quarrying and processing expertise; the factory has processing
capacity to the tune of over 7 containers a month. MGL is ranked among the top 3 export
oriented units for granite in the country.
3.3

Madhucon Sugars & Power Industries Limited (MSPIL)

MSPIL has its registered office at Khammam, Andhra Pradesh. Madhucon acquired a loss-making
sugar factory from the co-operative sector at Khammam and turned it around into a profit making
company. The total installed capacity for the sugar plant is 4000 TCD (Tonnes Crushed per Day)
and the capacity of the Co-gen plant is 20 MW; the company is planning to add an ethanol
distillery.

PROJECT INFORMATION MEMORANDUM

Page 20

Strictly Private & Confidential

Salient financials of MGL and MSPL are provided below:


(Rs Lacs)

Particulars

Net Sales

MGL
FY 2007
FY 2008
FY 2009
MSPIL
FY 2007
FY 2008
FY 2009

3.4

PBIDT

PBT

PAT

Net Fixed Secured


Assets
Loans

Net
worth

11483
13062
11898

5321
4121
4424

3388
2636
2922

3169
2632
2274

5915
5557
5582

3238
2417
1094

7160
9710
10483

3220
1921
5516

370
249
1899

8
-77
380

4
-68
128

2862
15628
16970.826281

795
10353
12393

1418
1348
5429

Groups Banking Relationships

The Madhucon group has developed strong banking relationships over the last 15 years. The
various facilities enjoyed by the Groups operating companies and the outstanding limits are
summarized below:
(Rs Crore)

Facility
Company

MPL

Madhucon
Sugar & Power
Industries
Limited
Madhucon
Granites
Limited

Bank Name and Branch

Canara Bank
State Bank of India
IDBI Bank
United Bank of India
ICICI Bank
Oriental Bank of Commerce
Centurion Bank of Punjab
IndusInd Bank
Standard Chartered Bank
Bank of Bahrain & Kuwait
Axis Bank
TOTAL
Canara Bank
Vijaya Bank
Andhra Bank
Indian Bank
TOTAL
State Bank of India
TOTAL

PROJECT INFORMATION MEMORANDUM

Fund
based
Limits
100.00
50.00
50.00
0.00
0.00
100.00
0.00
0.00
0.00
0.00
125.00
425.00
25.00
15.00
61.50
30.00
131.50
20.00

Non Fund
Based
Limits
200.00
100.00
150.00
100.00
150.00
100.00
100.00
50.00
25.00
1.00
0.00
976.00
0.00
0.00
13.00
13.00
26.00
10.00

20.00

10.00

Outstanding as on
31/03/2010
Fund
Non Fund
based
Based
Limits
Limits
50.25
2.42
50.00
66.69
50.00
1.11
0.00
24.66
0.00
38.90
0.53
45.06
0.00
89.21
0.00
44.25
0.00
25.00
0.00
0.00
125.00
0.00
275.78
337.3
19.66
0.00
11.63
0.00
56.36
4.81
23.97
0.00
111.62
4.81
7.38
4.68
7.38

4.68

Page 21

Strictly Private & Confidential

The status of loans disbursed for SEPLs thermal power project (Phase I) is provided below:
(in Rs Crore)

S.
No.

Name of the Bank

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Canara Bank
State Bank of India
Andhra Bank
Allahabad Bank
Central Bank of India
Oriental Bank of Commerce
Punjab & Sind Bank
United Bank of India
Corporation Bank
Indian Bank
Indian Overseas Bank
State Bank of Patiala
UCO Bank
Vijaya Bank
Tamilnad Mercantile Bank
Total

Term Loan Term


Loan Earmarked
Sanctioned
Disbursed as of for FLC
Apr 30, 2010
206
91.61
57.00
138.4
61.56
38.31
70
31.12
19.37
70
31.12
19.37
70
31.12
19.37
70
31.12
19.37
35
31.12
19.37
35
31.12
19.37
35
15.55
9.68
35
15.55
9.68
35
15.55
9.68
28
15.55
9.68
70
15.55
9.68
70
15.55
9.68
35
12.50
7.75
1002.4
445.69
277.36

Balance

57.39
38.53
19.51
19.51
19.51
19.51
19.51
19.51
9.77
9.77
9.77
9.77
9.77
9.77
7.75
279.35

The status of loans disbursed for Nama Hotels Private Ltd. is provided below:

(in Rs Cr.)

S.
No.
1
2
3
4
5
6
7
8

Name of the Bank


Canara Bank
State Bank of Travancore
State Bank of Mysore
Punjab & Sind Bank
Corporation Bank
Andhra Bank
Union Bank of India
Oriental Bank of Commerce
Total

Term Loan
Sanctioned
45.50
22.75
45.50
45.50
22.75
22.75
22.75
25.43
252.93

PROJECT INFORMATION MEMORANDUM

Disbursed as of
Mar 31, 2010
4.14
2.07
4.14
0.00
2.07
2.07
2.07
2.30
18.86

Balance
Amount
41.36
20.68
41.36
45.50
20.68
20.68
20.68
23.13
234.07

Page 22

Strictly Private & Confidential

4.

PROJECT DESCRIPTION

4.1

Scope of the Project

As per NHAIs terms, CHEL has been incorporated by MPL for executing the Project. The
Project envisages Design, Build, Finance, Operate, Transfer (DBFOT) of 4 laning of Chhapra Hajipur section of NH-19 from km 143.200 to km 207.200 in the state of Bihar under NHDP
Phase III on Annuity basis for a period of 15 years (2.5 years of construction period and 12.5 years
operating period). The Project envisages the following:
i)

Construction of the Project Highway and Project Facilities as per the Schedule A of the CA

ii) Operations & Maintenance of the Project Highway


iii) Performance and fulfillment of all other obligations of the Concessionaire in accordance with
the provisions of the CA and matters incidental thereto or necessary for the performance of
any or all of the obligations of the Concessionaire under the CA.
iv) Transfer of the Project to NHAI at the end of the Concession Period
4.2

Site & Project Location

National Highway 19 (NH 19) connects Ghazipur in Uttar Pradesh with Patna in Bihar. It covers
a distance of 240 km, of which 120 km is in Uttar Pradesh and 120 km is in Bihar. This road spans
across the districts of Ghazipur, Bhallia in Uttar Pradesh and Saran, Muzafarpur and Patna in
Bihar. In Bihar it passes through Chhapra, Dighwara and Hajipur and crosses the River Ganges to
terminate at Patna. To cope with the rapidly rising traffic density, a number of 2-lane sections on
NH-19 were identified for widening to 4 lanes on BOT (Annuity) Basis under NHDP Phase III.
One of these sections is a 65 Km stretch from Chhapra to Hajipur section of NH-19 from km
143.200 to km 207.200 (Project Highway) in the state of Bihar.
Hajipur is around 10 km from Patna whereas Chhapra is around 70 km from Patna. The area
nearer to Patna falls under Zone-4 of earthquake hazard zoning of India. The latest seismic zoning
map of India given in the earthquake resistant design code of India [IS 1893 (Part 1) 2002] assigns
four levels of seismicity for India in terms of zone factors. In other words, the earthquake zoning
map of India divides India into 4 seismic zones (Zone 2, 3, 4 and 5) unlike its previous version
which consisted of five or six zones for the country. Zone-4 is called the High Damage Risk Zone
and it covers areas in Indo-Gangetic basin and the capital of the country (Delhi, Jammu) and
Bihar.

PROJECT INFORMATION MEMORANDUM

Page 23

Strictly Private & Confidential

Figure 5.1

4.3

Site Map of the Project Highway

Existing Project Highway Characteristics

a. Land
The project road generally lies between latitude N840 to N 850 +2323 and longitude E250 to
E260 + 3143. The road traverse through plain terrain and this road lies in Seismic Zone IV.
b. Carriageway
The present carriageway of the Project Highway is a 2-lane carriageway with paved shoulders in its
entire length, from Km 143.200 to Km 207.200 of NH - 19. The Site does not include any
Permanent Bridge, Bye Pass or Tunnel costing Rs. 50 crore or more.
c. Total Number of Structures
The total number of existing structures on the Site is noted below:
a.
b.
c.
d.
e.
f.
g.
h.

No. of Major Bridges


No. of Railway Over Bridges
No. of Fly-over
No. of Minor Bridges
No. of Underpass
No. of Pipe Culverts
No. of Slab Culverts
No. of Arch Culverts

PROJECT INFORMATION MEMORANDUM

01
01
01
04
03
30
17
10
Page 24

Strictly Private & Confidential

d. Bus bays & Truck Lay byes


The total number of bus bays and truck lay byes on the Project Highway is noted below:

4.4

No. of Bus bays on LHS

- Nil

No of Bus bays on RHS

- Nil

No. of Truck lay-bays on LHS

- Nil

No. of Truck lay-bays on RHS

- Nil

Proposed Scope of Work under the CA

The scope of work under the CA constitutes providing a fourlane Project Highway. The Project
Highway shall be widened to four lane dual carriageway configuration with paved shoulder with or
without Service Roads.
a. Width of Carriageway
The paved carriageway shall generally be 17.5 meters wide excluding the median. Covered drains
shall also be provided on both sides of the building edge in built-u sections, wherever service
roads are provided during four laning.
b. Alignment and Longitudinal Section
An alignment plan and vertical profile of the Project Highway are to be designed as per Appendix
BII of the Technical Schedule of the Manual of Specifications and Standards for 4-laning of
National Highways through Public Private Partnership published by MoRT&H.
c. Provision of Bypasses/New Alignment/ Realignment
3 bypasses having an aggregate length of 37.962 km, as mentioned in the table below, need to be
provided in the Project Highway.
S. No.
1.
2.
3.
Total

Name of Bypass

Length in Km

Chappra Bypass

15.012

Aami & Digwara Bypass


Shitalpur Bypass

4.95
18.00
37.962

d. Service Roads
There are no service roads and/or lay byes existing on this project road.
e. At Grade Intersections
At grade intersections shall have to be provided at all the intersecting roads at 1 location for major
intersections and at 12 locations for minor intersections in the CA.
PROJECT INFORMATION MEMORANDUM

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Strictly Private & Confidential

f. Grade Separated Intersections


Grade separated intersections shall have to be provided at 24 locations.
g. Underpasses
3 Existing 2 lane underpasses shall be widened to 4-lane. The existing underpasses shall be
rehabilitated/ maintained by Concessionaire during the entire concession period.
h. Major Bridges
3 new Major Bridge shall have to be constructed and 1 bridge shall have to be
rehabilitated/repaired/widened.
i. Minor Bridges
17 new Minor Bridges shall have to be constructed and 4 bridges shall have to be
rehabilitated/repaired/widened.
j. Culverts
81 new Culverts have to be provided, while 19 existing Culverts have to be widened.
k. ROB
Details of the proposed ROB is shown
S.
No.
1

Location

Chappra Bypass
2
3
4
5

Chappra Bypass
Chappra Bypass
Aami
&
Digwara Bypass
Existing
Hajipur Bypass

Name of
Crossing
Level crossing
No.28 (Chokti)
b/w Mansi
Maheshkunth
Section
ROB-13 @ Rly
km 69/8-9

Existing
Structure

Proposed Structural
Configuration

Proposed
Structure type

Proposed

Three span simply supported


on pile foundation

Pre-cast PSC I
Girder

Proposed

Proposed

Steel Girder
(1 x11+1 x18)

Single span simply


on pile foundation
Three span simply
on pile foundation
Five span simply
on pile foundation
Two span simply
on pile foundation

Pre-cast PSC I
Girder
Pre-cast PSC I
Girder
Pre-cast PSC I
Girder
Pre-cast PSC I
Girder

Proposed

supported
supported
supported
supported

Existing ROB shall be rehabilitated / maintained by Concessionaire during entire concession


period.
Project Facilities
The Concessionaire shall have to provide Project Facilities in accordance with the provisions of
Schedule C in the CA to form part of the 4-lane Project Highway. Such Project Facilities shall
have to be completed on or before the Project Completion Date and shall have to include the
PROJECT INFORMATION MEMORANDUM

Page 26

Strictly Private & Confidential

following and it shall conform to the Manual of Specifications and Standards for Four Laning of
Highways through Public Private Partnership (IRC:SP:84-2009) published by the Indian Roads
Congress.
a) Toll plazas: One toll plaza has to be provided at Km 174+700 to Km 175+235
b) Roadside furniture
c) Street Lighting
d) Pedestrian facilities
e) Landscaping and tree plantation
f) Rest areas
g) Truck lay-byes
h) Bus-bays and Bus shelters
i) Cattle crossings
j) Traffic aid posts
k) Medical aid posts
l) Vehicle rescue posts
m) Telecom system
In case of any discrepancy in the locations of any of the project facilities mentioned above, the
Independent Engineer is required to finalize the numbers/locations of these facilities as per site
requirements.
4.5

Project Timetable

The main milestones and the corresponding dates for the implementation of the Project from the
Appointed Date are as under:
Project Completion Schedule
Days
0 days
180 days
400 days
650 days
910 days
Appointed
Project Milestone Scheduled
FourEvent
Date
Project Milestone - I Project Milestone - II
III
Laning Date
Greater or Equal to Greater or Equal to Greater or Equal to
Progress
10% of the Total 35% of the Total 70% of the Total 100% of the Total
Cost
Compliance
Project Cost set in the Project Cost set in Project Cost set in
Financial Package
the Financial Package the Financial Package

1. During Construction Period, the Concessionaire shall comply with the requirements set
forth in this Schedule-G for each of the Project Milestones and the Scheduled Four-Laning
Date
2. Within 15 (fifteen) days of the date of each Project Milestone, the Concessionaire shall notify
the Authority of such compliance

PROJECT INFORMATION MEMORANDUM

Page 27

Strictly Private & Confidential

5.

PROJECT STRUCTURE

5.1

Project Structure

The relationships among the Projects various key parties are set out hereunder:
Madhucon Projects Ltd (MPL)

Sponsor

Infrastructure Holding
Subsidiary of MPL

85%
Government of
Bihar

Madhucon Projects Limited +


Madhucon Infra Limited

State Support
Agreement

100%
Concession
Agreement

GoI/NHAI

Insurers

Chhapra Hajipur Expressways


Limited
(CHEL)

Insurance
Policies
Financial
Arrangement
Lenders/FIs

Progress Report
Independent
Consultants

O&M Contractor

5.2

EPC Contract
O&M
Contract

MPL

Consultation/
Reports
Lenders
Independent
Consultant

Project Agreements

5.2.1

Concession Agreement

The CA is based on the Model Concession Agreement of NHAI. The key terms and conditions of
the CA are summarized below:
5.2.1.1

The Concession

In February 2010, NHAI had initiated the ICB process inviting proposals from eligible parties for
the Project. MPL emerged as L1 for the Project based on the lowest annuity that the Company
had sought from NHAI in consideration of the grant of Concession. Letter of Award (LoA) was
awarded to MPL on May 13, 2010. As per the LoA, the annuity sought by the Company is a

fixed Rs 65.43 crore per annum and is payable by NHAI every 6 months from the COD for an
operating period of 12.5 years. The overall Project implementation framework involves a special
purpose vehicle (SPV), promoted by the successful bidder (i.e. MPL); entering into an agreement
(the Concession Agreement) with NHAI, wherein the SPV shall implement the Project.
Accordingly, an SPV, by the name of Chhapra Hajipur Expressways Limited, (CHEL or the
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Company), has been incorporated by MPL on June 2, 2010.


