Infrastructure-Financing-India PWC

Draft Final Report for the WORLD BANK
September 2007
Infrastructure
Public-Private Partnership (PPP)
Financing in India
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Infrastructure Public-Private Partnership (PPP) Financing in India
Draft Final Report
September 2007
Content
Main Report
ACRONYMS......................................................................................................................................................... 5
CURRENCY EQUIVALENTS ........................................................................................................................... 6
1 EXECUTIVE SUMMARY ......................................................................................................................... 7
2 INTRODUCTION ..................................................................................................................................... 10
2.1 SOME POINTS/ASSUMPTIONS TO BE KEPT IN MIND .............................................................................. 10
2.2 OBJECTIVE OF THE STUDY ................................................................................................................... 12
3 OBJECTIVE 1: EVIDENCE BASED DESCRIPTION OF PRESENT FINANCING SOURCES
FOR PPP INFRASTRUCTURE ....................................................................................................................... 14
4 OBJECTIVE 2: ANALYSIS OF THE FINANCING OF PPP IN INDIA ............................................ 19
4.1.1 Debt financing ................................................................................................................................ 19
4.1.2 Equity Financing ............................................................................................................................ 25
4.1.3 Significance of Subordinated Debt ................................................................................................. 27
4.1.4 Strategic Investors and their Investment in the Projects................................................................. 28
4.1.5 Summary of Major Issues on the Debt and Equity Side.................................................................. 29
4.1.6 What is Happening in Infrastructure Financing in Other Countries? ............................................ 29
5 OBJECTIVE 3: TO IDENTIFY CHANGES REQUIRED TO REDUCE AND EASE THE
IDENTIFIED CONSTRAINTS......................................................................................................................... 31
5.1 NEW AREAS TO FOCUS ON THE DEBT SIDE .......................................................................................... 31
5.1.1 Bonds as a Source of Fund ............................................................................................................. 31
5.1.2 Funding from Insurance, Pension and Provident Funds ................................................................ 33
5.1.3 Improving Bank capacity to lend to Infrastructure Sector.............................................................. 36
5.1.4 ECB as a Source of Infrastructure Financing ................................................................................ 36
5.2 NEW AREAS TO FOCUS ON THE EQUITY SIDE ....................................................................................... 38
5.2.1 Holding Company Structure Creates Issue in Raising Equity ........................................................ 38
5.2.2 Private Equity Investment to Shore up Promoter Equity ................................................................ 39
5.2.3 Equities Market as a Source ........................................................................................................... 41
5.2.4 Role of International Developers.................................................................................................... 42
5.3 CONCLUSION ....................................................................................................................................... 43
7.1 LIST OF INTERVIEWS CONDUCTED ....................................................................................................... 53
7.2 LIST OF PPP PROJECTS......................................................................................................................... 54
7.3 SOURCES FOR PROJECT INFORMATION ................................................................................................. 60
7.4 ASSUMPTIONS ...................................................................................................................................... 64
7.4.1 Analysis Assumptions...................................................................................................................... 64
7.4.2 Regions ........................................................................................................................................... 65
7.4.3 Sample Sizes.................................................................................................................................... 66
7.4.4 Approximation of Financial Closure Year from Secondary Sources .............................................. 66
7.4.5 Approximation of TPC from Secondary Sources ............................................................................ 70
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Annexures
6 ANNEXURE 1 - PROCESS FOR SELECTION OF PPP INFRASTRUCTURE SECTORS FOR

THE DETAILED STUDY ................................................................................................................................. 44
7 ANNEXURE 2 - APPROACH AND METHODOLOGY OF THE STUDY ........................................ 51
8 ANNEXURE 3: SURVEY COVERAGE ................................................................................................. 74
9 ANNEXURE 4 - OTHER KEY TRENDS IN PPP INFRASTRUCTURE FINANCING.................... 79
10 ANNEXURE 5 - FUTURE LENDING TO PPP INFRASTRUCTURE PROJECTS FROM
COMMERCIAL BANKS IN INDIA ................................................................................................................ 92
11 ANNEXURE 6 - PROJECT RISK PROFILE AND RELATIONSHIP TO LENDING TERMS 108
12 ANNEXURE 7 - DIFFERENCES IN EQUITY INFUSION............................................................ 126
13 ANNEXURE 8 - REFINANCING OF PPP PROJECTS ................................................................. 129
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List of Exhibits
EXHIBIT 1: SAMPLE SIZE FOR PROJECT INFORMATION COLLECTION ..................................................................... 14
EXHIBIT 2: TRENDS IN TOTAL 231 PROJECTS AND SAMPLE OF 104 PROJECTS ....................................................... 14
EXHIBIT 3: PPP PROJECTS IN DIFFERENT SECTORS BY NUMBER AND VALUE ....................................................... 16
EXHIBIT 4: TRENDS IN PPP PROJECTS BY AWARDING AUTHORITY ....................................................................... 16
EXHIBIT 5: OVERALL FINANCIAL STRUCTURE OF PPP PROJECTS IN INDIA ............................................................ 16
EXHIBIT 6: SOURCE OF SENIOR DEBT FUNDING .................................................................................................... 17
EXHIBIT 7: SOURCES OF DEBT BY SECTOR AND SHARE OF COMMERCIAL BANKS BY TYPE ................................... 17
EXHIBIT 8: LOAN TENURE TO CONCESSION PERIOD RATIO FOR TEN PPP PROJECTS IN LAST TWO YEARS............ 22
EXHIBIT 9: DSCR REQUIRED BY BANKS ............................................................................................................... 23
EXHIBIT 10: PROJECT RISK CATEGORY AND AVERAGE INTEREST RATE ............................................................... 25
EXHIBIT 11: INCREASED GEARING OVER THE YEARS ............................................................................................ 26
EXHIBIT 12: DER BY SIZE ..................................................................................................................................... 26
EXHIBIT 13: SOURCES OF PURE EQUITY ................................................................................................................ 26
EXHIBIT 14: SOURCES OF EQUITY ......................................................................................................................... 27
EXHIBIT 15: INSTANCES OF SUB-DEBT BY YEAR AND SECTOR .............................................................................. 28
EXHIBIT 16: STRATEGIC INVESTMENT BY SECTOR ................................................................................................ 28
EXHIBIT 17: INVESTMENT BY LIFE AND NON-LIFE INSURER IN LAST THREE YEARS (USD MILLION) .................. 33
EXHIBIT 18: YEAR ON YEAR FUND COLLECTION BY EPFO................................................................................... 33
EXHIBIT 19: INVESTMENT BY INSURANCE COMPANIES IN RATED SECURITIES ...................................................... 34
EXHIBIT 20: CHINESE INSURANCE REGULATION ................................................................................................... 34
EXHIBIT 21: ECBS IN INFRASTRUCTURE (MARCH 2004 - FEBRUARY 2007).......................................................... 36
EXHIBIT 22: HOLDING COMPANY STRUCTURE AND ITS IMPLICATIONS ................................................................. 39
EXHIBIT 23: PE DEALS FOR THE YEAR 2006.......................................................................................................... 39
EXHIBIT 24: PRIVATE EQUITY INVESTMENTS IN THE YEAR 2006........................................................................... 40
EXHIBIT 25: INFRASTRUCTURE FUND BY MUTUAL FUNDS .................................................................................... 41
EXHIBIT 26: SECTORS CONSIDERED BY INFRASTRUCTURE DEFINITIONS BY VARIOUS AGENCIES ......................... 45
EXHIBIT 27: SELECTION OF SECTORS .................................................................................................................... 49
EXHIBIT 28: PROJECT METHODOLOGY .................................................................................................................. 51
EXHIBIT 29: REGIONAL DISTRIBUTION OF VALUE OF PPP PROJECTS BY STATE .................................................... 74
EXHIBIT 30: REGIONAL DISTRIBUTION OF PPP PROJECTS BY VALUE AND NUMBER ............................................. 74
EXHIBIT 31: SECTORAL DISTRIBUTION OF PROJECTS IN THE FOUR REGIONS......................................................... 75
EXHIBIT 32: REGIONAL DISTRIBUTION OF PROJECTS BY AWARDING AUTHORITY ................................................ 75
EXHIBIT 33: SECTOR WISE DISTRIBUTION OF STATE AND CENTRE PROJECTS BY NUMBER AND VALUE ............... 75
EXHIBIT 34: SIZE WISE GROUPING OF PPP PROJECTS BY VALUE AND NUMBER ................................................... 76
EXHIBIT 35: PROJECTS BY SIZE CLASSIFICATION AND SECTOR ............................................................................. 77
EXHIBIT 36: AVERAGE SIZE OF PROJECTS ............................................................................................................. 77
EXHIBIT 37: TRENDS IN AVERAGE SIZE OF ALL ROADS & BRIDGES AND NHAI PROJECTS .................................... 77
EXHIBIT 38: CENTRE AND STATE BY NUMBER AND VALUE................................................................................... 78
EXHIBIT 39: SECTORAL DISTRIBUTION OF CENTRE/STATE PROJECTS BY NUMBER AND VALUE ........................... 78
EXHIBIT 40: SECTORAL COMPOSITION BY VALUE AND NUMBER .......................................................................... 79
EXHIBIT 41: SIZE WISE DISTRIBUTION AND REGIONAL DISTRIBUTION .................................................................. 79
EXHIBIT 42: ISSUE OF NEGATIVE GRANT IN ROAD PROJECTS................................................................................ 80
EXHIBIT 43: SECTOR WISE NON GRANT, POSITIVE GRANT AND NEGATIVE GRANT PROJECTS ............................. 80
EXHIBIT 44: POSITIVE AND NEGATIVE GRANT PROJECTS – NUMBERS AND AMOUNT ........................................... 81
EXHIBIT 45: COUNT AND AMOUNT OF POSITIVE AND NEGATIVE GRANT IN ROAD & BRIDGES SECTOR ................ 82
EXHIBIT 46: FINANCING STRUCTURE FOR POSITIVE AND NON-GRANT PROJECTS AND ANNUITY AND NEGATIVE
GRANT PROJECTS ......................................................................................................................................... 82
EXHIBIT 47: FINANCING STRUCTURE BY AWARDING AUTHORITY AND SECTOR ................................................... 83
EXHIBIT 48: FINANCING STRUCTURE BY SIZE ....................................................................................................... 83
EXHIBIT 50: SOURCES OF DEBT BY YEAR AND SIZE .............................................................................................. 83
EXHIBIT 52: TREND IN DEBT FROM COMMERCIAL BANKS..................................................................................... 84
EXHIBIT 53: AVERAGE TENURE OF DEBT AND CONCESSION PERIOD .................................................................... 84
EXHIBIT 54: SENIOR DEBT TO PURE EQUITY RATIO BY SECTOR ........................................................................... 85
EXHIBIT 55: INCREASED GEARING ........................................................................................................................ 85
EXHIBIT 56: DER BY AWARDING AUTHORITY AND SIZE ...................................................................................... 86
EXHIBIT 57: DER BY SECTOR AND SIZE ................................................................................................................ 86
EXHIBIT 58: AVERAGE INTEREST RATE SPREAD OVER 10-YR G-SEC YIELD ......................................................... 87
EXHIBIT 60: INTEREST RATE SPREADS AWARDING AUTHORITY ........................................................................... 87
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EXHIBIT 61: REDUCING RESETS ............................................................................................................................ 88