NHAI shall grant to CHEL (the Concessionaire) a concession including the exclusive right, license
and authority during the subsistence of the CA to construct, operate and maintain the Project (the
Concession) for a period of 15 (Fifteen) years commencing from the Appointed Date2:
The Concession shall oblige or entitle (as the case may be) the Concessionaire to, inter-alia;
Finance and construct the Project Highway
Manage, operate and maintain the Project Highway in accordance with the provisions of
CA, and
Performance and fulfillment of all other obligations of the Concessionaire in accordance
with the provisions of CA.
Transfer of the Project to NHAI at the end of the Concession Period
5.2.1.2

Scope of the Project

The Project envisages the Design, Build, Finance, Operate, Transfer (DBFOT) concession (the
Concession) of 4 laning of Chhapra - Hajipur section of NH-19 from km 143.200 to km 207.200
in the state of Bihar under NHDP Phase III on Annuity basis for a specified period of 15 years
(including construction period of 2.5 years).
5.2.1.3

Concession Period

Unless extended or terminated earlier in accordance with the terms of the CA and subject to
provisions explained in the following paragraphs, the term of the Concession will be 15 years (the
Concession Period or CP) starting from the Appointed Date, including a 2.5 years construction
period.
5.2.1.4

Concession Fee

In consideration of the grant of Concession under this Agreement, the Concession Fee payable by
the Concessionaire to the Authority shall be Re.1.00 (Rupee One) per year during the term of this
Agreement. The Concession Fee, for each year, shall be paid in advance within 90 (ninety) days of
the commencement of the Accounting Year, for which it is due and payable.
5.2.1.5

Conditions Precedent

The rights and obligations of the Concessionaire under the CA are subject to satisfaction of the
following Conditions Precedent on or before Financial Close:
2Appointed

Date for this purpose means the date on which all the conditions precedent to the initial availability of
funds under the Financing Agreements are fulfilled (Financial Close) or an earlier date agreed upon by the parties. The
CA requires achievement of Financial Close within 180 days from date of signing of the CA.

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a) The Concessionaire shall have obtained all the applicable permits & clearances specified in
the Schedule E of CA;
b) The Concessionaire shall have provided Performance Security to the Authority;
c) The Concessionaire shall have executed and procured execution of the Escrow
Agreement;
d) The Concessionaire shall have executed and procured execution of the Substitution
Agreement;
e) The Concessionaire shall have executed the Financing Agreements
f) NHAI shall have procured the Right of Way to the site for the Concessionaire in
accordance to the provisions in Clause 10.3.1 of CA;
g) NHAI shall have procured approval of the Railway authorities in the form of a general
arrangement drawing that would enable the Concessionaire to construct road over
bridges/under bridges at level crossings on the Project Highway in accordance with the
Specifications and Standards and subject to the terms and conditions specified in such
approval;
h) NHAI shall have procured all Applicable Permits relating to environmental protection
and conservation of the Site;
5.2.1.6

Land/Site

The Site for the Project comprising the real estate and the right of way (ROW) is to be provided
by NHAI to the Concessionaire. Provision of site and the ROW by NHAI shall also include leave
& license rights in respect of all the land (along with any buildings, constructions or immovable
assets, if any, thereon) on an as is where is basis for the duration of the Concession Period and
for the purposes permitted under the CA. The schedule of handing over of the Site and ROW to
the Concessionaire and liquidated damages prescribed for failure to adhere to such schedule,
provided such failure is for reasons other than Force Majeure or breach of CA by the
Concessionaire, are shown below:
Site and ROW as % Schedule of handing Liquidated damages payable for delay
of total requirement
over
80%

Remaining 20%

On

or

before

Appointed Date

0.1% of the Performance Security for each


days delay subject to a maximum of 20% of
the Performance Security.

Rs.50 (Rupees fifty) per day for every 1,000


Within 90 days of the (one thousand) square metres or part thereof,
Appointed Date
commencing from the 91st (ninety first) day of
the Appointed Date

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5.2.1.7

Performance Security, Financial Close, Project Schedule, Damages & Completion

Performance Security:
The Concessionaire is required to furnish to NHAI a Performance Security, not later than 180
days from the date of the signing of the CA, in the form of an irrevocable and unconditional bank
guarantee of Rs. 28.75 Crores for the due and faithful performance of its obligations during the
construction period. Until above mentioned Performance Security is provided, the Concessionaire
has to provide a Bid Security of Rs 6.91 Crore. Bid Security shall be retained by NHAI till the
Concessionaire has provided a Performance Security as per the Concession Agreement. The
Performance Security shall have to be valid for one year from the Appointed Date. It can be
released earlier upon the Concessionaire expending on Project construction an aggregate sum not
less than 20% of the Total Project Cost and provided it is not in breach of its obligations under
the CA.
Financial Close:
The Concessionaire is required to achieve Financial Close (FC) within 180 days from the date of
signing of the CA. In the event of a delay in achieving Financial Close, the Concessionaire would
be entitled to a further period of 120 days subject to payment to NHAI of Damages at the rate of
0.1% of the Performance Security for each days delay, or for a further period not exceeding 200
days, subject to payment to NHAI of damages at the rate of 0.2% of the Performance Security for
each days delay (subject to a maximum of 20% of performance security). However, no Damages
would be payable if such delay in Financial Close has occurred solely as a result of any default by
NHAI or due to Force Majeure.
Project Schedule:
Apart from achievement of FC, the Concessionaire is also required to comply with each of the
following project milestones during the Construction Period, (Project Milestones)
Min. Amount reqd. to be
spent (as % of capital cost
as per Financial Package)

No of days from the


Appointed Date

1. Project Milestone I

10%

180

2. Project Milestone II

35%

400

3. Project Milestone III

70%

650

4. Completion of 4-lane Project Highway


(Scheduled 4-Laning Completion Date or COD
or SPCD)

100%

910

Milestones and Requirement

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Failure to achieve the above milestones within 90 days of the scheduled dates shown above will
result in the levy of damages payable @ of 0.1% of the Performance Security amount per day till
the milestone is achieved. In case the COD is achieved by the scheduled date shown above,
NHAI would refund (without any interest) the damages collected by it from the Concessionaire
for delays in achievement of the preceding milestones. In the event the four lane Project
Highway is not completed within 270 days after the Scheduled Four-Laning Date, NHAI shall be
entitled to terminate the CA. However, payment of damages and termination of CA by NHAI
would be possible only when the delay is not on account of reasons solely attributable to NHAI or
Force Majeure.
Completion (COD or commencement of Commercial operations):
The commercial operations date (COD) would be the date certified (in the form of a Completion
Certificate) by the Independent Engineer appointed by NHAI under the terms of the CA. The
Project Highway would be deemed to be complete and open to traffic from the date of receipt of
the Completion Certificate. The CA would also allow the IE to permit commencement of
commercial operations by issuing a provisional certificate, on request of the Concessionaire, even
though certain works or things forming part thereof are outstanding and not yet complete
(Punch List items). All items in the Punch List are required to be completed by the
Concessionaire within 90 (ninety) days of the date of issue of the Provisional Certificate. However,
as per the CA a Provisional Certificate may, upon request of the Concessionaire to that effect, be
issued for operating part of the Project Highway, if at least 75% of the total length of the Project
Highway has been completed. Subject to the provisions of Clause 12.4 in the CA, if COD does
not occur prior to the 91st (ninety first) day after the Scheduled Four-Laning Date, unless the
delay is on account of reasons solely attributable to NHAI or due to Force Majeure, the
Concessionaire shall pay Damages to the Authority in a sum calculated at the rate of 0.1% (zero
point one per cent) of the amount of Performance Security for delay of each day until COD is
achieved.
5.2.1.8

Annuity

From the date of receipt of the Completion Certificate (or Provisional Certificate) i.e. the
Concessionaire upon achieving COD for the Project Highway, the NHAI will make Annuity
payment to the Concessionaire for each Annuity Payment Period, on each Annuity Payment Date.
The Annuity payment will commence from COD The first Annuity Payment Date shall be the
date falling after 6 (six) calendar months from COD. In case COD is different from the Scheduled
four-laning Date in the CA, the Annuity Payment Schedule in the CA would be suitably modified.
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In case the Concessionaire achieves COD after to the Scheduled four laning Date then it shall be
liable for reduction in its first Annuity for delayed completion of the Project. Such Reduction shall
be effected on the first Annuity payment on the first Annuity Payment Date. The Reduction for
such delayed completion shall be the product of Average Daily Annuity and the number of days
by which the COD exceeded the Scheduled Four Laning Date.
5.2.1.9

Assured Lane Availability

If due to Concessionaires failure to perform/discharge its obligations the actual availability of the
Carriageway during any Annuity Payment Period was less than the Assured Lane Availability, the
Concessionaires right to receive Annuity shall proportionally reduce.
5.2.1.10 Other Revenue

The Concessionaire shall not levy, or collect or be entitled to charge for commercial advertising,
display and hoardings any sum whatsoever in the nature of a toll or fee. However, this restriction
shall not apply to the Toll Plaza, rest areas, bus shelters and telephone booths located on the
Project Highway if the advertising does not in the opinion of the Authority, distract the Users or
violate extant guidelines of MoSRTH.
5.2.1.11 Independent Engineer

A consulting engineering firm would be appointed by NHAI to act as the independent consultant
under the CA (Independent Engineer or IE). The IE is required to review and approve the
design, drawings, contracts (relating to construction and operation); manuals etc.; review,
inspect & monitor the construction works; conduct tests on completion of construction and
issuing Completion/ Provisional Certificate; review, inspection and monitoring of O&M;
determine costs of any works or services; evaluate and report to NHAI, on issues related to the
CA. The appointment of the IE shall be made by 90 days from the date of this Agreement and
shall be for a period of 3 years. The Independent Engineer shall submit regular periodic reports to
the Authority in respect of its duties and functions set forth in Schedule-Q of the CA. In
determining the nature and quantum of duties and services to be performed by the Independent
Engineer during the Development Period and Construction Period, the NHAI shall endeavour
that payments to the Independent Engineer on account of fee and expenses do not exceed 2% of
the Total Project Cost.
On expiry or termination of the aforesaid period of 3 years, NHAI may renew the appointment,
or appoint another firm to be the Independent Engineer for a term of 3 years and such procedure
shall be repeated after expiry of each appointment. Duties and services to be performed by the
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Independent Engineer during the Operation Period shall be determined by NHAI. All payments
made to the Independent Engineer on account of fee and expenses during the Operation Period
shall be borne equally by the Authority and the Concessionaire
5.2.1.12 Change of Scope

NHAI may require the provision of such additional works and services, which are not included in
the Scope of the Project or the Concessionaire may also propose a Change of Scope for providing
safer & improved services to the users. The costs arising out of such Change of Scope during the
Construction Period will be reimbursed by NHAI as per actuals, provided however, that costs
upto 0.25% of the Project Cost would be borne by the Concessionaire. The Concessionaire would
be entitled to nullify any Change of Scope order if the cumulative costs relating to all the Change
of Scope orders exceed 5% of the total project cost as per the CA (TPC) in the immediately
preceding 3 years or if such cumulative costs exceed 20% of the TPC at any time during the
Concession Period.
5.2.1.13 Operation and Maintenance

The Concessionaire is required to operate and maintain the Project Highway in accordance with
the provisions of the CA either by itself, or through the O&M Contractor, the Applicable Laws
and Applicable Permits, and to conform to Good Industry Practice. The obligations of the
Concessionaire are permitting safe, smooth and uninterrupted flow of traffic on the Project
Highway during normal operating conditions, carrying out periodic preventive maintenance of the
Project Highway, undertaking routine maintenance, undertaking major maintenance, etc.
In the event that the Concessionaire fails to repair or rectify any defect or deficiency set forth in
the Maintenance Requirements within the period specified therein, it shall be deemed to be in
breach of this Agreement and the Authority shall be entitled to recover Damages, to be calculated
and paid for each day of delay until the breach is cured, at the higher of (a) 0.5% (zero point five
per cent) of Average Daily Annuity, and (b) 0.1% (zero point one per cent) of the cost of such
repair or rectification as estimated by the Independent Engineer. If the actual traffic exceed the
design capacity, during any year or part thereof and the Concessionaire fails to repair or rectify any
defect or deficiency set forth in the Maintenance Requirements within the period specified, it shall
be deemed to be in breach of this Agreement and the Authority shall be entitled, from such date,
to recover Damages, to be calculated and paid for each day of delay until the breach is cured, at
the higher of (a) 5% (five per cent) of Average Daily Fee, and (b) 1% (one per cent) of the cost of

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such repair or rectification as estimated by the Independent Engineer, for the balance period of
the concession.
5.2.1.14 Escrow Account

The Concessionaire is required to open and establish an Escrow Account with a bank prior to the
Appointed Date. All funds constituting the Financial Package, all Annuities and any other
revenues from or in respect of the Project Highway including proceeds of any rentals, deposits,
capital receipts or insurance claims, and all payments by NHAI after deducting any outstanding
Concession Fee shall be credited to such account. Also, all capital as well as revenue expenditure
of the Project shall be made from this account.

5.2.1.15 Financing Arrangements and Security to Lenders

Substitution Agreement:
As per the provisions of CA, a tripartite substitution agreement would be signed among NHAI,
the Concessionaire and the Lenders (represented through the Lenders Representative) providing
that the Lenders shall have the right to substitute the Concessionaire by a Selectee for the residual
period of the Concession, in case of the Concessionaires event of default under any of the
Financing Documents.
Upon substitution of the Concessionaire under and in accordance with the Substitution
Agreement, the Nominated Company substituting the Concessionaire shall be deemed to be the
Concessionaire under this Agreement and shall enjoy all rights and be responsible for all
obligations of the Concessionaire under this Agreement as if it were the Concessionaire; provided
that where the Concessionaire is in breach of this Agreement on the date of such substitution, the
Authority shall by notice grant a Cure Period of 120 (one hundred and twenty) days to the
Concessionaire for curing such breach.

Charges & Assignments


The CA cannot be assigned by the Concessionaire to any person, save and except with the prior
consent of NHAI. Also, the Concessionaire cannot create nor permit to subsist any Encumbrance,
or otherwise transfer or dispose of all or any of its rights and benefits under the CA or any Project
Agreement to which it is a party except with the prior consent of NHAI. However, these restraints
are not applicable to the following:
-

Liens arising by operation of law (or by an agreement evidencing the same) in the ordinary
course of business of the Project Highway;

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-

Mortgages/pledges/hypothecation of goods/assets other than Project Assets, and their related


documents of title, a charge on the Escrow Account, arising or created in the ordinary course
of business of the Project Highway, and as security only for indebtedness to the Senior
Lenders under the Financing Agreements and/or for working capital arrangements for the
Project Highway;

Assignment of rights, interest and obligations of the Concessionaire to or in favour of the


Lenders Representative as nominee and for the benefit of the Senior Lenders, to the extent
covered by and in accordance with the Substitution Agreement as security for financing
provided by Senior Lenders under the Financing Agreements; and

Liens or encumbrances required by any Applicable Law.

5.2.1.16 Termination and Terminal Compensations

The CA can be terminated in the following circumstances:


Termination Due to Default:
Either party can terminate the CA upon occurrence of an event of default (Event of Default) on
the part of the other Party.
Termination due to Force Majeure
Either party can terminate the CA upon occurrence and subsistence of a force majeure event (a
Force Majeure Event) for a period of 180 (one hundred and eighty) days or more within a
continuous period of 365 (three hundred and sixty five) days,
i.

Termination Due to Default:

(a) Concessionaire Event of Default


Apart from the usual events of default used in such agreements, the following constitute a default
on the part of the Concessionaire:
-

failure to replenish or provide fresh Performance Security within a cure period of 30 days;

failure to achieve Financial Close within prescribed period;

failure to achieve the latest outstanding Project Milestone and such default continues to subsist
for 120 days;

failure to achieve Project Completion within the 270 days from the Scheduled Four-Laning
Date

failure to complete the Punch List items within 90 days of the issue of Provisional Certificate.

failure to make timely payments to NHAI within the period specified in the CA

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-

failure to cure the escrow default (if happens) within a cure period of 15 days

transfer of the Concessionaires rights and/or obligations under any of the Project Agreements
or all or material part of the assets which may affect the Concessionaires ability to perform;

Winding up, bankruptcy or appointment of receiver for the Concessionaire;

breach of any of the Project Agreements resulting in a Material Adverse Effect;

material default in complying with any provision of the CA if such default causes a Material
Adverse Effect on NHAI;

material breach under the Financing Agreements or a continuous default in Debt Service for a
minimum period of 3 (three) months (Financial Default);

the Concessionaire abandons the operations of the Project Highway for more than 15
consecutive days without the prior consent of NHAI;

a Change in Ownership has occurred in breach of the provisions of Clause 5.3 of the CA

The concessionaire repudiates the CA or otherwise evidences an intention not be bound by


CA;

The concessionaire suffers an execution being levied on any part of its assets/equipment
causing a material adverse effect on the project continuing for a period of 15 days; and

The concessionaire has delayed any payment that has fallen due under the CA exceeding 90
days.

Should the Concessionaire fail to remedy the breach within the prescribed period, NHAI may
evoke termination proceeding by issuing a notice of its intention to the Concessionaire. Following
this, the Concessionaire will have a further fifteen (15) days to make its representation. After the
expiry of the said period, NHAI may at its sole discretion proceed to issue the termination notice.
(b) NHAI Event of Default
The Concessionaire may terminate CA pursuant to a 90 days notice in writing to NHAI upon the
occurrence of the following events deemed as NHAIs default. The following events constitute an
NHAI Event of Default:
-

a material default on the part of NHAI in complying with any of the provisions of the CA and
such default has a Material Adverse Effect on the Concessionaire;

failure to make any payment to the Concessionaire within the period specified in the CA;

NHAI repudiates the CA;

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NHAI/GoI or GoB or any governmental agencies have caused circumstances that have a

material adverse effect on the performance of the Concessionaire and have failed to remedy
within ninety (90) days of notice.
(c) Compensation upon Termination due to Default
The details of the termination payments for these termination events are as under:
Termination payments under Events of Default:
1

Events of Default
Concessionaire
Events of Default

NHAI Events
Default

Termination payments to concessionaire by NHAI


Post COD
An amount equal to discounted value of future Annuity payments,
the discounting factor applied being the then SBI PLR + 3% less
Insurance Cover; provided that if any insurance claims forming part
of the Insurance Cover are not admitted and paid, then 80% of such
unpaid claims shall be deducted from the termination payment so
assessed.
Pre COD
No termination payment shall be due or payable
of An amount equal to the discounted value of future Annuity
payments, the discounting factor applied being the then SBI PLR 3%

In case of termination due to a Concessionaire default during the construction period, no


compensation is payable by NHAI. Termination Payment shall become due and payable to the
Concessionaire within 15 days of a demand being made by the Concessionaire to NHAI with the
necessary particulars, and in the event of any delay, NHAI shall pay interest at a rate equal to 3%
above the Bank Rate on the amount of Termination Payment remaining unpaid; provided that
such delay shall not exceed 90 (ninety) days.
ii.

Termination Due to Force Majeure:

Force Majeure Event (FME) is defined as the occurrence of an event, in India of any or all of Non
Political Event, Indirect Political Event and/or Political Event, provided that such event affects
the performance by the Party, claiming the benefit of Force Majeure (the Affected Party) of its
obligations under the CA. Provided further that such act or event (i) is beyond the reasonable
control of the Affected Party, and (ii) the Affected Party could not have prevented or overcome
by exercise of due diligence and following Good Industry Practice, and (iii) has Material Adverse
Effect3 on the Affected Party.

Material Adverse Effect is defined as the effect of any act or event on the ability of either Party to perform any of its

obligations under the CA and which act or event causes a material financial burden or loss to either Party;
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Non-Political Events
These include acts of God or events beyond the reasonable control of the Affected Party (such as
extremely adverse weather conditions, landslide, earthquake, cyclone, flood, volcanic eruption or
fire or explosion); radioactive contamination or ionizing radiation; strikes or boycotts (other than
those involving the Concessionaire or EPC Contractor); any judgment or order of any court in
India made against the Concessionaire or NHAI (other than failure of the Concessionaire to
comply with any applicable Law or applicable permit); or any event or circumstance of a nature
analogous to any of the foregoing. When the Force Majeure Event is a Non Political Event, the
Parties shall bear their respective costs.
Indirect Political Events
These include an act of war, invasion, armed conflict or act of foreign enemy, blockage, embargo,
riot, insurrection, terrorist or military action, civil commotion or politically motivated sabotage;
industry wide or state wide strikes or industrial action for continuous period of 24 (twenty four)
hours and exceeding an aggregate period of 7 (seven) days in an Accounting Year; civil
commotion, boycott or political agitation which prevents collection of Fee by the Concessionaire
for an aggregate period exceeding 7 (seven) days in an accounting year; any Indirect Political Event
that causes a Non-Political Event; or any event or circumstances of a nature analogous to any of
the foregoing. For Indirect Political Event, the costs attributable shall have to be borne by CHEL
to the extent of the Insurance Cover, and to the extent such Force Majeure Costs exceed the
Insurance Cover, one half of the same shall be reimbursed by NHAI to CHEL.
Political Events
These include change in law; expropriation or compulsory acquisition of any Project Assets or
rights of the Concessionaire or of the Contractors; unlawful or unauthorized or without
jurisdiction revocation of, or refusal to renew or grant without valid cause, any clearance of permit
or exemption required by the Concessionaire or any of the Contractors (to the extent not caused
by a breach on their part) to perform their respective obligations under the Project Agreements; or
circumstance of a nature analogous to any of the foregoing. For Political Events, all the Force
Majeure Costs shall be reimbursed by NHAI to CHEL.
In addition to the above, for each of these events , any failure or delay of a Contractor, to the
extent caused by another event of the same category is also included under the force majeure

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provision provided however, such an event should not result in any offsetting compensation being
payable to the Concessionaire by or on behalf of such Contractor;
Further, inclusion of Change In Law events under Political Events above, is applicable only
when:
-

the effect of the underlying change in law exceeds the higher of Rs. 1 Crore and 0.5%of the
Annuity in any accounting year, and

provided that such effect cannot be addressed in accordance with the change in law provisions
existing in the agreement. These change in law provisions envisage appropriate amendments in
the CA or any other mutually agreeable arrangement to place the Concessionaire in the same
financial position as it would have been but for the change in law

Allocation of costs arising out of Force Majeure

Upon occurrence of any Force Majeure Event prior to the Appointed Date, NHAI and
the Concessionaire shall bear their respective costs and no Party shall be required to pay to
the other Party any costs thereof.

Upon occurrence of a Force Majeure Event after the Appointed Date, the costs incurred
and attributable to such event and directly relating to the Project (the Force Majeure
Costs) shall be allocated and paid as follows:
a. upon occurrence of a Non-Political Event, the Parties shall bear their respective
Force Majeure Costs and neither Party shall be required to pay to the other Party
any costs thereof;
b. upon occurrence of an Indirect Political Event, all Force Majeure Costs
attributable to such Indirect Political Event, and not exceeding the Insurance
Cover for such Indirect Political Event, shall be borne by the Concessionaire, and
to the extent Force Majeure Costs exceed such Insurance Cover, one half of such
excess amount shall be reimbursed by the Authority to the Concessionaire; and
c. upon occurrence of a Political Event, all Force Majeure Costs attributable to such
Political Event shall be reimbursed by the Authority to the Concessionaire.

Compensation upon Termination due to FME


The details of the termination payments for the above-mentioned FME are as under:

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Termination payments under Force Majeure events:

Force Majeure
Event
Non Political Event

Indirect Political
Event

Political Event

Termination payments to the Concessionaire by NHAI


An amount equal to 90% of the Book value of physical Project
Assets less Insurance Cover
An amount equal to the discounted value of future Annuity
payments, the discounting factor applied being the then SBI
PLR (minus) 3%.
An amount equal to the discounted value of future Annuity
payments, the discounting factor applied being the then SBI
PLR -(minus) 3%

The Termination Payment payable by NHAI upon Termination consists of payments on account
of and restricted to the Debt Due and Adjusted Equity, as the case may be, which form part of the
Total Project Cost in accordance with the provisions of the CA; provided that the amount payable
in respect of any Debt Due expressed in foreign currency shall be computed at the Reference
Exchange Rate for conversion into the relevant foreign currency as on the date of Termination
Payment.
Within 60 days from the COD, the Concessionaire is required to notify to NHAI the Total Project
Cost as on COD and its break-up between Equity & Debt Due. Only the amounts so conveyed
shall form the basis of computing Termination Payment and in the event such break-up is not
notified to NHAI, Equity shall be deemed to be the product arrived at by subtracting Debt Due
from Total Project Cost as per the CA.
5.2.1.17 Arbitration

Any dispute between the Concessionaire & NHAI, which is not resolved amicably, shall be finally
decided by reference to arbitration by a Board of Arbitrators, which will consist of three
Arbitrators of whom each party shall select one and the third Arbitrator shall be appointed in
accordance with the Rules of Arbitration of the Indian Council of Arbitration.
5.2.1.18 Governing Law and Jurisdiction

The CA is governed by the Laws of India and the Courts at New Delhi, India shall have
jurisdiction over all matters arising out of or relating to the CA.
5.2.1.19 State Support

A Memorandum of Understanding (MoU) will be executed between NHAI and the GoB for
enabling support from the GoB for proper implementation of NHAI road projects in the State of
Bihar. Four laning of various stretches in Bihar were amongst the projects identified and this MoU
will facilitate the development of the projects.
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5.2.2 EPC Agreement


CHEL proposes to enter into a formal EPC contract with MPL by July 2010.
General Scope of Work
MPL will be responsible for the works of the entire stretch from km 143.200 to km 207.200 of the
Project. The Scope will reflect all the construction requirements from the Concession Agreement
on a back-to-back basis.

Contract Price

The EPC contract shall be fixed time and fixed price lump sum contracts with MPL for an
aggregate value of Rs.720.13 Crore.

Construction Commencement Date

The construction commencement date for the Project Highway is expected to be January 1, 2011
i.e. within 180 days of signing the CA. CHEL is to provide possession of site and access to the site
on or before this day in accordance with the handover of the site from NHAI.

Completion Dates

The completion date of construction has been scheduled at May 31, 2013 with the view that the
construction activity shall be completed in 29 months against the available period of 30 months
for the construction as per the CA.

Certification for Completion of Work

The Work shall be certified complete only when the Independent Engineer issues the relevant
certificate(s) under the CA.

Damages for Failure to complete by Completion Dates


o In case of failure on part of the EPC Contractor(s) to achieve completion by the respective
completion dates, the EPC Contractor(s) shall be liable to pay suitable liquidated damages
to CHEL, for such default for every week or part of a week.
o LDs to be recovered from Monthly Interim Payments
o No LD payable if delay arises on account of reasons solely attributable to NHAI or due to
Force Majeure.

Maintenance of Existing Highway

The EPC Contractor shall maintain the existing highway during the construction period to the
same extent required of the Concessionaire under the CA.
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Defects Liability Period


o There shall be a 365-days defects liability period from the issuance of Completion
Certificate by the IE i.e. COD
o Defects so identified in the Defect Liability Period by the O&M operator to be corrected
by MPL. If MPL fails to carry out the repairs then the defects shall be got rectified by
CHEL and the cost of the same would be recoverable from the EPC Contractor.

Performance Guarantee

The EPC Contractors shall provide performance guarantee equivalent to 10% of the EPC
Contract Price in the form of corporate guarantee before commencement of work. The
Performance Guarantee shall be released within 28 days of the issue of Defect Liability Certificate.

Design Responsibility

The EPC Contractor shall be responsible for the design of the Project Highway and its approval
by NHAI/IE.

Obtaining Permits

The EPC Contractor shall be responsible for obtaining Applicable Permits, licences and approvals
necessary for the design, execution and completion of the works as defined in the CA with the
assistance of the Concessionaire.

Payment

The EPC Contractor will serve in notice Request for Payment requesting payment of the sum
which it considers to be due in respect of the preceding month. Within seven days of the receipt
of the request, the Concessionaire will inspect the relevant works, and upon satisfaction, will issue
the Certificate of Payment. The amount shall become due on the issue of Certificate of Payment.
There shall be a mobilization advance payment of 10% of the Contract Price. To ensure the
payment due to the EPC Contractor, CHEL proposes to open a Letter of Credit in favour of the
EPC Contractor. Appropriate retention money clause shall be built into the EPC contract.

Insurance

The EPC Contractor will be responsible for CAR Policy, Third Party Liability Insurance,
workmens compensation insurance; plant and equipment insurance, marine / transit insurance;
any other insurance that the EPC Contractor may be required to take out under Indian law.

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Definition of Effects of Force Majeure

The definition and consequences of Force Majeure would generally follow those in the CA.

Termination

Termination by the Concessionaire would generally follow the provisions in the CA. The EPC
Contractor, upon the occurrence of Project Company Event of Default, may terminate the
Contract by issuing a Termination Notice.