EXHIBIT 62: AVERAGE RESET PERIOD ................................................................................................................... 88
EXHIBIT 63: SOURCES OF EQUITY ......................................................................................................................... 89
EXHIBIT 64 : STRATEGIC INVESTMENT BY SECTOR ............................................................................................... 89
EXHIBIT 65 : FDI ALLOWED BY SECTOR ............................................................................................................... 90
EXHIBIT 66: FDI IN PPP INFRASTRUCTURE ........................................................................................................... 90
EXHIBIT 67: EQUITY RETURNS EXPECTATIONS BY INVESTORS ............................................................................. 91
EXHIBIT 68: CREDIT OUTSTANDING OF COMMERCIAL BANKS (USD BILLION)..................................................... 93
EXHIBIT 69: ROADS, PORTS & OTHERS PPP LENDING/ INFRASTRUCTURE LENDING RATIO BY BANKS IN INDIA TO
THESE SECTORS............................................................................................................................................. 96
EXHIBIT 70: PRIVATE SECTOR LENDING OUT OF TOTAL BANKS LENDING TO POWER PROJECTS IN USD BILLION .. 98
EXHIBIT 71: PPP POWER FINANCING CAPACITY OF BANKS IN NEXT 5 YEARS (USD BILLION) AT PRIVATE TO
INFRASTRUCTURE LENDING RATIOS OF 15% MEDIUM GROWTH ................................................................... 98
EXHIBIT 72: CALCULATION OF DEBT FINANCING GAP .......................................................................................... 99
EXHIBIT 73: INFRASTRUCTURE LOAN OUTSTANDING OF IDFC ............................................................................ 100
EXHIBIT 74: IDFC’S TRANSPORT PPP LENDING AS ON 31ST DECEMBER IN USD MILLION ................................. 100
EXHIBIT 75: PFC LENDING TO POWER PROJECTS IN USD BILLION ...................................................................... 102
EXHIBIT 76: FINANCING REQUIREMENT FROM SOURCES OTHER THAN COMMERCIAL BANKS AND FINANCIAL
INSTITUTIONS (USD BILLION) .................................................................................................................... 102
EXHIBIT 77: RISK AND INTEREST CHARGED ........................................................................................................ 110
EXHIBIT 78: DEBT ANNUITY PER KM AND RISK CATEGORY ................................................................................. 111
EXHIBIT 79: PROJECT CATEGORY AND DATA ...................................................................................................... 126
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Acronyms
ADB Asian Development Bank
ALM Asset Liability Management
APIIC Andhra Pradesh Industrial Infrastructure Corporation
BOT Build Operate Transfer
DEA Department of Economic Affairs
DER Debt to Equity Ratio
DFI Development Financial Institution
DIAL Delhi International Airport Limited
DoRTH Department of Road Transport and Highways
DSCR Debt Service Coverage Ratio
FII Foreign Institutional Investor
FPO Follow-on Public Offer
GDP Gross Domestic Product
GoI Government of India
G-Sec Government of India Securities
HCC Hindustan Construction Company
HDC Haldia Dock Complex
HIAL Hyderabad International Airport Limited
IDBI Industrial Development Bank of India
IDFC Infrastructure Development Financial Corporation
IFC International Finance Corporation
IIFCL India Infrastructure Finance Company Limited
IL&FS Infrastructure Leasing & Financial Services
INR Indian National Rupees
IPPs Independent Power Producers
IRDA Insurance Regulatory and Development Authority
JICA Japan International Cooperation Agency
JBIC Japan Bank for International Cooperation
KPCL Karnataka Power Corporation Limited
LIBOR London Interbank Rate
LIC Life Insurance Corporation of India
MCD Municipal Corporation of Delhi
MF Mutual Funds
MoF Ministry of Finance
MW Mega Watt
NBFC Non Banking Financial Company
NCD Non Convertible Debentures
NDMC New Delhi Municipal Corporation
NHAI National Highway Authority of India
NTBL Noida Toll Bridge Company Limited
PFC Power Finance Corporation
PFI Private Finance Initiative
PLR Prime Lending Rates
PMGSY Pradhan Mantri Gram Sadak Yojna
PNB Punjab National Bank
PPP Public Private Partnerships
PwC PricewaterhouseCoopers
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PWD Public Works Department

RBI Reserve Bank of India
RVNL Rail Vikas Nigam Limited
SBAR State Bank Advance Rate
SBI State Bank of India
SCB Scheduled Commercial Banks
SPV Special Purpose Vehicle
TOR Terms of Reference
ULB Urban Local Body
UNESCAP United Nations Economic and Social Commission for Asia and the Pacific
USD United States Dollar
VGF Viability Gap Funding
WB World Bank
’00,00,000 Crore
’00,000 Lakh
Currency Equivalents
Conversion Factor 1 USD (US Dollars) = 45 INR (Indian National Rupees)
Conversion Factor 1 USD (US Dollars) = 0.034 UF1 (Unidad de Fomento)
Conversion Factor 10 USD (US Dollars) = 1MXN (Mexican peso)
Conversion Factor 1 USD (US Dollars) = 3 UDI2 (Unidades De Inversion)
All values are at historical value.
1
The Chilean UF (Unidad de Fomento) is a reference currency updated daily in relation to inflation, internal consumer prices,
and currency fluctuations. Most long term contracts, mortgages, insurance premiums, house prices etc. are quoted in UF while
the actual payments are made in Chilean pesos at the rate of the day.
2
The Mexican UDI is a inflation-adjusting reference currency used to price Investments and loans which is converted to pesos
at the time of payment
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1 Executive Summary
It is being increasingly recognised in India that lack of good quality infrastructure is a
bottleneck that must be removed in order to maintain the growth rate shown by the country
in the past two years. To achieve the targeted economic growth, there is an urgent need to
increase the level of investments in infrastructure. Government estimates peg the total
infrastructure investment requirement in the country at about USD320-350 billion over the
next five years. Considering the high emphasis on using PPP as an important format for
creation and maintenance of infrastructure and considering the realistic levels that PPPs can
go upto, about 20% of the total (USD64 to 70 billion) is estimated to come from PPP route.
Though PPP infrastructure development in India is at a nascent stage, recent trends have
been very encouraging. Our study has estimated that the total value of PPP infrastructure
projects in India that have achieved financial close in the last ten years is about USD15.8
billion (in the study, sectors included are - all transport sectors, urban infrastructure, water &
sanitation, power transmission and distribution). Hence, achieving the growth rate envisaged
over next five years for investment from private players will definitely require a huge step-up
approach to project development and implementation.
Sectoral Distribution of PPP Projects by Value
Trend in PPP Projects by Value
(Total Value USD15.8 billion)
Waste Water 6.00
0.1%
Solid Waste Water Supply
2.3% Airports 5.00
Management
0.4% 17.2%
4.00
USD Billion
3.00
2.00
Ports
20.5% 1.00
Roads & Bridges Power
53.7% Distribution
1.8%
-
Power 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Railways Transmission
1.8% 2.3% Year of Financial Close
The good sign is that the year on year the

Sources of Senior Debt
trend is increasing. In the last 3 years alone, (Total Value USD7.72 billion)
PPP infrastructure projects worth USD 8.2
billion (93 in number) have achieved financial Others
close as against USD 5.1 billion (131 in 28%
number) projects in the previous 8 years.
Many PPP projects are in Roads & Bridges Commercial
sector. However, other sectors have also Banks
72%
participated in PPP infrastructure growth
except for urban infrastructure sector, where
success of PPP is yet to be tested. Regionally
West along with South dominates in Composition of Other Sources of Senior Debt
development of PPP infrastructure Insurance
(accounting for more than 75% by value and Companies

IFCI 1.9%
1.5%
Others
5.5%
also number of projects). HUDCO

2.6%
IL&FS
3.1%
Infrastructure financing not only in terms of SIDBI
IIFCL
34.4%
3.2%
amount but also in terms of the cost and ADB
3.7% IFC
4.9%
terms at which the finance is available to
private players is very critical. The study
shows that PPP infrastructure projects have
IDBI IDFC
so far been largely financed by debt (68% of 17.3% 22.0%
project costs, on an average). The
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contribution of equity has been 25% with Average Tenure and Concession Period
remaining coming from subordinate debt- Airports
16
30
3% and grant-4%. Ports
13
28
12
Power Transmission
Commercial banks are the major source of 10
25
Railways
debt and constitutes 72% of all debts with 14
28
Roads & Bridges
other financial institutions such as IDFC, 5
23
Solid Waste 16
IIFCL, IDBI, IL&FS, etc. constituting the 15
Water Supply 28
balance 28%. Interestingly, the tenor of term
- 5 10 15 20 25 30 35
loan by banks is around 50% of concession Number of Years
period length (see charts overleaf). Average Concession Period Average Tenure of Debt
Unlike the international markets that have a very high gearing, the typical gearing ratio in
India is 70:30 though there is a clear trend towards increasing gearing ratios in recent
projects, as also in the road sector which has moved the farthest in the PPP market.
Commercial banks are comfortable lending to PPP projects despite having limited long term
resources, but always with resets. The resets have shown a clear trend of becoming shorter
and shorter in duration. In the absence of appropriate interest rate swaps in the market,
project developers have limited choice. However, the survey reveals that when interest rates
came down substantially, Developers have tried successfully to refinance their loans,
particularly when the construction periods were over. This activity also mirrors what happens
in the developed markets.
Internationally, banks that are active in the infrastructure PPP market have various options to
manage their matching of long term lending with several products. Unlike international
banks, which package and sell down their different debts to various types of buyers, the
Indian banks do not have many options as yet.
From our survey and analysis of financing of PPP projects, other interesting observations on
the debt side of funding are:
• Relationship banking or promoters strength is the most important factor that influences
lending to PPP projects. Driven by the fact that there is little history of operational PPP
projects, banks ask for corporate and sometime personal guarantees from the
developers.
• Long term sources such as Insurance and Pension Funds are currently not going into
PPP infrastructure, as they can invest in only in ‘AA’ rated instruments and there are no
‘AA’ rated instruments available from the SPVs of the PPP projects in the market as of
now. Internationally, investment grade “BBB’ is the minimum rating requirement for
Insurance and Pension Funds’ investment.
• Bonds are not a popular source of funding at all in the PPP market. Apart from the
absence of an active market, the developers surveyed also indicated that the cost of
issuing and credit enhancement makes these costlier than the term loan from banks.
Though not explicitly stated, higher level of disclosure is also a reason. Absence of
monoline institutions in India, unlike in the international scenario, is also an important
reason.
• External Commercial Borrowings (ECBs) in the current scenario have become relatively
less expensive and developers are looking at them favourably even with such loans
having no option of long term forward cover or convertibility into rupee loan before their
maturity. The ECB policies followed in the next few years will determine their contribution
to financing of infrastructure projects.
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Of the USD11.48 billion investments made in the last 12 years (in the surveyed 104 PPP
projects for which detailed financial Sources of Pure Equity
information was obtained), the total equity (Total value USD2.93 billion)
Strategic
was USD2.93 billion. Of this, the maximum Inverstors
equity (USD1.43 billion) has been funded in Government 6%
10%
Roads & Bridges because of large number of Financial
projects being awarded on PPP basis in the Institution
2%
last 3-4 years. On the Equity side, our survey
reveals that majority of the equity, almost Developer
82% is provided by developers themselves. 82%
Financial investors and other strategic

sources are small. In a few cases, where the
SPV has been set up as a joint venture
between Government and the Developers, Government has made their equity contribution,
typically limited to 26% or less. Clearly, if this trend were to continue, there would be big
issue on the volume of equity available from the developers when significant up-scaling of
PPP activity takes place.
However, there are very significant developments taking place in the market wherein
strategic investors in the form of PE funds are entering in. Though the volume of their
investments in infrastructure PPP market has been small till now (under USD300 million in
the year 2006), it is expected that this will go up very rapidly with recent entry
announcements by both Indian and international PE players. Many PE firms are looking at
the infrastructure sector favourable and Government too has supported the setting up of a
USD5 billion fund to invest in PPP projects.
Our survey identified certain key equity side constraints in PPP infrastructure financing. For
example, FDI cannot come into Holding Companies (typically created by Developers
combining a few infrastructure projects) under automatic route thus requiring specific
Government approvals (FIPB). This restrains holding company to raise capital outside India.
Given the fact that the Government has removed most hurdles for FDI into infrastructure in
the country, this still remains a road block for FDI into PPP infrastructure.
Also, a two tier structure of holding & SPV companies (again typical of Indian infrastructure
developers) results in cascading effect of Dividend Distribution Tax. The two tier structure is
important for attracting equity investors to the PPP infrastructure projects because there are
a number of exit restrictions to direct equity investments into SPVs as also the SPV’s
existence is co-terminus to the concession period.
Accepting the recommendations of the Patil Committee Report, the Government has already
taken some steps to develop the Bond Market. Also, the Government is actively looking at
the initial recommendations of the Parekh Committee to address several constraints
identified. The role of an important financing institution (IIFCL) is being examined for playing
the role of a monoline institution.
It is therefore, our suggestion that on all these issues, namely bond market development,
FDI into holding companies, cascading effect of dividend tax, and accessing insurance and
pension funds, the Government should give preferential and liberal treatment as far as
infrastructure investments are concerned.
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2 Introduction
The Indian economy is going through its most remarkable phase of growth - with GDP
growth rate at an average of 7.6% in the Tenth Plan Period (2002-03 to 2006-07) as
compared to the average of 5.5% in the Ninth Plan Period (1997-98 to 2001-02). The
Eleventh Five Year Plan projects an even higher average annual growth rate of 9%.
This rapid growth of the Indian economy has brought into focus the poor state of
infrastructure in India. Congestion can be seen everywhere, be it roads, ports or airports and
reports show that all sections of the Indian society, from the business community to the
common man, feel constrained by the lack of adequate infrastructure. Their concern is
highlighted in the approach paper to the 11th plan, put out by the Government of India (GoI),
which states that, “The most important constraint in achieving a faster growth of
manufacturing is the fact that infrastructure, consisting of roads, railways, ports, airports,
communication and electric power, is not up to the standards prevalent in our competitor
countries. This must be substantially rectified within the next 5-10 years if our enterprises are
to compete effectively.”
The message coming from all quarters is that the continuation of the growth momentum of
India will require significant improvement in infrastructure. Several estimates have been
made about the level of infrastructure requirement in the next five years required to sustain a
growth rate of 9 percent. The most widely quoted of these estimates is a GoI estimate which
projects that, during the 5 years of the 11th plan period, USD 320 billion of infrastructure (in
2005-06 prices) will be required. The estimate also breaks down this requirement sector
wise and projects that a majority of this investment will go in the power sector followed by
railways and national highways.
In this report we deal with the likely challenges that will be encountered in financing of this
infrastructure requirement. In recent times there have been several committees, individuals
and interest groups that have given their recommendations on how to increase the level of
financing for infrastructure projects. This report does not aim to replicate their work. Instead
the focus of this report is on providing evidence based descriptions on the challenges
of infrastructure financing- how infrastructure projects are being financed currently and the
sufficiency of the existing means to finance future infrastructure requirements. In this report
we present an extensive amount of primary data on the current situation in infrastructure
financing, and this sets apart this report from others which mostly offer viewpoints of experts
on the situation of infrastructure financing in India. In addition to the primary data we also
present views from prominent stakeholders in the infrastructure sector on the challenges of
financing infrastructure. Based on an understanding of the challenges we highlight our views
on how infrastructure financing is going to evolve, especially in the near term. However,
before we get into the analysis we need to clarify some important points/assumptions that
we have made in the report.
2.1 Some Points/Assumptions to be Kept in Mind