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5.2.3

O&M Agreement

Under the DBFOT framework, the Concessionaire is responsible for the O&M of the Project
Highway throughout the Concession Period. The Operations & Maintenance (O&M)
responsibility is proposed to be entrusted to MIL/MPL.
5.2.3.1

Obligation of the O&M Contractor:

Some of the obligations of the Concessionaire are provided underneath:


(i) Permitting safe, smooth and uninterrupted flow of traffic on the Project Highway during
normal operating conditions
(ii) Allowing and assisting Authority or Authority Contractor(s) in collecting and appropriating the
Fee
(iii) Carrying out periodic preventive maintenance of the Project Highway
(iv) Undertaking routine maintenance, undertaking major maintenance which includes resurfacing
of pavements, repairs to structures, and repairs and refurbishment of tolling system and other
equipment
(v) Operation and maintenance of all communication, control and administrative systems
necessary for the efficient operation of the Project Highway
(vi) Maintaining a public relations unit to interface with and attend to suggestions from the Users,
government agencies, media and other agencies, etc.
(vii)Preventing, with the assistance of the concerned law enforcement agencies, any
encroachments on the Project Highway
(viii) Maintenance of approach roads to underpasses, overpasses upto 100 meters from the Project
Highway in accordance with good industry practices
5.2.3.2

Maintenance Manual

The O&M Contractor shall prepare Maintenance Manual in consultation with the Independent
Engineer and the Concessionaire for the regular and periodic maintenance as per Maintenance
Manual.
5.2.3.3

Maintenance Programme

Not later than 45 days before the beginning of each Accounting Year during the Operation
Period, the O&M Contractor shall prepare a programme for maintenance of Project Highway in
consultation with the Independent Engineer as per the requirements set forth in Maintenance
Manual, schedule L which shall include, but not limiting to the following:

criteria to be adopted for deciding maintenance needs;

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preventive maintenance schedule;

intervals for major maintenance works and the scope thereof;

lane closure schedule for each type of maintenance (length and time);

intervals at which the Concessionaire shall carry out periodic maintenance;

intervals and procedures for carrying out inspection of all elements of the Project
Highway;

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6. PROJECT COST
The Project Cost comprises the EPC contract Cost, Design & Engineering expenses, Site
Expenses, Interest During Construction, Financial Fees & Expenses, Preliminary & Pre-operative
expense and Contingency cost. The capital cost estimates have been provided by the Company y
based on its in-house data base. Considering the MPLs established credentials in implementing
road projects, the estimates provided by the Company may be considered reasonable. The breakup of the Project Cost is set out below:
Item
EPC Cost
Interest During Construction
Preliminary & Pre-operative Expense
Contingency
Working Capital Margin
Total Project Cost
a.

Amount in Rs Crore
720.13
37.71
29.58
17.03
8.05
812.50

% of total cost
85.99%
4.64%
3.64%
2.10%
0.99%
100.00%

EPC Contract Cost

CHEL will enter into an EPC contract with MPL for the construction of the Project Highway.
The EPC contract would cover the construction of road works, at-grade junctions, lay-byes, toll
plazas, and the installation of the toll equipment & other fixed assets. The EPC contract will be
awarded at fixed costs of Rs. 720.13 Crore to MPL. The phasing of the EPC costs during the
construction period is as under:
Phasing of EPC Cost
Amount in Rs Crore

FY 2011 FY 2012 FY 2013 FY2014


12.50% 32.50% 45.00% 10.00%
90.02
234.04
324.06
72.01

Total
100%
720.13

The major components of the EPC cost include:


Sl. No.
1
2
3
4
5

Particulars
Major structure
Bitumen base & Surface course
Sub-base and base course
Earth works
Others
(a) Drainage & Protection Areas
(b) Safety & Maintenance During Construction
(c) Roadside Amenities
(d) Traffic Signs, Road Markings & Road Furniture
(e) Toll Plaza
(f) Truck Lay-Bye Building
Total EPC Cost

PROJECT INFORMATION MEMORANDUM

Amount in Rs Crore
196.58
151.09
134.88
123.32
114.26
41.17
6.72
15.43
35.79
12.39
2.75
720.13

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i. Major Structure:
Five (5) ROBs have been proposed on the whole project road at locations where railway line
crosses the project road along the proposed alignment. There are 100 nos. of culverts passes
through proposed alignment out of which 19 nos. are existing and 81 nos. are new proposed
culverts. The existing bridges constitute 4 minor bridges and 1 major bridge and all of them
requires repair according to the feasibility report. 14 additional new minor bridges and 3 major
bridges will be constructed along the stretch.
ii. Bitumen base & Surface course
The company proposes to source the following raw materials:
Sl. No.

Description of Materials

1
2
3
4
5
6

Granular Sub-Base (GSB)


Aggregate 40mm
Aggregate 20mm
Aggregate 10mm
Dust
Sand

7
8

Lime
Cement

9,770
60,220

9
10
11
12

Emulsion (for PC & TC)


Bitumen 60/70
CRMB
HYSD

1,800
16,437
6,219
9,030

Approximate
Quantity (in MT)
1,070,351
287,272
419,921
394,173
448,859
144,069

Proposed Sources

MPL Crusher (Gaya) 130


Km from Hajipur
Ganga River 10 Km from
Site
Patna - 20 Km
Satna 500 Km from Hajipur
(Birla/JP Cement)
IOCL Haldia 600 km from
Hajipur or from Barauni
TATA/SAIL Patna 20 Km

iii. Sub-base and base course


Wet Mix Macadam (WMM) base and granular sub-base along the entire stretch of the road is to be
provided as per the detailed specifications laid out in the CA.
iv. Earth Works
The Company will carry out excavation and surface preparation work necessary for construction
of road way and other supporting infrastructures along the Project Highway.
b.

Interest during Construction

Interest during construction is projected to be Rs. 37.71 Crores, based on the projected drawdown
of the finance facilities.
c.

Preliminary & Preoperative Expenses

CHEL will incur Rs 29.58 Crore as preliminary & pre-operative expenses during the construction
period. These expenses include costs incurred on design & engineering, during bidding stage, costs
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incurred in the incorporation of the SPV and further expenses proposed to be incurred in
connection with increase in the authorized share capital of SPV, LLC charges, administrative
charges, financial charges and other expenses. These are based on Companys estimates. A detail
of the same is provided below:
Prelim.& Pre-Operative Expenses
Engineering Consultancy Expenses
Administrative & Establishment Expenses
Pre-Operative Expenses
Statutory Charges
Loan Document Charges
LLC Charges
Travel & Conveyance Charges
Insurance during construction
Consultancy, Financial Charges & TRA &
Trustee Charges
Total Prelim.& Pre-Operative Expenses

d.

Rs. In Crore
3.60
5.00
1.05
5.00
0.50
0.15
2.00
6.87
5.41
29.58

Contingency Provisions

Typically in road projects, the major component of the Project Cost is the EPC contract cost. As
the EPC contract is proposed to be awarded on a fixed price fixed time basis, a nominal
provision of about Rs 17.03 crore has been provided as contingency to cover any unanticipated
increase in preliminary & pre-operative expenses, consultancy charges and other expenditure.
e.

Working Capital Margin

Typically in annuity based projects, the annuity from NHAI will commence on COD and the first
annuity will be payable 6 months from the COD. However, the company will incur expenses on
O&M, administrative costs and interest on term loan during this period. As per normal
calculations, CHELs would be eligible to receive around 75% of the receivable from NHAI in the
first year of operation; however, we have assessed the expenses to be incurred by the Company
during this period for the working capital requirement in the first year of operation. The total
Working Capital requirement for the Project in the first year of operations comes out to be
Rs.32.19 Crore. Margin money to be brought for meeting working capital requirement by the
promoters has been estimated at Rs 8.05 Crore (i.e. 25% of projected net working capital
requirement) which is provided for in the Project cost towards meeting these expenses for the
initial 6 months after COD. The balance of Rs 24.14 Crore shall be raised from various working
capital bankers in due course. The rate of interest for the working capital finance has been
assumed at 10.00% p.a.

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7.

MEANS OF FINANCE

The project cost is proposed to be funded by a mix of promoters contribution and term loan
(RTL) at a debt: equity ratio of 72:28 as shown below:
Financing Structure
Source of Fund
Rs. in Crore % of total
585.00
Term Loan
72.0%
Promoters Contribution
227.50
28.0%
- Unsecured Loans from the
188.50
23.20%
Promoters
39.00
- Equity Capital
4.80%
812.50
Total Funding
100.0%
The debt / equity ratio was arrived at on the basis of the debt servicing ability of the Project under
various scenarios.
Promoters Contribution
The Promoters would be bringing in Rs 39.00 Crore (4.80% of the Equity requirement) by
subscribing to equity share capital of CHEL and the balance Rs 188.50 Crore would be brought in
the form of interest free unsecured loan. Considering the specific purpose of the SPV, unsecured
loans are proposed to be brought in as Equity to minimize the cost on transferring the surplus
funds to the Sponsors once all the term loans are fully repaid. The phasing of Promoters
Contribution of Rs. 227.50 Crore is envisaged to occur in the following manner:

Figures in Rs Crore
Phasing of Equity
Phasing of Interest Free Unsecured
Loan from the Promoters

FY 2011
7.80
37.70

FY 2012
8.90
43.02

FY 2013
17.73
85.70

FY 2014
4.57
22.08

Total
39.00
188.50

The consolidated estimated cash accruals for the next four years are shown below:
Projected Cash Flow Statement of MPL
FY
Sources

2011

2012

2013

2014

Total

Net cash accruals (PAT + Depreciation)

108.0

117.0

130.0

140

495.0

Less: Repayment of term loans

48.0

28.0

24.0

24.0

124.0

60.0

89.0

106.0

116.0

371.0

Madhucon Projects Ltd (MPL) & MIL

- Net cash accruals available for investments


MPL - QIP, long term loans, CP, etc
MIL -

Private Placement
MIL -

Total funds available


PROJECT INFORMATION MEMORANDUM

100.0

100.0

400.0

400.0

IPO
560.0

400.0
489.0

106.0

116.0

400.0
1271.0
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FY
Requirements
Nama Hotels Pvt Ltd

2011

2012

2013

2014

Total

20.0

62.0

0.0

0.0

82.0

Simhapuri Energy - Phase I

102.0

0.0

0.0

0.0

102.0

Simhapuri Energy - Phase II

201.0

115.0

86.0

0.0

402.0

Chhapra-Hajipur Expressways Ltd.

45.5

51.9

103.4

26.7

227.50

368.5

100.0
328.9

200.0
389.4

50.0
76.7

350.0
1163.5

Other projects
Total equity requirement

MIL proposes to raise about Rs 400 Crore by way of private placement and a further Rs.400 Crore
by way of IPO. MIL has received in-principle commitments for Rs 400 crore placements and is
confident of completing the private placement by July 2010. From the projected cash flow of MPL
mentioned above, it can be seen that the Sponsors are making adequate arrangements to meet its
equity commitments for various projects.
For the IPO of Rs 400 Crore, the company has mandated IDFC-SSKI, SBI Capital Markets
Limited, Edelweiss Securities and ICICI Securities as Book Running Lead Managers (BRLM).
Canara Bank and Motilal Oswal Financial Services Limited have been appointed as co-lead BRLM.
Amarchand Mangaldas are the legal advisors to the management and AZB Partners are the
advisors to the underwriters. Jones Day is the legal advisor for the foreign offering.
The status of the proposed equity issue is provided below:
a. Merchant bankers, legal advisors have been appointed
b. Lender approvals for transfer of shares of infrastructure companies from Madhucon
Projects Limited to Madhucon Infra Limited have been received / under process.
c. Legal counsels have completed vetting.
The IPO issue of MIL will follow after necessary approval from SEBI.
Term Loan from Banks/FIs/Multilateral Funding Agencies
Term Loan amounting to Rs. 585.00 Crore is proposed to be raised from banks and FIs. The main
terms of the Facility are as under
Facility

Term Loan

Facility Size

Rs. 585.00 Crores with LC sub-limit of upto 75% of the


Term Loan component

Purpose

Part-financing the total cost of the Project

Interest Rate

1.75% below SBAR, present effective rate of 10.00%


p.a. payable monthly

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Moratorium

0.50 years

Repayment

9.50 years

Security

As per Annexure 2

An indicative term sheet for the proposed Facility is enclosed at Annexure 2.

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8.

NATIONAL HIGHWAY AUTHORITY OF INDIA

8.1

Background

National Highways Authority of India (NHAI) was constituted by an Act of Parliament, namely
the National Highways Authority of India Act, 1988, to develop, maintain and manage the
National Highways vested or entrusted to it by the Central Government. It became operational in
February, 1995. NHAI is an autonomous organization wholly owned by Government of India
(GoI) under the Ministry of Shipping, Road Transport and Highways (MoSRT&H). The road
sector has been identified as one of the key infrastructural bottlenecks impeding economic growth
in India. In order to address this issue, GOI initiated the comprehensive National Highways
Development Programme (NHDP) in 1999. NHAI has been given the mandate to implement the
NHDP.
The mission of NHAI is to meet the nations need of development and maintenance of national
highways network to world standards within the strategic policy framework set by GoI and thus
promote economic well being. GoI vests the management of NHAI with a board of members
comprising the Chairman, five full time members and four part time members.
Indian road network of 33 lakh Km is around second largest in the world and it consists of 70,548
km of National Highways, 1, 31,899 Km of State Highways, 200 Km of Expressways, 4, 67,763
Km of Major District Roads and 26, 50,000 Km of Rural and Other roads In India, about 65% of
freight and 80% passenger traffic is carried by the roads. National Highways constitute only about
2% of the road network but carry about 40% of the total road traffic. Number of vehicles has
been growing at an average pace of 10.16% per annum over the last five years.
8.2

Operations of NHAI

The primary mandate of NHAI is time and cost bound implementation of the National Highways
Development Programme (NHDP) through a host of funding options including from external
multilateral agencies like World Bank, Asian Development Bank, JBIC etc. The main functions of
NHAI are as follows:

Survey, develop, maintain and manage highways vested in, or entrusted to it;

Regulate and control the plying of vehicles on the highways vested in, or entrusted to, it
for the proper management thereof;

Develop and provide consultancy and construction services in India and abroad and carry
on research activities in relation to the development, maintenance and management of
highways or any facilities thereat;

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Provide such facilities and amenities for the users of the highways vested in, or entrusted
to, it as are, in the opinion of the Authority, necessary for the smooth flow of traffic on
such highways;

Form one or more companies under the Companies Act, 1956 ( 1 of 1956) to further the
efficient discharge of the functions imposed on it by this Act;

Advise the Central Government on matters relating to highways; and

Collect fees on behalf of the Central Government for services or benefits rendered under
section 7 of the National Highways Act, 1956 ( 48 of 1956) , as amended from time to
time, and such other fees on behalf of the State Governments on such terms and
conditions as may be specified by such State Government.