Future Infrastructure requirement: As already stated earlier in the report, GoI estimates
the level of infrastructure requirement in India in the next five years to be around USD 320
billion. However, it is difficult to determine the accuracy of this estimate.
This requirement is based on an estimate of infrastructure capacity expansion required in
some chosen infrastructure sectors during the eleventh plan period. Projects chosen are
mostly in the Central sector, for example in roads the estimate accounts explicitly for only
National Highways and not for State Highways or Rural Roads. There is an ‘Other’ category
which possibly encompasses infrastructure needs in the states and in sectors such as
Special Economic Zones, telecommunication etc. However, estimating that only 17 percent
of the USD 320 billion pie will go for these is definitely an underestimate. Also many
estimates of infrastructure requirements even in the chosen sector are only preliminary and
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Draft Final Report
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the financing requirements for the infrastructure are just ballpark. It is therefore, difficult to
know what the actual requirements will be.
However, at the same time many experts doubt that the Government will be able to
implement USD 320 billion worth of projects even if financing was available. They point to
the limited capacity of Government departments and agencies and question their ability to
formulate such a large number of projects. Because of this lack of capacity, they claim that
while USD 320 billion of financing need might be projected, the actual financing need will be
significantly less. In this sense the USD 320 billion figure is an overestimate.
Because it is difficult to pinpoint the actual future infrastructure requirement we will take the
figure of USD 320 billion for analysis in this report. While it is clearly not the right number it
does show that the infrastructure financing requirement is very large and that significant
improvements need to be made to infrastructure financing in India to meet this large
demand.
Focus on Public Private Partnership: Infrastructure development in India has largely been
in the Government domain. However, in recent years Government of India (GoI) and State
Government(s) have been putting an increasing focus in involving the private sector in
infrastructure creation under the public private partnership (PPP) framework3. Two
commonly cited reasons for this are as follows:
1. Funding the infrastructure deficit: Given the large investment required for
infrastructure development in India and the scarce Government resources, it is unlikely
that public funds would be adequate to meet the needs in this context. In addition, the
Fiscal Responsibility and Budget Management Act4 and steps towards fiscal prudence
adopted by both the Centre and State Governments have also contributed to the thought
process of involving the private sector in the process of infrastructure development in the
country.
2. Value addition: Apart from being an alternate source of finance, private sector
participation is also viewed as a possible way of value addition in the various aspects of
the value chain of infrastructure development including innovation, managerial efficiency
in the project management process, adoption of better technology in key infrastructure
areas etc.
PPPs are thus being seen as an important tool for producing an accelerated and larger
pipeline of infrastructure investments, and catching up with the infrastructure deficit in the
country.
In this report we will concern ourselves with the financing of infrastructure projects
under the PPP framework. Government financing of infrastructure is done primarily from
budgetary resources and public debt and Government provides guidance on its investments
in many of its documents like the Union and State budgets, annual plans etc. In contrast
PPP projects in India are not well documented and only very limited information is available
on their financing in the public domain. Given that PPP projects are being looked at as an
important means of meeting the infrastructure requirement in India we have focused this
study on the financing of PPP infrastructure projects (in consultation with the GoI and World
Bank).
Definition of Infrastructure: Infrastructure is defined differently by different
reports/estimates and by different agencies. Currently there is no consensus on the
sectors to be included in infrastructure. For example, the Economic Survey of India
3
GoI has specifically defined PPP in the “Scheme for financial support to Public Private Partnerships in Infrastructure”
(also commonly known as Viability Gap Funding or VGF) as follows –
“PPP means a project based on a contract or concession agreement between a Government or Statutory entity on the one side
and a private sector company on the other side for delivering an infrastructure service on payment of user charges.”
4
The FRBM bill, passed in August 2003, makes the government responsible for elimination of revenue deficit by 2008-09 and a
fiscal deficit of 3 percent.
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September 2007
published by the Reserve Bank of India includes “Storage Infrastructure” as a part of

Infrastructure while it is not included as Infrastructure by most other agencies. Also most
reports do not drill down to the sub-sectors which they include. For example while the
Economic Survey includes inland waterways in its definition of transport sector some other
agencies do not. Because of the diversity of definitions available we also need to clearly
define the infrastructure sectors we will look at so as to not confuse the reader.
For defining Infrastructure for the purpose of this report we start with taking a
comprehensive approach to the definition of infrastructure, basing it on as many relevant
sectors as is done commonly by the Government agencies. However, for analysis in this
report we have excluded some sectors as the focus of this report is on PPP infrastructure
projects in particular and not on all infrastructure projects as in India PPP have not taken
place in all infrastructure sectors and not all sectors are looked upon as equally amenable to
PPP.
To come to our definition of PPP we developed some criteria and then subjected the
infrastructure sectors to these criteria. Annexure 1 gives the details of the process we used
for selecting PPP infrastructure sectors for the detailed study. Based on the process our
definition of PPP infrastructure involves projects in the following:
1. Roads
2. Railways
3. Airports
4. Ports
5. Power including generation (to a limited extent), transmission and distribution
6. Urban water supply including treatment, transmission and distribution
7. Waste water including disposal and treatment
8. Solid waste management
These sectors include all prominent sectors highlighted by GoI in their estimation of the
infrastructure financing requirement. Keeping the above points/assumptions as boundaries
for this report the objectives of this study are described next.
2.2 Objective of the Study

The primary objectives of the study is to identify issues and constraints to Public
Private Partnership (PPP) infrastructure financing which are foremost on the minds of
market players/ stakeholders in the infrastructure financing market, and to elicit feedback to
identify efforts required to ease the constraints. Specifically the objectives of the study are as
follows:
1. To provide evidence-based descriptions of present financing sources for PPP
infrastructure projects in India with an idea to specifically identify and assess financing
constraints associated with such projects.
2. To analyse the financing of PPP in India in detail. The analysis will be used to identify:
• Constraints to expanding the range of investors in infrastructure;
• Constraints to financing faced by current investors; and
• Financial innovations in India and abroad for infrastructure financing and their
applicability in Indian context.
3. To identify changes required to reduce and ease the identified constraints.
To meet these objectives a detailed approach and methodology was developed and agreed
upon in consultation with GoI and the World Bank. This approach and methodology is
highlighted in Annexure 2. The key elements of our methodology are as follows:
1. We prepared a detailed list of PPP projects in the sectors chosen for the study.
2. We met key stakeholders including sponsoring agencies, project developers and
financial institutions to obtain detailed information on the mode of financing of the chosen
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September 2007
projects. The data was then analyzed to bring out trends in Infrastructure financing in
India. We also carried out detailed interviews with over 80 individuals representing the
above institutions as well as some other developers, financial institutions, rating
agencies and Government agencies. The interviews focussed on their perception of the
issues with the current mode of PPP infrastructure financing and ways to ease the
constraints.
The following sections detail out the objective listed above.
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September 2007
3 Objective 1: Evidence Based Description of Present

Financing Sources for PPP Infrastructure
PPP projects have begun to take off in the infrastructure sector in India. In the infrastructure
sectors chosen for the study we estimated that as many as 231 projects have already
achieved financial close with a combined value of USD 15.80 billion. We were able to get
detailed financial information for 104 of these projects, which form nearly 45 percent of the
total PPP projects by number, but with a total value of USD 11.48 billion form more than 72
percent of the total PPP projects by value. This indicates that we have been able to capture
detailed financing information for most large PPP projects in our sample. We could not
obtain information for all the projects as for many projects the stakeholders refused to share
financing details citing confidentiality or commercial reasons. In spite of that our sample of
104 projects is large enough to highlight the trends in financing of PPP infrastructure
projects. Even for projects where we were not able to obtain detailed financial information we
did manage to obtain other project information. Exhibit 1 & Exhibit 2 below highlight our
coverage. Annexure 3 highlights the coverage of our survey in greater detail.
Exhibit 1: Sample Size for Project Information Collection
Number Value (USD billion)
Number % of total Value % of total
Project Information* 231 100% 15.80 100%
Detailed Financing Information 104 45% 11.48 72%
Notes:
*Considered only those projects that have achieved Financial Close
*As agreed with World Bank during inception phase, we have not considered:
• Urban projects less than USD1 million; cities less than 1 million population
• Smaller road projects in states (below USD1 million) in MP, Maharashtra and Rajasthan (about 20
numbers.)
• Select power distribution projects such as Noida, Ahmedabad and Mumbai; Real estate oriented projects
such as Nandi Corridor (NICE), Mumbai Car Park, etc.
We have also made assumptions in a very small number of projects about project costs, financial closure, etc
Exhibit 2: Trends in Total 231 Projects and Sample of 104 Projects
Value of PPP Projects Number of PPP Project
6.00 50
5.00 40
Number
USD Billion
4.00
30
3.00
20
2.00
10
1.00
- 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year of Financial Close Year of Finanacial Close
Detailed Financial Information All PPP Projects Detailed Financial Information All PPP Projects
If we look at the temporal trend of the PPP projects in India we find that PPP projects clearly
show an increasing trend in the past 10 years with a sharp increase particularly in the
last 3 years. Out of the total projects more than 93 PPP infrastructure projects have
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Draft Final Report
September 2007
achieved financial close in the last three years. This is as compared to a total of 131 projects
in the previous 8 years5. If we look at a sector wise distribution, as can be seen from the
graph below, road sector (especially National Highways) has seen the maximum activity in
terms of the number of projects.
PPP Projects in India by Number

(Total Number 224)
50
40
Number
30
20
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year of Financial Close
Roads & Bridges Ports Airports

Railways Power Distribution Power Transmission
Solid Waste Management Waste Water Water Supply
In value terms we find that growth has been even steeper in the recent years. In 2006
projects worth USD 6 billion achieved financial close as compared to projects worth only
USD1.8 billion in 2005. However, when looked at sector wise we find that road projects are
not as dominant as they are by numbers. Roads sector which forms more than 81% of the
total PPP project by number accounts for approximately 54% of the total projects by value
(please refer to Exhibit 3). Even though the Port and Airport projects are fewer by number
they are usually large by value and constitute 20.5% and 17.2% of the total PPP projects by
value respectively.
PPP Projects in India by Value

6,000
5,000
USD Million
4,000
3,000
2,000
1,000
-
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Roads & Bridges Ports Airports

Railways Power Distribution Power Transmission
Solid Waste Management Waste Water Water Supply
5
Project achieving financial closure in the year 2007 (7 in number – 2 Airport, 5 Roads & Bridges) have been excluded in this
trend analysis because the analysis cannot be done for the whole year in 2007. That is why in the graphs showing yearly trends
the number of projects comes to 224 instead of 231 and the project value comes to USD 13.32 billion rather than USD15.8
billion.
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Draft Final Report
September 2007
Exhibit 3: PPP Projects in Different Sectors by Number and Value

Sectoral Distribution of PPP Projects by Value Sectoral Distribution of PPP Projects by Number
(Total Value USD15.8 billion) (Total Number 231)
Waste Water Water Supply
0.1% 2%
Solid Waste Water Supply
2.3% Airports Airports Ports
Management Solid Waste 2% 8% Power
0.4% 17.2% Management Distribution
2% 2%
Railways
2%
Ports
20.5%
Roads & Bridges Power
53.7% Distribution
1.8% Roads & Bridges
Power
82%
Railways Transmission
1.8% 2.3%
We also find that the number of projects awarded by Central Government agencies is only
slightly higher than those of State projects. This bears testimony to the widespread
acceptance of PPP projects in India. However, by value PPP projects awarded by Central
agencies dominate over those in the states.
Exhibit 4: Trends in PPP Projects by Awarding Authority
PPP Projects Awarded by Centre/State by Number PPP Projects Awarded by Centre/State by Value
(Total Number 224) (Total Value USD13.32 billion)
60 6,000
50 5,000
40 4,000
USD Million
Number
30 3,000
State
20 2,000
State
10 1,000
Centre Centre
- -
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year of Financial Closure Year of Financial Closure
If we look at the financing of these projects we find that PPP projects in India have been
largely financed by plain vanilla debt6. On an average across all projects 68 percent of the
project cost is usually financed by debt, 26 percent by promoter’s equity while only 2 percent
comes from sub-debt. The remaining 4 percent of the project cost comes from Government
grants of different kinds. The grants are mainly in the form of monetary support given by both
the State and the Central Government to make the projects viable.
Exhibit 5: Overall Financial Structure of PPP projects in India
Financial Structuring of PPP Infrastrutcure Projects

Sub-Debt Grant
3% 4%
Equity
25%
Debt
68%
6
The analysis hereon is done for a sample of 104 projects for which we have detailed financing information.
pwc 16
Draft Final Report
September 2007
The institutions which dominate infrastructure financing in India are commercial banks. Out
of a total debt financing done for PPP projects nearly 72 percent can be attributed to term
loans from banks while other institutional lenders provide the rest. This is slightly higher than
what is prevalent in the financing of infrastructure in developing countries overall, where
World Bank estimates suggest that nearly 62 percent of the financing comes from this
source.
Out of the debt financing of USD7.72 billion, 72% can be attributed to term loans from
commercial banks. USD1.93 billion, which forms 28% of the total debt funding, is from
sources other than banks. Players like IIFCL (34.4%), IDFC (22%) and IDBI7 (17.3%)
dominate in the funding from other sources.
Exhibit 6: Source of Senior Debt Funding
Sources of Senior Debt Composition of Other Sources of Senior Debt

(Total Value USD7.72 billion) Insurance
Companies Others
IFCI 1.9%
1.5% 5.5%
HUDCO
Others IL&FS 2.6%
28% 3.1% IIFCL
SIDBI 34.4%
3.2%
ADB
3.7% IFC
4.9%
Commercial
Banks
72%
IDBI IDFC
17.3% 22.0%
Banks and other institutional lenders provide debt on a syndicated basis, especially for large
projects. There are nearly 30 lenders which are active in the infrastructure financing market
and participate in the lending syndications. However, only 6-7 of these play the role of lead
banks in the syndicate and have the capacity to appraise projects. Others rely on the
appraisal carried out by the lead bank for lending to projects.
Within commercial banks we find that a majority of the senior debt funding is done through
public sector banks in India. The project database shows that public sector banks dominates
with a share of 82 percent, while share of private sector banks and foreign banks are only
13% and 5% respectively8.
Exhibit 7: Sources of Debt by Sector and Share of Commercial Banks by Type
Sources of Debt by Sector Share of Commercial Banks by Type

(Value USD5.6 billion)
Water Supply
Foreign Bank
5%
Solid Waste Management
Private Sector
Roads & Bridges Bank
13%
Railways
Power Transmission
Ports
Airports Public Sector

Bank
0% 20% 40% 60% 80% 100% 82%
Commercial Banks Institutions Others
7
IDBI has become a bank only after the 2004 we have therefore,, considered it to be an institutional lender in this report
8
Lenders break-up into banks or institutional investors is only available for debt amounting to USD4.18 Billion
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September 2007
Equity contribution in projects, the next highest means of financing a project comes mostly in
the form of promoter’s equity. In the past year a number of private equity players have been
showing keen interest in financing a portion of the equity. However, the difficulty in being
able to take out equity from the project SPV has slowed down the extent of private equity
deals in the sector.
The only financial innovation of any sort that has
Sub-Debt from Commercial Banks by Source & Value
taken place is the issuing of sub-debt to cover a
Not Known
portion of the equity. A unique aspect of the sub
14% debt issue in India is that as much as 86 percent
of the sub debt is lent from institutions which
syndicate the issue of senior debt. If we look at
Member
the financial structuring of infrastructure projects
22% over the years we find that the level of or senior
debt has been increasing over the years while the
Lead level of equity has been going down9. What the
64%
trend demonstrates is that bankers seem to be
getting more confident on the infrastructure
projects. From 2004 we find an increased
optimism for infrastructure projects with a drop in equity required below the commonly
accepted 30 percent. In some projects, especially in the road sector, promoter equity even
went below 10 percent. However, to compensate for the lower levels of equity banks often
insist on sub debt to be taken by the promoter, with the level of sub debt going to as much
as 25 percent in some cases10.
Changes in Financial Structure Over the Year

80%
70%
60%
50%
40%
30%
20%
10%
0%
1995 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Senior Debt Equity Sub-Debt Grant
Other key trends and analysis are presented in
9
The trend in 2000 and 2001 of relatively low debt levels and high equity levels is because of the closing of a few port projects
during those years which had high levels of equity.
10
Some experts have raised the concern that developers are using grants from Government for reducing their equity
contribution rather than reducing the debt component of the project. Annexure 8 highlights this issue in more detail.
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Draft Final Report
September 2007
4 Objective 2: Analysis of the Financing of PPP in India

PPP projects in India are
Size Wise Grouping of PPP Projects by Value and Number
predominantly small in (Value USD15.8 billion, Number 231)
size (less than USD 50
million) by number of
projects and these small
by Value 11% 20% 69%
projects are able to reach
financial closure without
much difficulty (given that
they are viable and carry
reasonable levels of risk). by Number 61% 18% 21%
However, there are also
a small number of large
PPP projects (project 0% 20% 40% 60% 80% 100%
size greater than USD <USD 50 Million USD 50-100 Million >USD 100 Million
100 million), the financing
of which is significantly more complicated. As can be seen from the accompanying graph
while only 21 percent of the total PPP projects (or about 48 projects) are large projects, they
account for nearly USD 11 billion in project size11. The average size of such large projects is
approximately USD 230 million and financing each of such projects requires significant
coordination between markets players involved in infrastructure financing.
In this section we analyze in detail the present modalities and issues in infrastructure
financing particularly bringing out issues in the financing of large projects. The discussion is
divided in two parts- first we analyze the modalities and issues in the use of Debt to finance
infrastructure and second we analyze the modalities and issues concerning the use of equity
and sub debt in financing of infrastructure projects. A discussion on grants is also
incorporated in this section, where appropriate.
4.1.1 Debt financing