NHAI is implementing the NHDP in the following modes of delivery:


(a) BOT (Toll)
(b) BOT (Annuity)
(c) Special Purpose Vehicle (SPV)
(d) EPC
BOT (Toll) Model
In a BOT (Toll) Model, the concessionaire (private sector) is required to meet the
upfront/construction cost and the expenditure on annual maintenance. The Concessionaire
recovers the entire upfront/construction cost along with the interest and a return on investment
out of the future toll collection. The viability of the project greatly depends on the traffic (i.e. toll).
However, with a view to bridge the gap between the investment required and the gains arising out
of it, i.e., to increase the viability of the projects, capital grant is also provided (up to a maximum
of 40% of the project cost has been provided under NHDP).
BOT (Annuity) Model
Annuity projects have been conceived by NHAI as an alternative to the traditional toll based BOT
projects to catalyse private sector participation in large NH projects. Under the BOT (Annuity)
Model, the Concessionaire (private sector) is required to meet the entire upfront/construction cost
(no grant is paid by the client) and the expenditure on annual maintenance. The Concessionaire
recovers the entire investment and a pre-determined cost of return out of the annuities payable by
the client every year. The selection is made based on the least annuity quoted by the bidders (the
concession period being fixed). The client (Government/NHAI) retains the risk with respect to
traffic (toll), since the client collects the toll.
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Special Purpose Vehicle (SPV) Model


Under SPV Model, NHAI forms Special Purpose Vehicle (SPV) for funding road projects. SPVs
are separate legal entities formed under the Companies Act, 1956. It involves very less cash
support from the NHAI in the form of equity/debt; rest of the funds come from Ports/Financial
Institutions/beneficiary organisations in the form of equities/debt. The amount spent on
development of roads/highways is to be recovered in prescribed concession period by way of
collection of toll fee by SPV.
EPC Model
In an EPC Model, NHAI invites the bids from the Contractors for the construction of the
required Highway. NHAI provides the entire technical specifications and the payment terms in the
bid documents. The bidding parameter under the EPC model is the lowest construction cost
bidded by the Contractors. After completion of the construction, NHAI retains the right to toll
the completed stretch.
8.3

Finance Mechanisms

NHAI proposes to finance its projects by a host of financing mechanisms. Some of them are as
follows:Revenue from Cess
This consists of cess on every litre of diesel and petrol sold in the country. It is proposed that
earmarking of cess may be done for viability gap funding relating to the approved programme of
BOT (Toll) projects. The earmarking would be done annually by the Planning Commission in
consultation with MoSRT&H and Finance Ministry, along with fixing of the borrowing limits of
NHAI. The remaining cess revenue may continue to be used for ongoing expenditures including
construction contracts, annuity repayments, land acquisitions, DPR preparation etc.
Surplus from Toll Revenues
The other major source of revenue for NHAI is the collection of tolls on the stretches of GQ and
NHDP-II, which were already four laned under EPC/Annuity Models. These funds are expected
to be utilised by NHAI for funding its capital and revenue expenditures.
Additional Budgetary Support
As the NHDP-I, NHDP-II and NHDP-III did not envisage any budgetary support other than
cess and external assistance and the fact that the cess revenues would be doubled next year
onwards, NHAI does not propose any additional budgetary support for funding its future NHDP
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programmes except for Special Accelerated Road Development Programme for North East
(SARDP-NE).
Market Borrowings
The shortfall between the inflows from all sources and the projected outflows, including the
payment of annuity, is proposed to be met out of Market Borrowings. Market Borrowings would
have to be raised against suitable forms of support or back stopping by the Finance Ministry. This
may include a commitment that cess revenues at a pre-determined level would be made available
to NHAI and may be suitably assigned for debt service. Given the size and tenure of borrowings,
it would be necessary for the Ministry of Finance to provide the requisite comfort to lenders so
that NHAI is able to raise the projected borrowings.
Negative Grant from the Private Sector
This is another source of funds for NHAI. It may be mentioned that in some of the BOT (Toll)
projects, the bidder has quoted the negative grant payable to NHAI.
8.4

Financial Profile of NHAI

NHAI has a strong financial position because of the support it receives from the GoI for
implementing its projects. The support includes allocation of Cess on fuels, earmarking of
budgetary resources and flexibility to raise funds through Capital Gains Bonds. In order to
support the funds required for NHDP, the government levies a cess of Rs 2 on every liter of
petrol/diesel sold.This allocation of cess on fuel which constituted 59.3% of NHAIs capital
employed as on March 31,2009 has been increased by 23% to Rs. 85.78 billion in 2009-10.Cess
funds are used by NHAI for repayment of principal and interest of market borrowings, payment
of viability gap funds and payment of Annuity (in BOT Annuity Projects). NHAI also receives
budgetary support from the GoI. It received Rs. 1.59 billion in 2008-09 and RS. 5.59 billion in
2007-2008. The allocation varies based on yearly requirements. GoI also extends financial support
in the form of multilateral agency loans for the road sector. NHAI receives 80% of these funds as
grant. In 2008-09, Rs. 15.13 billion was received as grant and Rs. 3.79 billion as loan.
NHAI is one of the two bodies authorised to float bonds that qualify for Capital Gains
Exemption, this gives the authority an opportunity to tap the debt market of the country. The
response to the debt issues of NHAI has always been overwhelming. These issues have a
reaffirmed AAA rating from CRISIL.
To reduce NHAIs financial exposure and also to bring in private participation, NHAI has been
awaring projects on BOT basis. Though some projects thus awarded require viability gap funding,
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there are some projects on certain commercially viable stretches through which NHAI is getting
negative grant. NHAI had received a negative grant of Rs. 13.53 billion till March 31,2009.As on
March 31, 2009, NHAI has a networth of Rs. 51,696 Crore, against this NHAI has a total debt of
Rs. 5544 Crore.
11.3.1 Credit Rating
CRISIL had carried out rating of NHAI for its Rs 80.0 billion long term borrowing programme
and Rs. 55.93 billion Taxable Bond Programme and has assigned the following rating to NHAI:
Program
Rs. 80 billion Long Term Borrowing Programme

Rating
AAA/Stable (Assigned)

Rs. 55.93 billion Taxable Bond Programme

AAA/Stable (Reaffirmed)

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9.

APPROVALS AND CLEARANCES

The status of approvals and clearances as given by the company are as follows:
Sl. Clearances/Permissions
No.
1.
Environmental Clearance
2.
Tree Cutting Approval
3.
4.
5
6.
7.

8.
9.
10.
11.
12.
13.
14.
15.

Concerned Department

Responsibility Approval Status

MOEF
Regional Forest Department

NHAI
EPC
Contractor
EPC
Contractor

Exception of Customs duty MoF/Customs


on Major Plants and
Machinery
Wireless System
DoT

EPC
Contractor
Extraction of boulders from Directorate of State Mines EPC
Quarry
Department
Contractor
Borrow Earth Permit
Village
Panchayat/ State EPC
Government
Contractor
Permission for installation Village Panchayats/SPCB
EPC
of Crusher, Batching Plant,
Contractor
Hot Mix Plant, Asphalt
Plant, etc.
Explosive Licenses for Explosive Controller
EPC
storing explosives and diesel
Contractor
Electrical
Supply Bihar State Electricity Board
EPC
Connections and Diesel Gen
Contractor
Set
License for setting up Inspector of Factories & EPC
Batching Plant
Other Competent Authority
Contractor
NOC for Batching Plant and SPCB
EPC
Hot Mix Plant
Contractor
Water Mains and Sewerage Local Authorities
EPC
Lines
Contractor
Water Usage/Drawing water Irrigation Department
EPC
from river/reservoir
Contractor
Construction Power
Bihar State Electricity Board
EPC
Contractor
Environmental protection State Pollution Control Board EPC
and
conservation
(for
Contractor to
crusher etc)
initiate
at
appropriate
time

PROJECT INFORMATION MEMORANDUM

Obtained

MPL is taking
necessary steps
to obtain the
required
approvals.

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10. FINANCIAL PROJECTIONS


10.1 Assumptions
a) Project Schedule
Milestones
Appointed Date
Construction Start Date
Construction End Date
Commercial Operations (COD)
Concession End Date
Scheduled Commercial Operations (SPCD)
First Annuity Payment from COD

Date
January 1, 2011
January 1, 2011
May, 2013
June 1, 2013
November, 2025
May, 2013
November, 2013

b) Capital Structure
Capital Structure
Equity
Interest Free Loan
Senior Debt
Total Project Cost
D/E

Rs. in Crore
39.00
188.50
585.00
812.50

%
4.80%
23.20%
72.00%
100.00%

2.57

c) Term Loan
Facility
ROI
Moratorium
Repayment Period
Door to Door
Tail Period
Drawdown Schedules
Draw down Start
Repayment Start
Repayment End

Rs 585.00 crore
10.00%
0.50 years
9.50 years
12.50 years
2.50 years
Date
January, 2011
December, 2013
December, 2022

d) Revenue Assumptions
Annuity Amount (per year)
Mode of Payment
Concession Period
No of Installments
First annuity billing date
Credit Period for Annuity
PROJECT INFORMATION MEMORANDUM

Rs 130.86 crore
Semi-Annual
12.50 years
25
1-June-13
6 months
Page 59

Strictly Private & Confidential

e) Operations and Maintenance Assumptions


The following are considered as the basis for the future O&M costs and are summarized in
the table below:
Components

From the base year of FY 2011

Administration Expense

Rs. 2.00 Crore p.a. with annual escalation of 5% p.a.

Routine Maintenance Expense Rs. 5 Lakhs per Km with annual escalation of 5% p.a.
Rs. 1.08 Crore (i.e. 0.15% of EPC Cost) with yearly escalation
Insurance Expense

of 5% p.a.

f) Major Maintenance Expenses


The Major maintenance (MM) is scheduled to be carried out every 5 years commencing from
FY 2019. It is estimated at Rs.15 lakhs per km with half yearly escalation of 5% starting from
FY 2011. A major maintenance reserve account (MMRA) creation is also planned for the
same.
g) Assumptions on Depreciation, Tax and Interest Rate
Other financial and economic assumptions used in the financial projections are set out below.

i.

Taxation
The following categories of taxation have been adopted to be applicable:

Corporate tax rate of 32.90% (inclusive of surcharge & cess) on the net business
income of the Concessionaire;

Dividend Distribution of Tax of 16.6%(inclusive of surcharge & cess) on dividend


payouts made to the equity holders;

ii.

iii.

Minimum Alternate Tax (MAT) has been assumed at 19.9% (inclusive of surcharge
& cess); and

Depreciation under Income Tax Act has been assumed as under:


Item
Construction Works

Rate (WDV)
15.00%

Major Maintenance

100.00%

Depreciation as per Companies Act


Item
Construction Work

Rate (SLM)
8.00%

Major Maintenance

100.00 %

PROJECT INFORMATION MEMORANDUM

Page 60

Strictly Private & Confidential

iv.

Interest Rate on the Finance Facilities


The interest rate for the Term Loan has been assumed at 10.00% p.a.
The interest rate for the Working Capital Loan has been assumed at 10.00% p.a.
The Company would be availing the LC option for which the charges are assumed at 0.40%
p.a.
Return on 50% of average cash balance has been assumed at 5.00% p.a.

v.

Working Capital Requirement


Margin Money = 25% of the Working Capital Requirement
Working Capital Loan = 75% of the Working Capital Requirement

PROJECT INFORMATION MEMORANDUM

Page 61

Strictly Private & Confidential

10.2 Financial Projections


10.2.1 Projected Profit & Loss Statement
Profitability Statement
FYE
Operating FY Count

(in Rs Crore)

2014
1

2015
2

2016
3

2017
4

2018
5

2019
6

2020
7

2021
8

2022
9

2023
10

2024
11

2025
12

2026
13

109.05

130.86

130.86

130.86

130.86

130.86

130.86

130.86

130.86

130.86

130.86

130.86

87.24

Routine Maintenance Expense

3.11

3.91

4.11

4.32

4.54

4.77

5.01

5.26

5.53

5.81

6.10

6.41

4.46

Insurance

1.03

1.30

1.37

1.44

1.51

1.58

1.66

1.75

1.84

1.93

2.03

2.13

1.48

Administrative Expenses
Total Expenditure
Operating Profit
Amortization

1.91
6.06
102.99
4.93

2.41
7.62
123.24
5.92

2.53
8.01
122.85
5.92

2.66
8.41
122.45
5.92

2.79
8.84
122.02
5.92

2.93
9.28
121.58
0.99

3.08
9.75
121.11
-

3.24
10.25
120.61
-

3.40
10.77
120.09
-

3.57
11.31
119.55
-

3.75
11.88
118.98
-

3.94
12.49
118.37
-

2.75
8.69
78.55
-

Depreciation

51.66

61.99

61.99

61.99

61.99

69.23

84.07

61.99

61.99

61.99

71.26

90.25

41.33

Interest on Term Loan

47.59

53.09

48.55

43.80

38.55

32.58

25.96

18.58

10.90

3.11

Interest on WCL
Interest on 50% of Avg. Cash
Balance
Profit Before Tax (PBT)
Current Tax
Profit After Tax (PAT)
Major Maintenance Reserve

2.01

2.41

2.41

2.41

2.41

2.41

2.41

2.41

2.41

2.41

2.41

2.41

1.21

0.29

1.11

2.38

3.73

4.69

5.35

6.26

7.36

8.54

9.54

11.03

12.73

9.79

(2.91)
(2.91)

0.93
0.22
0.71

6.36
1.27
5.09

12.06
2.40
9.66

17.85
3.56
14.29

21.72
4.33
17.39

14.92
2.97
11.95

44.99
8.97
36.02

53.33
10.63
42.70

61.57
12.27
49.30

56.34
11.23
45.11

38.44
7.66
30.78

45.81
9.13
36.68

Opening Balance

2.90

14.62

26.35

29.32

29.32

33.02

48.03

63.04

66.84

Transfer to MRR

2.90

11.73

11.73

2.97

3.71

15.01

15.01

3.80

Closing Balance

2.90

14.62

26.35

29.32

29.32

33.02

48.03

63.04

66.84

66.84

(2.91)

0.71

5.09

6.76

2.56

5.66

8.98

36.02

39.00

34.29

30.10

26.98

36.68

Revenue
Income
Expenditure

Retained Earnings (RE)

PROJECT INFORMATION MEMORANDUM

Page 62

Strictly Private & Confidential

10.2.2 Projected Cash Flow Statement of CHEL


(in Rs Crore)
Cash Flow Statement
FYE

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23

Mar-24

Mar-25

Mar-26

Cash Flow From Operating Activities


PAT

(2.91)

0.71

5.09

9.66

14.29

17.39

11.95

36.02

42.70

49.30

45.11

30.78

36.68

Add: Depreciation

51.66

61.99

61.99

61.99

61.99

69.23

84.07

61.99

61.99

61.99

71.26

90.25

41.33

Add: Amortization

4.93

5.92

5.92

5.92

5.92

0.99

(43.62)

43.62

10.05

68.62

73.00

77.56

82.20

87.60

96.02

98.01

104.69

111.29

116.37

121.03

121.62

8.90

17.73

4.57

106.45

301.50

141.95

(40.95)

(46.80)

(49.72)

(55.57)

(62.89)

(70.20)

(76.05)

(78.97)

(68.74)

(Increase)/Decrease in
Receivables from NHAI
Net Cash from Operations

Cash Flow from Financing Activities


Equity
7.80
Add: inc/(dec) Term Loan
Add: inc/(dec) WCL

24.14

(24.14)

Add: inc/(dec) Unsecured loan

37.70

43.02

85.70

22.09

(75.40)

(75.40)

(37.70)

Net Cash Fin Activities

45.50

158.36

404.93

192.75

(40.95)

(46.80)

(49.72)

(55.57)

(62.89)

(70.20)

(76.05)

(78.97)

(68.74)

(75.40)

(75.40)

(61.84)