On the debt side we present the current trends on the basis of detailed information on debt
financing information for the 104 projects, as indicated earlier. We also present views
obtained from our interaction with the key financial institutions and developers. The value of
total senior debt, for the 104 projects, aggregate to USD7.72 billion.
Box 1: Institutions Operating in Debt Financing of PPP Projects
The accompanying diagram gives a schematic representation of the types of institutions
presently providing debt financing for PPP projects. As can be seen from the diagram PPP
debt financing is dominated by commercial banks in India (the size of the circle depicts the
size of lending to infrastructure). These banks offer mainly plain vanilla loans and sub debts
where needed. However, as we will explore in detail later, the commercial banks are
hampered by the lack of availability of long term finance as well as lack in providing
innovative financial instruments.
The second group of institutions are DFI’s (development finance institutions) like IDBI, IDFC,
HUDCO, PFC, and IL&FS etc. Some of them like IDFC have comparatively long term
finance available from the Government and most of them were keen to introduce a portfolio
of innovative financial products (like some initial use of take out financing by IDFC).
11
World Bank has estimated that 20 percent of the Infrastructure Financing requirement of USD 320 billion will come from PPP
projects. This works out to a financing requirement of USD 64 billion for PPP infrastructure projects in the next 5 years. If the
same trend in value and number of PPP projects continues in the future then it would be fair to assume that out of the USD 64
billion nearly 45 billion will come from a small number of large projects, financing of which will require significant financial
innovation
pwc 19
Draft Final Report
September 2007
However, today their lending behaviour has become (for most purposes) not much different
from commercial banks. They also are not prominent players as they lack size.
Finally there are bilateral and multilateral institutions. While they too have long term loans
available and can offer innovative financial products (like political risk insurance, currency
risk insurance etc.) their participation in lending to PPP projects is insignificant as of now.
High
Bilateral and Multilateral
Institutions
Availability of Long Term Finance
IL&FS
IDBI
IDFC Specialized Institutions
-PFC, HDFC, HUDCO, Indian Railway
Finance Corporation etc.
Commercial
* Size of circle indicates relative size
in the financing pie
Banks
Low High
Use of Innovative Financial Instruments
The project database shows commercial banks to be the predominant source of long term
debt. However, this has not always been so. Historically requirements of long term debt by
industry were predominantly met from development finance institutions (DFI’s) promoted by
the GoI. The financial sector reforms started in the 1990s allowed the private sector to raise
long term finance from banks and international capital markets. At the same time it made
DFIs unable to raise long-term resources at reasonable cost due to changes in the SLR
requirements by banks and disqualification of investment by banks in DFI bonds to meet
their SLR requirements. Since then banks have become the largest source of financing for
long term debt, with some erstwhile DFI’s like ICICI and IDBI have also converted
themselves into banks. This raises questions on the future role of DFIs in financing of
infrastructure projects.
Bank lending to the infrastructure sector has grown rapidly over the last few years. However,
the growth in lending to infrastructure is not unique. In fact it is concomitant with a sharp rise
in non food credit provided by banks, with strong growth in credit off take being observed in
both the corporate and retail segments (more detailed projections for the PPP infrastructure
lending by commercial banks is presented in Annexure 5). Also infrastructure projects are
not unique in the need for long term loan. Significant proportion of the credit demand for the
long term exists in other sectors like real estate. This demand for long term loan from
multiple sectors will eventually hamper the lending by commercial banks due to the issue of
Asset Liability Mismatch. This issue is explored next.
Asset Liability Mismatch (ALM): Long term financing by banks exposes them to the risk of
asset liability mismatch. The major source of fund for Indian banks is saving bank deposits
and term deposits, the maturity profile of which ranges from less than 6 months to 5 years.
Such deposits account for over 80 percent of the liabilities of Public Sector banks and
around 73 percent for Private Sector banks. Lending long term with such a short term asset
base exposes the banks to ALM risks.
One manifestation of ALM is in terms of liquidity risk. This is the risk that excessive long term
lending growing faster than the growth in credit will result in banks failing to repay its short
term depositors. As long as there is surplus liquidity in the banking system there is very little
liquidity risk. This situation prevailed in the Indian banking system for a long time when the
deposit growth was much higher than the credit off-take. However, in the past 2-3 years the
situation has reversed, with credit off-take (including long term credit off-take) far exceeding
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Draft Final Report
September 2007
deposit growth. This has resulted in banks liquidating their statutory reserves with the RBI to
fund the credit demand.
While this is unlikely to cause banks to fail in India, yet there are some worrying signs. Firstly
there is a rapid reduction in excess Statutory Liquidity Ratio12 (SLR) in the banking system.
ICRA estimates that SLR has reduced to around USD 13 billion (Rs. 600 billion) as on March
2007 from over USD 55 billion (Rs. 2.5 trillion) as on March 2005 and around USD 26 billion
(Rs. 1.2 trillion) as on March 2006. As a result the ability of the banks to repo these excess
securities to meet liquidity pressures have reduced. Also by lending long term banks expose
themselves to the risk of reduction in margins. To service liabilities and to meet credit
demand banks need deposits. The scarcity of deposits in such a situation leads them to pay
ever higher premium for them. In India this has been seen in the form of high interest rate
time deposits being issued by banks to improve their liquidity situation.
RBI view on the ALM issue is that in the future banks role will have to be confined to
supplementing long term lending rather than remain as the primary lenders. The
development of other avenues for long term funding is important in the light of the fact that
RBI is pushing the banks to become more stringent in lending long term. Internationally
many banks avoid ALM by participating in infrastructure projects through bridge loans and
mini perm loans during the riskier construction period of infrastructure projects. After the
operations begin and the risks are lower then financing is sought from other less expensive
long term lenders (like insurance firms) as well as from bond issues. In India the absence of
such lenders makes such a situation difficult at present.
Another way in which International banks are able to manage their long term Asset Liability
matching issue is selling down their loans in a variety of ways, sometimes packaging several
project debts together, to buyers with different risk appetite. Typically these buyers include
other banks, pension funds, insurance companies, other institutional investors etc. Since, the
market is very liquid for such products, banks or the buyers of such products do not have
major issue of asset-liability mismatches. The timing of such sell downs also range from
immediate to few years depending on the risk profile of projects as well as the risk appetite
of buyers.
Commercial banks in India are not able to meet their ALM mismatch in the same way. The
market for such products is not liquid and hence not preferred by many investors. Banks can
raise long term Bonds to provide long term debt to PPP projects. RBI through its annual
Policy statement for the year 2004-05-issue of long-term Bonds by banks13 has allowed for
this. The circular allows banks to raise rupee denominated long term bonds to the tune of
bank’s exposure to infrastructure projects with residual maturity of more than 5 years.
However, the cost of these long term funds to banks and ultimately to the PPP project is high
and there is not much demand for expensive credit. Some institutions/ banks like IDBI, ICICI,
UTI, and IDFC etc have raised long term funds through bonds for lending long term.
However, competition with commercial banks, who lend long term using cheap retail assets
(cost of assets being less than 5 percent in some cases), forces even the more prudent
banking institutions to price below what is necessarily prudent.
In addition, to ALM issues another issue with the present financing of the debt component of
infrastructure projects relates to the short tenure of loans and the reset periods on offer.
Tenure and Reset Period of Infrastructure Loans: Presently the tenure of infrastructure
loans is nearly half of the concession period. Our interviews with banks indicate that the
short tenure is possibly given by the banks to give them enough time for restructuring the
infrastructure asset in the event that something goes wrong with the project.
12
SLR is that amount which a bank has to maintain in the form of cash, gold or approved securities with the Reserve Bank of
India (RBI). The quantum is specified as some percentage of the total demand and time liabilities of a bank. This percentage is
fixed by RBI and the minimum stands at 25 percent at present.
13
Circular number RBI/2004/236-DBOD No. BP.BC. 90 /21.01.002/ 2003-04 dated June 11, 2004
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Draft Final Report
September 2007
Average Tenure and Concession Period

Airports 16
30
13
Ports 28
Power Transmission 12
25
Railways 10
28
Roads & Bridges 14
23
5
Solid Waste 16
15
Water Supply 28
- 5 10 15 20 25 30 35
Number of Years
Average Concession Period Average Tenure of Debt
As compared to India internationally the debt tenure is typically 80-90% of the concession
period. For example, some of the PPP deals in the international market as presented in
Exhibit 8 have average debt tenure to concession period ratio of 80%.
Exhibit 8: Loan Tenure to Concession Period Ratio for Ten PPP Projects in last Two Years
Year of Debt Debt

Concession
# Project Financial Amount Currency Tenure Ratio
Period (years)
Close (million) (years)
1.
Lancashire Waste Project 2007 29 320 Pound 25 86%
(UK)
2.
The Keppel Seghers Tuas 2006 25 105 US Dollar 23 92%
Project (Waste to Energy
Project – Singapore)
3.
The Uijeongbu light rail 2006 30 132 Euro 18 60%
Project (Korea)
58 W 20 67%
51 W 23 77%
4.
Limerick Tunnel conduit 2006 36 258 Euro 34 94%
(Ireland)
5.
The Brussels-North 2006 20 167 Euro 18 90%
Wastewater Project
(Belgium) 100 Euro 19 95%
6.
Cyprus Airports Project 2006 25 542 Euro 19 76%
(Cyprus)
7.
Calle 30 (Madrid) Ring-road 2005 35 1350 Euro 30 86%
Project (Phase-1) (Spain)
8.
Madrid's flagship ring-road 2005 35 1350 Euro 30 86%
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Draft Final Report
September 2007
project, Calle 30 (Spain)