Cash Flow from Investing Activities


Capex Expenditure
45.50

158.36

404.93

195.66

14.48

14.84

18.53

19.00

45.50
-

158.36
-

404.93
-

195.66
7.15

27.67

26.20

27.84

26.62

14.48
10.24

14.84
10.98

21.96

25.72

42.55

18.53
22.44

19.00
26.63

59.78

Net Cash from Investment


Net Cash Flows
Opening Cash & Bank Balance

7.15

34.82

61.02

85.96

100.86

113.85

136.69

158.66

180.67

208.21

234.17

275.99

Add/ (Deductions)

7.15

27.67

26.20

27.84

26.62

10.24

10.98

21.96

25.72

42.55

22.44

26.63

59.78

Cash Available for MM Invest


Transfer to MM Investment

7.15

34.82

61.02

88.86

112.58

111.09

124.82

158.66

184.37

223.22

230.65

260.80

335.77

2.90

11.73

(2.75)

(11.87)

3.71

15.01

(3.52)

(15.20)

7.15

34.82

61.02

85.96

100.86

113.85

136.69

158.66

180.67

208.21

234.17

275.99

335.77

Closing Cash & Bank


Balance

PROJECT INFORMATION MEMORANDUM

Page 63

Strictly Private & Confidential

10.2.3 Projected Balance Sheet


(in Rs Crore)
Balance Sheet
FYE
Sources of Funds
Promoters Equity
Reserves & Surplus
Major Maintenance
Reserve
Unsecured Debt
Term Loan
WC Loan
Total Sources
Application of
Funds
Gross Block
Less: Acc.
Depreciation
Net Block
CWIP
Preliminary Expenses
not written off
Cash & Bank Balance
Receivables from
NHAI
Major Maintenance
Investment
Total Uses

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23

Mar-24

Mar-25

Mar-26

7.80
-

16.70
-

34.43
-

39.00
(2.91)

39.00
(2.20)

39.00
2.89

39.00
9.66

39.00
12.22

39.00
17.88

39.00
26.86

39.00
62.89

39.00
101.88

39.00
136.18

39.00
166.28

39.00
193.25

39.00
229.93

2.90

14.62

26.35

29.32

29.32

33.02

48.03

63.04

66.84

66.84

37.70
45.50

80.72
106.45
203.86

166.41
407.95
608.79

188.50
549.90
24.14
798.63

188.50
508.95
24.14
758.39

188.50
462.15
24.14
716.69

188.50
412.42
24.14
676.62

188.50
356.85
24.14
635.34

188.50
293.96
24.14
589.84

188.50
223.76
24.14
531.59

188.50
147.71
24.14
491.56

188.50
68.74
24.14
455.29

188.50
(0.00)
24.14
435.85

113.10
(0.00)
24.14
405.57

37.70
(0.00)
24.14
360.94

0.00
(0.00)
(0.00)
335.77

774.87

774.87

774.87

774.87

774.87

789.34

804.18

804.18

804.18

804.18

822.71

841.71

841.71

51.66

113.65

175.64

237.63

299.62

368.84

452.91

514.90

576.89

638.88

710.13

800.38

841.71

41.91

194.02

584.99

723.21
-

661.22
-

599.23
-

537.24
-

475.25
-

420.50
-

351.27
-

289.28
-

227.29
-

165.30
-

112.58
-

41.33
-

3.59

9.84

23.80

24.65

18.74

12.82

6.90

0.99

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

7.15

34.82

61.02

85.96

100.86

113.85

136.69

158.66

180.67

208.21

234.17

275.99

335.77

43.62

43.62

43.62

43.62

43.62

43.62

43.62

43.62

43.62

43.62

43.62

43.62

2.90

14.62

11.87

3.71

18.72

15.20

45.50

203.86

608.79

798.63

758.39

716.69

676.62

635.34

589.84

531.59

491.56

455.29

435.85

405.56

360.94

335.77

PROJECT INFORMATION MEMORANDUM

Page 64

Strictly Private & Confidential

10.2.4 DSCR Calculations


(in Rs Crore)
DSCR Calculation FYE
PAT
Add: Depreciation
Add: Amortization
Add: Term Loan Interest
Net Cash Accruals for
debt servicing

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23

(2.91)
51.66
4.93
47.59

0.71
61.99
5.92
53.09

5.09
61.99
5.92
48.55

9.66
61.99
5.92
43.80

14.29
61.99
5.92
38.55

17.39
69.23
0.99
32.58

11.95
84.07
25.96

36.02
61.99
18.58

42.70
61.99
10.90

49.30
61.99
3.11

101.27

121.72

121.55

121.36

120.74

120.19

121.98

116.59

115.59

114.40

Debt Obligation
Term Loan Repayment
Term Loan Interest
Total Debt Obligation

35.10
47.59
82.69

40.95
53.09
94.04

46.80
48.55
95.35

49.72
43.80
93.52

55.57
38.55
94.12

62.89
32.58
95.47

70.20
25.96
96.16

76.05
18.58
94.63

78.97
10.90
89.88

68.74
3.11
71.85

DSCR
Minimum DSCR
Average DSCR

1.22
1.22
1.29

1.29

1.27

1.30

1.28

1.26

1.27

1.23

1.29

1.59

Considering that the receivable on successful completion of the project are defined and from NHAI, a GoI undertaking rated AAA by
CRISIL, the average DSCR is considered comfortable.

PROJECT INFORMATION MEMORANDUM

Page 65

Strictly Private & Confidential

10.2.5 IRR Calculations


(In Rs Crore)

HY ended

Mar-11

Sep-11

Mar-12

Sep-12

Mar-13

Sep-13

Mar-14

Sep-14

Mar-15

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

Mar-18

PAT

(1.63)

(1.29)

(0.17)

0.88

1.99

3.10

4.25

5.41

6.56

7.73

Add: Amortization

1.97

2.96

2.96

2.96

2.96

2.96

2.96

2.96

2.96

2.96

Add: Depreciation

20.66

30.99

30.99

30.99

30.99

30.99

30.99

30.99

30.99

30.99

Add: Term Loan

19.50

28.09

27.06

26.04

24.86

23.70

22.52

21.28

19.96

18.58

Net Transfer to MMI

2.90

5.86

5.86

Total Cash Inflows

40.51

60.76

60.84

60.87

60.80

60.75

60.72

63.54

66.34

66.13

97.46

54.46

195.90

218.68

150.69

120.30

0.04

1.09

3.39

9.05

16.28

40.88

Cash Inflows

Cash Outflows
Capex Expenditure
Less: IDC & other
expenses
Repayment of WC Loan
Total Cash Outflows
Net Cash Flows

97.42

53.37

192.51

209.63

134.42

79.42

(97.41)

(53.37)

(192.51)

(209.62)

(134.42)

(38.91)

60.76

60.84

60.87

60.80

60.75

60.72

63.54

66.34

66.13

PROJECT INFORMATION MEMORANDUM

Page 66

Strictly Private & Confidential

(In Rs Crore)

Sep-18

Mar-19

Sep-19

Mar-20

Sep-20

Mar-21

Sep-21

Mar-22

Sep-22

Mar-23

Sep-23

Mar-24

Sep-24

Mar-25

Sep-25

Mar-26

PAT
Add:
Amortization
Add:
Depreciation

10.55

6.84

2.31

9.64

17.20

18.83

20.51

22.20

23.88

25.42

26.19

18.92

11.53

19.24

27.15

9.53

0.99

30.99

38.23

45.65

38.41

30.99

30.99

30.99

30.99

30.99

30.99

30.99

40.26

49.76

40.49

30.99

10.33

Add: Term Loan


Net Transfer to
MMI
Total Cash
Inflows

17.08

15.51

13.86

12.11

10.24

8.35

6.43

4.47

2.41

0.70

5.86

(8.61)

(11.87)

3.71

7.51

7.51

7.51

(11.03)

(15.20)

65.47

51.97

49.95

60.16

58.43

58.17

57.94

61.36

64.79

64.62

64.69

48.15

46.09

59.74

58.14

19.86

24.14

24.14

65.47

51.97

49.95

60.16

58.43

58.17

57.94

61.36

64.79

64.62

64.69

48.15

46.09

59.74

58.14

(4.28)

Project IRR
Cash Inflows

Cash Outflows
Capex
Expenditure
Less: IDC &
other expenses
Repayment of
WC Loan
Total Cash
Outflows
Net Cash
Flows

IRR = 10.35%

PROJECT INFORMATION MEMORANDUM

Page 67

Strictly Private & Confidential

10.2.6 Sensitivity Analysis


A sensitivity analysis of the companys financial position for the proposed loan duration has
been carried out to ascertain the effect of the following scenarios on the major financial
parameters of the company as a whole.
Scenario

Description

Scenario 1

Increase in interest rate by 0.5%

Scenario 2

Increase in operating cost by 5%

The summary of the sensitivity analysis is provided hereunder


Scenario
Base Case
Change in Interest Rate
Change in Operating Expenses

Project IRR

Min. DSCR

Avg. DSCR

10.35%
10.31%
10.28%

1.22
1.19
1.22

1.29
1.27
1.29

As may be seen from the above, the company is able to withstand the operations at various
sensitivity levels and its debt servicing coverage capacity is satisfactory. In the view of the
above, the company is expected to withstand above sensitivities satisfactorily.

PROJECT INFORMATION MEMORANDUM

Page 68

Strictly Private & Confidential

11. RISK ANALYSIS & SWOT ANALYSIS


11.1

Risk Analysis
The risks perceived during the existing operations period of the Project and risk mitigation
measures are as below:

Construction Risk
Risk Factor
Allocated to
Construction and EPC Contractor
Completion risk

Risk Mitigation Measures

Road construction methodologies and technologies


are simple, proven and standardized.

MPL is an established player in the road sector with


successful track record in implementing road projects
of over 700 km in length. The project will be
implemented on fixed cost & fixed time basis.
Suitable Liquidated Damages would be incorporated
in the EPC Contract to ensure timely completion.
80% of the land will be made available by NHAI
before the Appointed Date. The balance 20% is
proposed to be made available within 90 days of the
Appointed Date.

Thus, the construction and completion risk is


considered low.
Cost Over-run

EPC Contractor
/ Sponsors

The EPC contract is proposed to be awarded on fixed


price fixed time basis, which accounts for around
88.63% of the total project cost. Further, a
contingency provision of Rs 17.03 crore to cover the
impact of any unforeseen factors.
MPL/MIL will provide undertaking for cost overrun if
any.

The risk of delay due to cost over-run is considered


low.
Land Acquisition NHAI
and
timely
availability of land

As per the draft CA, NHAI has to provide land as


per the following schedule:
80% of the required land On or before the
Appointed Date (on or before Financial Close)
failing which NHAI has to pay Rs.50 per day for
every 1,000 square metres or part thereof,
commencing from the 91st day of the Appointed
Date

PROJECT INFORMATION MEMORANDUM

All the remaining land Within 90 days from the


Appointed Date failing which NHAI has to pay
0.1% of the Performance Security for each days
delay subject to a maximum of 20% of the
Performance Security
Page 69

Strictly Private & Confidential

Also, as per the draft CA, the Concessionaire can


request for a Provisional Certificate after completing
75% of the total length of the Project Highway.
Provisional Certificate allows the Project Highway to
enter into commercial service and allows the
Concessionaire to collect the Annuity Fee for the
completed stretch.
From the above provisions of the draft CA, it can be seen that
NHAI undertakes to provide at least 80% of the land on or
before Financial Close. Moreover, NHAI is committed to hand
over the balance 20% land within 90 days of the Appointed
Date.
Low Risk

Obtaining statutory CHEL


clearances
and
approvals

NHAI is required to procure all applicable permits


relating to environmental protection & conservation
of the site. All permits and approvals under applicable
laws and permits need to be obtained by CHEL.
NHAI has already obtained environmental clearance
from MoEF.
Low Risk.

Funding Risk

CHEL

The Promoters would be bringing in Rs 41.80 Crore


by subscribing to equity share capital of CHEL and
the balance Rs 192.28 Crore would be brought in the
form of interest free unsecured loan. The Sponsor(s)
are making adequate arrangements to meet their
equity commitments for various projects. The
Company proposes to raise about Rs 400 Crore by
way of private placement and a further Rs.400 Crore
by way of IPO. The Company is confident of
completing the private placement by July 2010.
Madhucon Group is one of the reputed infrastructure
development companies and has the resources to
bring in the entire equity required for the project.

Further, the Sponsor proposes to bring in 25% of its


equity contribution upfront, before approaching the
lenders for the first debt drawal.
The Project Sponsor(s) shall furnish a shortfall undertaking (to
bring in additional funds in a form & manner satisfactory to the
RTL Lenders) for cases of any cost overrun and /or gap in means of
financing.
Low Risk

Concessionaire
Event of Default

CHEL

Pre COD

The Concessionaire Events of Default are mentioned

in clause 6.1.15 (i) of this PIM. In case of termination


of the CA due to Concessionaire Event of Default
during the construction period, NHAI will not make

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any termination payments to the lenders.

The Sponsor will provide an undertaking to meet any


shortfall in the repayment of the lenders dues, owing
to termination of the Concession Agreement due to a
Concessionaire event of default during the
construction period.

Low Risk
Operations Period
Risk Factor
Revenue Risk

Allocated To
CHEL/NHAI

O&M risks

CHEL/MIL/
MPL

Risk Mitigation Measures

Being an Annuity project, the CA provides for


periodic payments of annuity by NHAI.
NHAI is a GoI undertaking and is rated AAA by CRISIL
indicating highest safety in meeting its financial obligations.
Therefore, the revenue risk is minimal.
The CA specifies the O&M standards, specification
and the manner in which the concessionaire would
carry out O&M of the facility. Moreover, IE and GoB
are entrusted to supervise and monitor the facility
throughout the concession period.
The Operations & Maintenance (O&M) responsibility
is proposed to be entrusted to MIL/MPL based on
their experience and skills. MPL has experience in
executing O&M works.
Low Risk

Force
Risks

Majeure CHEL/NHAI

Allocation of costs arising out of Force Majeure


Upon occurrence of any Force Majeure Event
prior to the Appointed Date, NHAI and the
Concessionaire shall bear their respective costs.
Upon occurrence of a Force Majeure Event after
the Appointed Date, the costs incurred and
attributable to such event and directly relating to
the Project shall be allocated and paid as follows:
a. In a Non-Political Event, the Parties shall
bear their respective Force Majeure Costs;
b. In an Indirect Political Event, all Force
Majeure Costs attributable to such Indirect
Political Event, and not exceeding the
Insurance Cover for such Indirect Political
Event, shall be borne by the Concessionaire,
and to the extent Force Majeure Costs exceed
such Insurance Cover, one half of such excess
amount shall be reimbursed by the Authority
to the Concessionaire; and
c. upon occurrence of a Political Event, all
Force Majeure Costs attributable to such
Political Event shall be reimbursed by the
Authority to the Concessionaire.

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Termination payments under FM

For non-political FM events, an amount equal to 90%


of the Book value of physical Project Assets less
Insurance Cover

For indirect-political FM events, NHAI will pay an


amount equal to the discounted value of future
Annuity payments, the discounting factor applied
being the then SBI PLR (minus) 3%.

For political Force Majeure events, NHAI will pay an


amount equal to the discounted value of future
Annuity payments, the discounting factor applied
being the then SBI PLR -(minus) 3%

During the implementation and operations period,


CHEL is required to take comprehensive insurance
package for all insurable events or any other
insurance required by the lenders.

All the termination payments due to FME would be


made through the Escrow Account.
The CA provides for suitable payments in the event of termination.
The risk is considered acceptable.

Concessionaire
Event of Default

CHEL

In case of termination of the CA due to


Concessionaire Event of Default during the
operations period, NHAI would pay a termination
amount equal to discounted value of future Annuity
payments, the discounting factor applied being the
then SBI PLR + 3% less Insurance Cover; provided
that if any insurance claims forming part of the
Insurance Cover are not admitted and paid, then 80%
of such unpaid claims shall be deducted from the
termination payment so assessed.

MPL is experienced in implementing road projects.


The risk of Concessionaire Event of Default is
considered Low.
NHAI Event of NHAI
Default

In case of termination of the CA due to NHAI Event


of Default during the operations period, the
termination payment payable by NHAI would be an
amount equal to the discounted value of future
Annuity payments; the discounting factor applied
being the then SBI PLR -3%.
Low Risk

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11.2 SWOT Analysis

Strengths
The Project is an outcome of the conscious recognition by NHAI to improve the road
transport network in the country. The Project is thus, assured of political and
administrative support, which is important for projects of this nature. The Project has the
support of GoB, NHAI and GoI.
Being an Annuity project, the revenue risk is minimal.
The Project is being sponsored by Madhucon Projects Limited (MPL), an experienced
construction company having successfully completed road projects of over 700 Km
length.
The EPC contract is proposed to be on a fixed price, fixed time basis with provisions for
Liquidated Damages. Moreover, the Sponsors will provide undertakings for cost overrun
support.
Given the assured revenues by way of Annuities from NHAI, an average DSCR of 1.29 is
considered comfortable.

Weaknesses
NHAI is not liable to pay any termination payment, on account of Concessionaire Event
of Default, during the Construction Period.
MPL, the EPC Contractor for the Project will enter into fixed-price fixed-time contracts with CHEL.
MPL has specialized in road construction for over 2 decades and they are specialized in major highway
projects.
The nature of the EPC contract will be such that the execution risk of the construction work is directly
linked to the ability of the EPC Contractor to continually and consistently meet their contractual
commitments under the EPC contract. This, in turn, is a function of the business and financial risks
associated with the operations of the EPC Contractor.
Moreover, the Sponsor will provide an undertaking to meet any shortfall in the repayment of the lenders
dues, owing to termination of the Concession Agreement due to a Concessionaire event of default during the
construction period.
In case the Concessionaire achieves COD after to the Scheduled four laning Date then it
shall be liable for reduction in its first Annuity for delayed completion of the Project. Such
Reduction shall be effected on the first Annuity payment on the first Annuity Payment
Date. The Reduction for such delayed completion shall be the product of Average Daily
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Annuity and the number of days by which the COD exceeded the Scheduled Four Laning
Date.
MPL is an established player in road construction. The EPC contract is a fixed cost and fixed
time contract. Moreover, MPL / MIL shall provide an undertaking for timely completion and
also for necessary infusion of funds in case of any delay.

Opportunity
Early completion of the Project can help the Company gain by way of Bonus payments
from NHAI.

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12. CONCLUSION
Madhucon Projects Limited (MPL), the flagship company of the Madhucon Group, was awarded
the LoA by NHAI for implementing the project for Four- laning of Chhapra to Hajipur section of
NH-19 from km 143.200 to km 207.200 in the state of Bihar under NHDP Phase III on Design,
Build, Finance, Operate, Transfer (DBFOT) Annuity basis. The LoA was issued by NHAI on May
13, 2010. As required by NHAI, CHEL was incorporated as an SPV of the Madhucon Group to
undertake the implementation of the Project. As per the LoA, the Concession Period is 15 years,
including 2.5 years of construction and 12.5 years of payment of annuity. On completion, the
project will receive an annuity of Rs 130.86 crore in semi-annual instalments of Rs 65.43 crore.
The total cost of the Project, estimated at Rs.812.50 Crore, is proposed to be funded through a
mix of Term Loans and Equity in the ratio of 72:28. Equity will consist of Rs 39.00 Crore of
equity capital and Rs 188.50 Crore of interest free unsecured loan from the Promoters. The equity
for the project would be contributed by MIL/MPL. MIL is proposing to raise Rs.400 Crore
through a private placement and another Rs 400 Crore from IPO. The other Project highlights are
as under:
9 The promoters of CHEL would be utilising its technical expertise and manpower for
implementing and operating the Project
9 The Project would set up through an fixed time fixed cost EPC contract, which would be
finalised by July, 2010.
9 Being an Annuity project, the revenue risk is minimal.
On an assessment of the project parameters, it is recommended that CHEL:
Execute the necessary contracts with NHAI in a time bound manner
Take appropriate steps for receipt of necessary approvals for implementing the project.
Follow-up with NHAI to ensure timely right of way / acquisition of balance 20% land by
NHAI
Based on the appraisal exercise, it may be concluded that
Considering the cash flows estimated for the project based on the assumptions, the Company
is expected to meet its debt serving obligations towards the project;
At the given assumptions, the overall financial, liquidity and profitability parameters of the
project are considered reasonable and satisfactory.
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Subject to the above analysis and the impact of the various scenarios as envisaged, under the
sensitivity analysis, the capital expenditure program of CHEL for the project is viewed as
economically viable.
SBI Capital Markets Ltd.
June, 2010

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13. ANNEXURE
Annexure 1: Letter of Award

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Annexure 2 Indicative Term Sheet


1. Project

The Project involves four-laning of Chhapra-Hajipur section of NH-19 from


Km 143.200 to Km 207.200 in the state of Bihar under NHDP III on Design,
Build, Finance, Operate and Transfer (DBFOT) Annuity basis under the
Concession agreement with The National Highways Authority of India
(NHAI) for a period of 15 years. The total length of the road involved in the
Project is 65.014 kilometers.

2. Purpose
3. Project
Sponsor(s)
4. Borrower
/
Concessionaire
5. Appointed
Date

Part financing the capital cost of the Project


Madhucon Projects Limited and Madhucon Infra Limited

6.

7.
8.
9.

10.
11.
12.

Chhapra Hajipur Expressways Limited (CHEL or Borrower)

The date on which Financial Close is achieved or an earlier date that the
Parties may by mutual consent determine, and shall be deemed to be the date
of commencement of the Concession Period (assumed to be January 1, 2011).
SPCD
Scheduled Project Commissioning Date shall be the 910th day from the
Appointed Date and shall be the scheduled date for completion of the
Project. The SPCD is assumed to be May 31, 2013 being the 29th month from
the Appointed Date.
Commercial
The COD shall be the date on which the Project receives the Completion
Operation Date Certificate or the Provisional Certificate from NHAI
(COD)
Construction
Means the period beginning from the Appointed Date and ending on the
Period
COD
Notice
to January 01, 2011 (Appointed Date)
Proceed
to
EPC
Contractor
Financial Close The date on which all Conditions Precedent to the initial availability of funds
under the Financing Documents are fulfilled.
Base
Case The Base Case Financial plan has been prepared by SBICAP and is available
Financial Plan in the Information Memorandum.
Project Cost & The Capital Cost for the Project is estimated to be Rs. 812.50 Crore ("Total
Means
of Project Cost"). The Total Project Cost is proposed to be funded as provided
Finance
below:
Equity Capital from Sponsor(s) Rs 39.00 Crore (A)
Interest free unsecured loan from Sponsor(s) Rs 188.50 Crore (B)
((A) and (B) shall together constitute the Equity for the Project Cost and for computation of
financial ratios such as debt equity ratio, TOL / TNW, etc)
Term Loan Rs 585.00 Crore

13. Facility
14. Availability

Term Loan aggregating to Rs. 585.00 Crore and capex LC of upto 75% of the
Term Loan Facility as a sub-limit of RTL. The providers of the RTL would be
referred to as Term Loan Lenders (Lenders).
From the date of first disbursement till 6 months after SPCD or COD,

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whichever is earlier
15. Upfront Equity 20% of the Equity will be brought in upfront by the Project Sponsor(s) before
/ interest free disbursement of RTL.
unsecured
loans
16. Drawdown
Anticipated Drawdown Schedules for RTL will be provided by the Borrower
Schedules
and vetted by the Lenders Independent Engineer (LIE), at least 30 days
before the first drawdown and thereafter at the beginning of each year. The
actual drawdown amount will be communicated by the Borrower 30 days
prior to the Debt drawdown dates.
17. Upfront Fee / The Borrower shall pay a onetime up-front fee at the rate of 0.20% of the
Processing Fee RTL amount, plus applicable service tax thereon, payable on or before the
date of execution of the Financing Documents.
18. Commitment
Fee

The Borrower shall pay a commitment fee of 1.20% for drawings not made
beyond 90 days in variance with the draw down schedule. Quarterly
Drawdown Schedules can be amended or replaced with thirty (30) days notice
prior to the commencement of relevant quarter, without attracting any
commitment fee. The fees will be calculated on the basis of drawings not
made and the number of days deviated from the scheduled dates.

19. Reference Rate The Reference Rate shall be the State Bank Advance Rate which is at 11.75%
or State Bank p.a. at present.
Advance Rate
20. Reset Date
The first Reset Date shall be on COD and annually thereafter.
21. Interest Rate

175 bps below State Bank Advance Rate (SBAR), present effective rate of
10.00% p.a. (floating) payable monthly. The Lenders will have the option to
reset the spread on the Reset Date.
The interest as above, shall be payable by the Borrower in arrears on the 1st of
each month (each an Interest Payment Date). Such interest shall become
payable from the first Interest Payment Date falling after the date of first
disbursement.
The Borrower shall pay interest rate surcharge or any charge, levy or fee at
such rate as may be levied or demanded from the Borrower or required to be
levied, demanded or collected by the Lenders from the Borrower from time
to time by Reserve Bank of India or any other authority pertaining to or in
respect of the RTL.

22. Prepayment

The Lenders reserve the right to realign or change the Applicable Interest Rate at
appropriate time pursuant to introduction of base rate policy by RBI or any modification or
replacement thereof.
The Borrower shall have the right to prepay, in part or full, the outstanding
RTL, which shall go towards prepayment of all the remaining installments in
inverse order of maturity. In this event, the Borrower shall be liable to pay a
pre-payment premium @ 1% of the pre-paid amount.
Notwithstanding the above, no pre-payment premium will be payable for
prepayments under the following circumstances:
Prepayment of loan at the instance of Lenders with 30 days prior written
notice to the Lenders.

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Prepayment made within 60 days after the Interest Spread Reset Date
with prior written notice to the Lenders.
Prepayment of loan from securitization of future receivables, with 60
days prior notice. However, in case of raising loans / NCDs from
securitization, existing Consortium shall have the first right to
participate in such a Facility.
Prepayment under cash sweep facility

23. Additional
Interest

Additional interest of 1.00% p.a. will be charged from the date of first draw
down till the creation of security, if the loan is disbursed pending creation of
mortgage and security is not created within 3 months from the date of the
first draw down.

24. Liquidated
Damages

In the event of default in payment of interest and/or installments of principal


amount on due dates, the Borrower shall pay additional interest @ 2% p.a. on
the defaulted amount for the period of such default.
The moratorium shall be for a period of 2 quarters from COD and the Term
Loan will be repaid in 19 semi-annual installments commencing from March,
2014.
The proposed repayment schedule for the RTL is as under:

25. Moratorium
and
Repayment

HY Beginning

HY %

HY Beginning

HY %

(in Rs Crore)
Annual Repayment

Sep-13

0.00%

Mar-14

6.00%

35.10

Sep-14

3.00%

Mar-15

4.00%

40.95

Sep-15

4.00%

Mar-16

4.00%

46.80

Sep-16

4.00%

Mar-17

4.50%

49.72

Sep-17

4.50%

Mar-18

5.00%

55.57

Sep-18

5.25%

Mar-19

5.50%

62.89

Sep-19

5.75%

Mar-20

6.25%

70.20

Sep-20

6.50%

Mar-21

6.50%

76.05

Sep-21

6.50%

Mar-22

7.00%

78.97

7.00%
46.50%

Mar-23

4.75%
53.50%

68.74
585.00

Sep-22
Total

26. Cash
Sweep In case DSCR is equal to or more than 1.20 (calculated on a year on year
Facility
basis), 40% of additional cash flow after meeting other normal obligations
including repayment of stipulated installments, MMR requirements, etc will be
swept for prepaying Term Loan, in the inverse order of repayment. Such
repayment under the Cash Sweep facility shall not carry any prepayment
charges.
27. Escrow
Account

The Project Escrow Account will be maintained with the lead bank. All cash
inflows (including those from the Project) shall be deposited in the Escrow
Account and all proceeds to be utilized / applied in a manner and priority as
stipulated by the Lenders, as per the Escrow Agreement.

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28. Security
Stipulations

The Security will be created in favour of the Security Trustee/ Agent, for the
benefit of the Lenders.
A first charge on the Borrowers bank accounts including, without
limitation, the Escrow Account and each of the other accounts required to
be opened by the Borrower under any Project Document or Contract,
together with the funds lying credited to these accounts (including the
operating cashflow and annuity deposited therein) to the extent the funds
are applied in the priority set out in the Escrow Agreement.
A first mortgage and charge over all the Borrowers properties and assets,
both present and future, excluding the Project Assets (as defined in
Concession Agreement);
A first charge on all intangible assets of the Borrower including but not
limited to the goodwill, undertaking and uncalled capital of the Borrower;
Pledge of shares aggregating to 51% of the paid-up equity capital of the
Borrower, Provided that any enforcement of the pledge over shares shall
be subject to prior approval of NHAI as provided for in the Concession
Agreement
A first charge by way of assignment or creation of Security Interest on
(i) all the rights, titles, interests, benefits, claims and demands
whatsoever of the Borrower under the Concession Agreement to
the extent covered by and in accordance with the Substitution
Agreement,
(ii) all the rights, titles, interest, benefits, of the Borrower in licenses,
permits, approvals, consents
(iii) all the rights, titles, interests, benefits, claims and demands
whatsoever of the Borrower in the insurance contracts/policies
procured by the Borrower or procured by any of its contractors
favoring the Borrower for the Project
(iv) all the rights, titles, interests, benefits, claims and demands
whatsoever of the Borrower in any guarantees, liquidated damages,
letter of credit or performance bond that may be provided by any
counter-party under any Project Contract in favor of the
Borrower.
(v) Assignment of rights, interest and obligations of the
Concessionaire to or in favor of the Lenders Representative as
nominee and for the benefit of the Senior Lenders, to the extent
covered in accordance with the Substitution Agreement as security
for financing provided by Senior Lenders under the Financing
Agreements.
I. Sponsor Undertakings
The Project Sponsor(s) shall furnish an Undertaking to cover the shortfall
in the repayment of Term Loan in the event of termination of the
Concession Agreement due to Concessionaire event of default during the
construction period.
The Project Sponsor(s) shall furnish a shortfall undertaking (to bring in
additional funds in a form & manner satisfactory to the Lenders) for cases
of any cost overrun and /or gap in means of financing.
The Project Sponsor(s) shall furnish an undertaking to complete the
Project as envisaged in the Base Case Financial Plan. The undertaking

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shall also be for making good any financial loss due to delays that are not
approved by NHAI.
Any additional equity infusion in to the Project shall also be subject to
pledge of shares aggregating to 51% of such enhanced paid-up equity
capital of the Borrower, provided that any enforcement of the pledge shall
be subject to prior approval of NHAI as per the Concession Agreement.
Any conversion of interest free unsecured loans brought in by Promoters
/ Sponsor(s)/ Others shall be subject to the security clause pertaining to
Pledge of 51% of equity capital to Lenders. The Promoters to undertake
to pledge such additional equity within 15 days of allotment of such
additional shares.