1150 Euro 20 57%
9.
E18 Grimstad-Kristians and 2006 35 399 Euro 28 80%
road project (Norway)
10.
Richmond Airport-Vancover 2005 35 600 (Canadian 25 71%
rapid transit project Dollar)
(Canada)
Average 80%
Source: Project Finance Magazine various issues

However, it must be noted that in UK too PPP loans, in the initial years, were of shorter
period when compared to concession lengths, the reason being little known history of
performance of PPP projects. Even now real toll projects, where the traffic risk is borne by
the project companies, have relatively smaller debt tenure to concession length ratios.
The significant issue with debt financing in India is that in addition to short tenure banks also
ask for short resets and high Average Debt Service Cover Ratio (DSCR) from promoters. In
our interviews banks have indicated that they prefer a 1.5 DSCR or more, except for (NHAI)
annuity projects where they are willing to look at lower DSCR (near 1.2) due to lower risk on
projected revenues.
Exhibit 9: DSCR Required by Banks
Minimum DSCR Desired by Banks
More than 1.5 1.2-1.5

26% 24%
Around 1.5
50%
In mature markets like UK, the Average DSCR in PPP projects range from 1.05-1.1.
However, banks attributed this difference to the lack of history of PPP projects in India which
forces the banks to keep a higher margin for repayment. Another reason for a higher DSCR
in India is because the traffic risk in the project is also factored in by banks.
Along with high DSCR requirements banks in India also push for short reset period in
projects. Volatile interest rate regime14 in India has been one of the factors that have led to
14
In order to assess the volatility we have analysed the four rates viz State Bank Advance Rate (SBAR), LIBOR, 5 Year
Government Securities Rate & 10 Year Government Securities Rate. The accompanying exhibit shows a decline in
average reset periods across years. From the point of view of projects short reset periods are potentially risk for
infrastructure projects as an upward movement in rates can worsen project viability.
The volatility of the interest rate is also evident from the Standard Deviation of each of the above rates, presented in table
below:
Benchmark Rates Standard Deviation
SBAR 0.013
3 year G-Sec 0.024
5 Year G-Sec 0.025
10 Year G-Sec 0.026
Libor 0.019
Source- RBI, SBI, Moneycafe website
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Draft Final Report
September 2007
banks to become cautious on interest rates. The accompanying exhibit shows a decline in
average reset periods across years. From the point of view of projects short reset periods
are potentially risk for infrastructure projects as an upward movement in rates can worsen
project viability.
Average Reset Periods
3.5
3.0 3.0
3.0 2.7
2.6
2.5
2.0
2.0
1.5
1.0
0.5
-
2002 2003 2004 2005 2006
Year
The reset period for some of the recent projects have become yearly. Yearly reset periods
are a way of passing the entire interest rate risk to the project. However, our interactions
surprisingly showed that many developers actually preferred shorter resets. This is because
the experience in India has been one of falling interest rates and projects being refinanced at
a lower rate. Having said this we have not come across any project in our survey where
there was an increase in interest rates because of the reset clause. The possible reason for
this phenomenon is that in general the interest rates have been falling over the years of the
survey and also that banks generally perceive a lower risk when the project construction
period is over.
Post construction, when the majority of the risks have been covered, the developers
frequently renegotiate the loan terms with the commercial banks to more favourable terms.
However, in the present system renegotiations have to be carried out for individual projects
which can be both time consuming and expensive. There is no availability of institutions
which actively seek projects to take up on their own once the construction risk is over.
(Annexure 8 presents some of the case studies and international examples on refinancing of
PPP infrastructure projects)
One view that we commonly encountered during our interviews was that despite some
obvious safeguards adopted by banks in lending to the infrastructure sector it was doubtful
whether the banks were pricing all the risks correctly. Some market participants felt that
commercial banks were showing a lot of exuberance in lending to infrastructure sector and in
the process was ignoring several project risks during lending. They felt that the situation of
not building in risks in the lending terms was not sustainable and a tightening of lending
conditions as well as the implementation of the Basel II norms might result in a reduction in
lending by banks to the sector. It is important to analyze this claim because one of the
significant criticisms of infrastructure development in China has been that banks have lent
without prudence thereby saddling them with huge levels of Non Performing Assets.
Risk pricing by banks: To test whether risks are being priced appropriately by commercial
banks we decided to analyze the lending terms of one set of projects all belonging to one
sector (in our case the road sector) but with differing risk profiles (Annexure 6 details out our
It can be seen above that 5 Year G-Sec and 10 Year G-Sec have been more volatile than LIBOR and SBAR. SBAR is much
less volatile and because of that, State Bank of India, the leading infrastructure lender in the country, has now linked its interest
rate to SBAR instead of G-Sec.
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Draft Final Report
September 2007
methodology and findings). Based on our analysis we categorized our sample of projects
into high risk, medium risk and low risk. We analyzed the average interest rate charged to an
infrastructure project belonging to the three categories for the years 2002 and 2006 (where a
large set of projects were available). Separate analysis was done for 2002 and 2006
because the interest rate charged differs across years due to the variation in the rate of
government securities. The following results were obtained from the analysis:
Exhibit 10: Project Risk Category and Average Interest Rate
Financial Closure Year Risk Category Average Interest Rate
2002 Low Risk 12.00
Medium Risk 13.00
High Risk 10.00
2006 Low Risk 9.09

Medium Risk 9.39
High Risk 9.79
Note: Higher risk category number means higher project risk.
As can be seen from the table there does not seem to be any significant correlation between
the level of risk in the project and the interest rate charge. It is easy to see why a perception
can arise that risks are not being taken into account. However, that might not entirely be
true.
Based on our data it is difficult to comment the level to which risks are taken into account.
However, there does not seem to be any significant reason to believe that risks are not being
taken into account during lending. Also the imminent implementation of the Basel II norms
will require banks to become even more stringent on project lending.
A bigger cause of worry for lending by banks is that RBI exposure norms may constraint the
lending to some developers by banks. RBI classifies infrastructure financing to SPV’s in
India as forming part of the group exposure of the parent company. Beyond a certain point
banks are not allowed to take further exposure to these companies. In the current situation
large companies with varied interests are likely to hit the group exposure norms in the next
2-3 years preventing banks from lending to them. Institutions such as the IIFCL have been
actively lobbying the RBI and Finance Ministry to do away with the group exposure norms for
infrastructure. However, till now the RBI has stuck to not making any changes to the group
exposure norms. But if no changes are made then companies will be forced to look at
additional means of financing the debt component of the projects. This situation might
become a driver for change in the project finance market as existing commercial banks will
be forced slow down the growth in lending to the infrastructure sector. (Though is difficult to
assess the lending capacity of banks given the limited amount of information available still
an attempt has been made to assess the PPP lending capacity of banks. The detailed
methodology and findings of the assessment are presented in Annexure 5).
The next section discusses the trends and issues in equity financing in India.
4.1.2 Equity Financing

In our interviews with key stakeholders we found repeated reference to one key issue- the
amount of equity required to attract large volume of debt in the infrastructure sector is not
available. The lack of adequate amounts of risk capital is leading promoters of large
infrastructure projects to push for ever higher leverage from commercial banks. The
commercial banks on their part have largely acquiesced to their demands realising that
reaching financial closure would be difficult otherwise.
If we look at the numbers we find that Senior Debt to Pure Equity Ratio (DER) over the years
for all sectors has increased has increased from 2.1 in the year 2002 to 4.3 in the year 2006.
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Draft Final Report
September 2007
Exhibit 11: Increased Gearing over the Years
Debt to Equity Ratio

(Senior Debt to Pure Equity)
5.0
4.5 4.3
4.0
3.5
3.0 2.6
Ratio
2.5 2.3
2.1 2.0
2.0
1.5
1.0
0.5
-
2002 2003 2004 2005 2006
Year
Also while we find that DER has increased across the board for all project sizes, the
maximum increase has been in the case of large projects. This indirectly hints at the problem
identified by stakeholders- large volumes of equity capital are not easily available.
Exhibit 12: DER by Size
Debt to Equity Ratio by Project Sizes

6.0
5.0
4.0
3.0
2.0
1.0
-
2002 2003 2004 2005 2006
Year
<USD 50 Million USD 50-100 Million >USD 100 Million
As per our analysis, total equity infused in PPP infrastructure projects (sector wise) is
USD2.93 billion by the Year 2006. The maximum equity (USD1.43 billion) has been brought
in Roads & Bridges which is due to the large number of projects being awarded on PPP
basis in the last 3-4 years. As can also be seen from the accompanying graphic nearly 80
percent of this equity at the SPV level is infused by the promoter’s themselves. This is
because due to the lack of exit options at the SPV level, lock-in etc. very few equity
providers are willing to participate at the SPV level. Annexure 7 explores the differences in
equity infusion by strong and small developers and looks at the restrictions on equity dilution
in concession and loan agreements. However, equity from other sources does come in at
the Promoter company/Holding company level through IPOs, private placements etc.
Exhibit 13: Sources of Pure Equity