Substitution Agreement:
The Borrower shall enter into a Substitution Agreement with the Lenders.
The Lenders Representative on behalf of Lenders may exercise the right to
substitute the Concessionaire pursuant to such Agreement.
Tripartite Agreement:
The Borrower shall enter into a tripartite agreement to the lenders
satisfaction with the Security Trustee and each party to the Project
Documents confirming continuation of such partys obligations under the
relevant Project Document with the nominated company in case of
substitution.

29. Reserve
Accounts

The Term Loan Lenders and Working Capital Lenders will, to the
extent permitted under the CA, and subject to any terms and conditions
contained herein, share in the Security on a pari- passu basis amongst
themselves.
Major Maintenance Reserve (MMR): An amount equivalent to the
projected Major Maintenance expenses shall be built up from the Project
cash flows as per the following profile:
(Rs.in. crore)
FY ending Mar 31
2015 2016 2017 2018 2019 2020
MMRA
2.90 14.62 11.87
FY ending Mar 31
2021 2022 2023 2024 2025 2026
MMRA
3.71 18.72 15.20

30. Legal
Expenses

Actual legal expenses incurred by the Lenders for documentation, filing of


charges, etc to be borne by the borrower. The Company shall pay / reimburse
all the expenses incurred/to be incurred by the Bank in respect of, creation of
security, obtention of legal and or any other consultant (s) services.

31. Insurance

The Borrower will arrange for comprehensive insurance policy (ies) to the
satisfaction of the Lenders. The insurance contracts shall stipulate that the
payment by the insurer under the insurance contract shall be paid or directed
to be paid into the Escrow Account. For the purpose, services of Lenders
Insurance Advisor may be retained at the cost of the SPV in consultation with
other Lenders.

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32. Financial
Covenants

A penalty of 1% p.a. shall be payable by the Borrower to the Lenders in case


there is an adverse deviation of more than 10% from the levels agreed upon
with the Lenders in respect of any one of the following:
i. TOL/TNW at 2.75 times
ii. Interest Coverage Ratio at 1.75 times {(PBDIT Tax / Interest)}
The measurement of deviation shall be once in a year with reference to the
last annual audited statement of accounts. Such interest shall be charged for
the period during which the deviation continues subject to a minimum of one
year. In case of continuous default/decline in performance levels, the lenders
may stipulate any other conditions as deemed necessary in consultation with
the borrowers. No dividend shall be paid till the position is rectified to the
satisfaction of lenders.

33. Management
Control

The Sponsor shall undertake to maintain, during currency of loans,


management control over CHEL which includes ability/right of the Sponsor
to appoint majority of the Directors on the Board and to direct the
management or policy decisions.

34. PrePrior to documentation , the following to be complied with:


Documentation a) Entered into the Concession Agreement with NHAI
Conditions
b) The Borrower shall open a Escrow Account to the satisfaction of the
Lenders through which all the project cash flows would flow
c) The Company shall appoint Lenders Legal Counsel (LLC) and any other
consultant(s) as may be necessary as per scope of work to be decided by
the Lenders. The cost of such consultant(s) shall be borne by the
Borrower.
d) Provide Sponsor undertakings as mentioned under Clause 28 (I) of this
Term Sheet.
35. Predisbursement
Conditions

The following conditions must be met to the satisfaction of the Lenders for
the first drawdown of the RTL:
a) Certification by an independent chartered accountant that 20% of the
total Sponsors Equity /interest free unsecured loans Contribution has
been brought in for the Project;
b) Entered into a Fixed Time Fixed Cost contract with the EPC
contractor for Project Implementation as per the milestones provided
in the Concession Agreement, with adequate penalties / Liquidated
Damages for delays. Such EPC contract to be reviewed by LIE/LLC
and issues raised, if any, shall be resolved to the satisfaction of the
Lenders. The EPC contracts would be examined by LLC & LIE, interalia, from the point of view of provision of liquidated damages.
c) Receipt by Lenders of satisfactory evidence that all material clearances,
authorizations, permits, approvals and clearances as required for
commencement of construction of the Project have been obtained by
the Borrower;
d) Appointment of Lenders Independent Engineer ("LIE"), and Lenders
Insurance Advisor ("LIA") in consultation with the Lenders and
satisfactory resolution of all issues raised by them. The cost for the
same will be borne by the Borrower, subject to any letters or
agreements being issued or entered into in relation to such appointment

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e)
f)
g)
h)
i)

j)

k)
36. Conditions
Precedent to all
Disbursements

with the consent of the Borrower.


Increase of authorized share capital, if necessary as per the means of
finance.
The Concessionaire shall have obtained Right of Way of 80% of the
total area of the site from NHAI required and necessary for the Project
Amendments to Project Contracts/Documents specified by the
Lenders, if any, shall have been carried out
Execution of Substitution Agreement and Escrow Agreement.
The Lenders shall have received from the Lenders Insurance Advisor a
certificate that all insurance coverage required under the terms and
conditions of the Project Documents and as advised by the Lenders
Insurance Advisor for the Construction Period have been obtained, are
adequate and are in full force and effect.
The Borrower shall have satisfied the Lenders regarding fulfillment by
all the contracted parties of all the conditions precedent to the
Concession Agreement, the financing agreements and any other
contract and agreement deemed essential for construction and
operation of the Project.
Creation of Security as provided for in clause 28. Receipt of
satisfactory report from the LLC on the same.

The following conditions must be met to the satisfaction of the Lenders for
any drawdown of the RTL:
1. No Event of Default or Potential Event of Default shall have occurred
and be continuing;
2. The representations and warranties which are to be repeated are
correct in all material respects;
3. The Borrower has provided details of the Project cost to be financed
by the relevant drawdown periodically, and the LIE has certified that
(i) the proposed drawdown is in accordance with the original
implementation schedule approved by it and (ii) the physical progress
of the Project and the cost incurred thereon till date are as originally
envisaged.
4. The Lenders shall have received certificate from an independent
chartered accountant certifying the contributions made to ensure that
the debt:equity ratio is at the envisaged level.
5. Evidence that all Equity required to be contributed by the Sponsor (at
the relevant time) into the Borrower has been contributed; and
6. All material permits, approvals and consents required by the Borrower
at that point of time have been received and continue to be effective.

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37. Other
Conditions

a) The Company shall agree to modify its Memorandum of Association


and Articles of Association, for enhancement of the authorized share
capital and borrowing power as per the envisaged financing plan, if
required, and incorporate any other changes if required by the Lenders.
b) All Project Agreements shall contain a provision as per clause 4.1 of the
Substitution Agreement.
c) CHEL to undertake that the completion cost shall not exceed Rs 812.50
Crore.
d) The Borrower shall agree that the preliminary and pre-operative
expenses shall be allowed as part of the project cost only to the extent
that they are certified by the Statutory Auditor as relating to the
proposed project and as accepted by Lenders.
e) The Borrower shall :

Undertake to furnish to the Lenders such information and data as may be


required by them or any agency appointed by the Lenders to ensure that
the physical progress as well as expenditure incurred on the project are as
per the schedule.
Enter into an O&M contract from the COD till the end of the
Concession Period.
prepare a schedule for award of contracts matching with the
implementation schedule for the Project (to be reviewed by LIE).
obtain all statutory and non-statutory clearances required during
implementation and for operation of the Project.
Make suitable arrangements for project management during
implementation and operation of the Project.
Finalize the insurance package and submit the same for review by the
Lenders Insurance Advisor/ Lenders and submit the certificate regarding
adequacy of insurance.
Agree that the Lenders reserve the right to appoint any independent
/concurrent auditors for the review of the Project as deemed fit during
the currency of the loan.
Agree that its receivables shall not be escrowed to any party other than
the Lenders.
Agree that during the currency of the Facility accorded by the Lenders,
any loans to the Project Sponsor from funds of the Borrower shall be
made only after fulfillment of Restricted Payment Covenants.
Agree that in the event of the Borrower committing default in the
payment of principal and/or interest on due dates, the Lenders shall have
an unqualified right to disclose the name of the Borrower and its directors
to the Reserve Bank of India / Credit Information Bureau of India Ltd.
The Borrower shall give its consent to the Lenders / RBI / CIBIL to
publish its name and the name of its directors as defaulters in such
manner and through such medium as the Lenders in their absolute
discretion may think fit.
f) The Lenders will have the right to examine the books of accounts of the
Borrower and to have the Project Assets inspected from time to time by

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officers of the Bank and /or outside consultants and the expenses
incurred thereon will be borne by the Borrower.
g) The Borrower shall advise the Lenders' Agent of any changes, proposed
in the share holding pattern and consent of the Lenders' Agent, which
shall not be unreasonably withheld, shall be communicated to the
Borrower.
h) The Borrower shall have agreed that the Lenders shall have the right to
review the cost of the Project any time during the implementation of the
Project and also before the final disbursements of the Facility.
i) The Borrower shall have agreed to maintain the MMR and shall have
procured from the Project Sponsor the stipulated undertakings /
guarantees / letter of comfort to the satisfaction of the Lenders.
j) Monies brought in by principal shareholders/directors for part funding
the project shall not carry any interest thereon and will not be allowed to
be withdrawn during the currency of the Facility.
k) The Borrower shall have agreed that the Lenders shall be entitled to
appoint nominee director(s) on the Board of Directors of the Borrower
during the currency of Facility in case of an Event of Default.
l) During the currency of the Facility, the Borrower shall not, without
prior approval of the Lenders in writing:

Effect any change in its capital structure;


Formulate any scheme of amalgamation or reconstruction;
Undertake any new project or expansion scheme,
Enter into borrowing arrangements (fund based or non fund based),
either secured or unsecured, with any other bank, financial institution,
company or otherwise, except for those arranged as part of means of
finance for the present Project;
Undertake guarantee obligations on behalf of any other company.
The Borrower should not create, without prior written consent of the
Lenders, charges on any or all its properties or assets during the
currency of the Facility.
m) The Borrower will keep the Lenders informed of the happening of any
event likely to have a substantial effect on its revenues and profits along
with the remedial steps proposed to be taken by the Borrower.
n) The Borrower shall get its credit facilities rated by an accredited credit
rating agency in accordance to the Lenders requirement within 6 months
of execution of the CLA.
o) Not make any amendments/modifications to or initiate termination
proceedings or grant any waiver under any of the Project Agreements
p) Ensure that the equipment installed / proposed to be installed are
adequate and appropriate to the pollution control requirements and that
all conditions mentioned in the environmental clearances granted by the
appropriate authorities are fulfilled.
q) Restricted payments will be permitted only when the following
conditions are fulfilled: (Restricted Payments Covenants):
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i.

No event of default or Potential event of default has occurred and


is continuing;
ii. MMR is maintained to the required amount and
iii. DSCR should not be less than 1.10 times for the immediate
previous year (for which Restricted Payments are proposed to be
made)

38. Rights
Event
Default

Restricted Payments means all dividends, and other distributions of the


Borrower (in cash, property or obligations) on, or other payments or
distributions on account of the purchase, redemption, retirement or
other acquisition of, any share capital of the Borrower or any warrants
or options thereof or any payment by the Borrower of interest, principal
or other sum in relation to any unsecured loan, Shareholders Loan etc.
on The Lenders reserve the right to call up the loan upon the happening of any
of of the under noted or other events, considered likely to jeopardize the
interests of the Lenders:
a) Delay in payment of any other amounts payable under the financing
documents remaining unpaid for 60 days beyond the respective due date
b) event of default under Project Agreements;
c) breach of other obligations or default in the performance or observance
of the financial covenants under Financing Documents;
d) misrepresentation;
e) cross-default to lenders;
f) insolvency
g) Execution or distress being enforced or levied against the whole or any
part of the Borrowers property.
h) The Borrower ceasing or threatening to cease to carry on its business.
i) A receiver being appointed in respect of the whole or any part of the
property of the Borrower.
j) The occurrence of any event or circumstance which is prejudicial to or
imperils or depreciates or is likely to prejudice, impair, imperil or
depreciate the security given by the Borrower
k) revocation of consents; and environmental matters;
l) breach of Shareholder/Sponsor Undertakings.
m) The occurrence of any event or circumstance, which would or is likely
to prejudicially or adversely affect in any manner the capacity of the
Borrower to repay the loan.

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39. Miscellaneous

40. Environment
related
covenants

The Borrower is required:


a) to furnish to the Lenders every year three copies of audited/ printed
balance sheet and profit & loss account statements of the Borrower
immediately on these being published/ signed by the auditors, along with
the usual renewal particulars.
b) to submit to the Lenders a quarterly progress report on the
implementation of the Project or whenever desired by the Lenders.
The Borrower shall also have to comply with customary covenants such as
Representation & Warranties of the Borrower, Conditions Precedent to the
effectiveness of the loan and conditions precedent to each disbursement,
Affirmative Covenants by the Borrower, Negative Covenants, Additional
Covenants, Information Covenants, Events of Default by the Borrower and
the Consequences of Events of Default, RBI disclosure norms etc., as
applicable
The Company shall, at all times during the currency of the assistance, comply
with the environmental, health, safety and social (EHSS) requirements
specified below:
1. Ensure compliance with provisions of all applicable legislation, and
clearances issued there under, and maintenance of documents to be
able to demonstrate compliance with the same.
2. Ensure compliance with all conditions stipulated in the State and
Central environmental clearances obtained by the company for the
project.
3. Provide the requisite information and provide access to lenders or a
consultant appointed by lenders to carry out a periodic Environment
& Social Monitoring and Review (ESMR) of the project.
4. Forward copies of any relevant Internal or consultants reports or
annual/ other periodical reports on the environmental and social
status and performance of the operations.
Ensure compliance with specified recommendations made by consultants as
per ESMR.

Letter of Credit (one time) Inland


A
Facility
Letter of Credit (one time) Inland (sub-limit of term loan facility)
B
Amount
Rs 452.00 Crore
C
Purpose
To be opened in favour of EPC Contractor for payment of bills and
receivables
D Security
As per security provided to term loan facility
E
Margin
The company should have infused equity as required for release of term
loan, and as per stipulated debt equity ratio
F
Tenor
Sight basis (As per RBI/Bank guidelines)
G Type
Inland
H Charges
0.35% p.a. payable quarterly in advance
I
Other
terms (i) It will be one time facility and will not be reinstated after payments of
and conditions bills under LCs.
(ii) The Bank will note lien on the term loan, to the extent of LC
commitments.
(iii) Other conditions will be same as for term loan.
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