Value of Pure Equity for sectors Sources of Pure Equity
(Total value USD2.93 billion) (Total value USD2.93 billion)
Strategic
Water Supply,
Solid Waste Inverstors
102.3
Management, Government 6%
7.8 Airports, 511.0 10%
Financial
Institution
2%
Roads & Ports, 648.3
Bridges,
Developer
1,429.5
82%
Power
Transmission,
Railways, 107.6
119.8
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September 2007
One major reason for the predominance of equity infusion by developers is that currently
there are several restrictions on equity investments. The way rules are structured in India
makes taking out of the equity by the developers very expensive. This issue is discussed in
detail later in the report.
The ability of a developer to reduce their equity in the project is important so that it can
recycle the equity into other projects. Equity can be shared at the beginning of the project or
it can be sold off later in the project. However, in India many concession agreements do not
allow the developer to sell off their equity in the project. Internationally it is common for
financial investors to take over the project once the construction phase is over. This is
because once the construction risk is over financial institutions are more adept at increasing
the returns on the project equity as compared to a developer. The financial investor in turn
hires a contractor/s to provide for O&M. In the Indian situation this can especially work as no
developer really has the experience to claim that they adept at operating the assets in
comparison to some one else. While some movement has been seen in this direction, with
the new NHAI agreements allowing for more selling down of the equity, many concession
agreements still do not even provide for such a possibility15. In the projects analyzed we
have not seen financial investors become a part of the bidding consortium. However, the
situation is slowly changing with IDFC, SREI and Macquarie showing some interest in
infrastructure projects in India in recent times.
Despite these restrictions our data clearly shows that developers have been able to reduce
the level of own equity invested in projects.
Exhibit 14: Sources of Equity
Source of Equity by Year Source of Equity by Sector

3%
2006 77% 12% 11% Railways 40% 36% 21%
2005 56% 24% 20%
2004 61% 11% 29% Airports 65% 15% 20%

Year
2003 73% 27%

3% 2%
2002 86% 3% 11% Ports 90% 5%
2001 84% 15% 1% 2%
Roads & Bridges 76% 5% 17%

2000 92% 8%
0% 20% 40% 60% 80% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Developer Own Equity Other Source of Equity Sub-Debt Developers Financial Institution Government Strategic Inverstors Sub-Debt
It can be seen that there has been substantial reduction in the percentage of equity provided
from developer’s own source for three years after the year 2002. A sector wise analysis
shows that equity funding by developers has been supplemented by Government equity as
well as sub debt in Airports & Railways projects while developer’s equity has been
supplemented primarily by sub debt in the Roads & Bridges projects. As can be seen, sub
debt has emerged as the primary means by which developers reduce their equity infusion.
The next section explores the role of this important mechanism in reducing equity.
4.1.3 Significance of Subordinated Debt

As mentioned above taking on sub debt has been an important avenue through which
developers try to reduce their equity stake. Sub-debt infusion in infrastructure PPP projects
since Year 1998 has been presented below-
15
In some Port Sector projects like in Pipava, Mundra etc. the original promoter has been able to exit.
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September 2007
Exhibit 15: Instances of Sub-Debt by Year and Sector

Instances and Value of Sub-Debt Sub-Debt Across Sectors by Value
(Total Value USD333 million) (Total Value USD333 million)
25
139.0
Solid Waste
20 93.3 Ports
Management
Number of Instances
4% Railways
1% 9%
15
10 48.0
44.3
5 3.1
3.1 2.2
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Roads &
Year Bridges
86%
It may also be noted that there has been an increasing trend in sub-debt since the Year
2004. It can also be seen above that since 1998 an amount of USD333 million has been
infused as sub-debt, in PPP infrastructure projects. It is also important to mention that
majority of sub-debt (86%) has come in Road & Bridges PPP projects which is a matured
and more active sector now in terms of PPP initiative.
Our analysis of detailed financing information on the sample of 104 PPP projects reveals
that against the popular perception, sub-debt is not limited to annuity projects in Roads &
Bridges sector and only about 7% of projects having sub-debt are annuity projects.
Analysis of the data shows that most of the sub-debt has been provided by the senior
lenders themselves. This clearly means that sub debt is not really considered as
quasi equity, providing the lenders with the requisite amount of risk capital, but more
as a way to assist developers in putting less equity in the projects. In return for
‘conserving’ the equity of the developers banks charge a higher rate of interest on the
sub debt thereby improving the overall yield on the project debt. We also found that
sub-debt arrangement becomes easy if the project IRR is comfortable and the developer is
reputed.
In addition to sub debt we also found a limited number of strategic investors participating in a
few PPP infrastructure projects. However, going forward their presence is likely to increase
significantly.
4.1.4 Strategic Investors and their Investment in the Projects

Based on the survey information collected we found strategic investor in infrastructure sector
in only 9 PPP projects. The exhibit below presents more details-
Exhibit 16: Strategic Investment by Sector
No of project with Equity Infused (USD

Sectors
strategic investor Million)
Ports 4 29.89
Airports 3 102.15
Water Supply 1 30.00
Railways 1 4.89
Total 9 166.93
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September 2007
It can be seen that a total of USD166.93 million has come as strategic investment in the PPP
infrastructure projects and this investment is mainly in Ports & Airports sector. In addition to
the lack of strategic investors there is also little Foreign Direct Investment in the
infrastructure sector.
4.1.5 Summary of Major Issues on the Debt and Equity Side

We find that on the debt side the major lenders are commercial banks. Going forward relying
on commercial banks as major lenders is precarious as banks are likely to be constrained in
their future lending due to the issue of asset liability mismatch. Also banks have not been
able to offer very long tenure loans and the reset period on these loans is very short. Finally
the exposure norms may prevent banks from lending to large developers in India thereby
stymieing the growth of PPP infrastructure in India.
On the equity side we find that promoter’s of PPP infrastructure projects have to put in most
of the equity requirement of an infrastructure project. There is an acute shortage of equity
with private developers and if the present trend continues then they will not be able to attract
the requisite amount of debt for the projects. Use of sub debt has eased the equity
requirement somewhat. However, restrictions on taking out of the equity by developers
remain a cause for concern. Involvement of financial investors in bidding for infrastructure
projects is also limited at present as is the involvement of strategic investors and
international companies.
4.1.6 What is Happening in Infrastructure Financing in Other Countries?

With an understanding of what is happening in India it is important to compare it with how
infrastructure projects are financed in other countries. This will help to highlight the gaps
faced by the infrastructure financing market in India and will also point to what can be done
about them, based on the experiences in other countries. This review is predominantly
focussed on infrastructure project development in other developing Asian countries
(especially China, Indonesia, Malaysia and Thailand where a majority of the private sector
investment in infrastructure have taken place) as the situation in many of these countries is
similar to the situation in India.
India is not unique in having a substantial infrastructure creation requirement. In fact as early
as the ninth five year plan (over the period 1996-2000) China had projected an infrastructure
requirement of nearly USD 305 billion, close to the infrastructure financing requirement being
projected in India for the 11th five year plan. And like India commercial banks have been the
major source for financing this infrastructure requirement. The role of other financial
institutions and capital markets has not been significant. It has also been seen that Chinese
banks are also resorting to using the corporate finance model as opposed to project finance
model for some infrastructure projects to bring in increased comfort.
As far as other Asian countries are concerned the infrastructure financing situation is also
not much different from India. Before the Asian economic crisis there was a significant flow
of foreign currency infrastructure financing, which was arranged by international banks.
International bank participation was high in a lot of countries as banks followed international
developers who participated significantly in developing infrastructure in these countries. The
long term relationship between international banks and developers helped to give an
additional sense of comfort in financing projects. Comfort was also got from various
guarantees given by Governments to reduce the risk of the lenders. However, the
experience of this first round of infrastructure development was bitter after the East Asian
economic crisis hit. Some countries like Indonesia defaulted on the guarantees offered to
project sponsors16 as they were hit by devaluation of the local currency. It was also realized
during the crisis that many projects had been financed on the basis of questionable viability
16
India (famously in the Dhabol case) too defaulted but it was not because of the East Asian crisis.
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September 2007
and under pressure from the economic downturn a lot of the projects suffered. As
infrastructure projects floundered in the wake of the crisis the increased risk perception led
to a significant reduction in the flow of capital for infrastructure projects in these countries.
With international capital flows drying up there has been an increased reliance on domestic
markets and commercial banks in many countries to provide the financing needed for
infrastructure projects. Infrastructure sector in countries with high liquidity in the banking
system have been able to tide the crisis as local commercial banks in these countries have
started to take a lead in infrastructure financing. The major reason for reliance on the
banking system has been that other avenues for financing are not significantly developed in
these markets.
China has seen the consequences of excessive reliance on commercial banks to lend to the
infrastructure sector. Chinese banks are saddled with very high levels of NPAs and as a
consequence very low returns on average assets. The returns on average assets for
Chinese banks are in the below .20 as compared to Indian banks where these returns range
from just below 1 to significantly more than 1. Banks are surviving only because of the high
levels of liquidity in the market and because the Chinese Government is strongly backing
them.
Confidence of international lenders has also slowly been returning. However, in their second
coming international banks have often been beaten by highly liquid local banks which have
been able to out price international banks as well as shown willingness to take higher levels
of risk while giving out plain vanilla products. International banks with higher financing cost
as well as currency risks have not been able to offer the kind of products needed by the
markets in these countries. Another issue for the lack of financing products from international
banks has been that the attendant legal underpinning necessary for such transactions is
either absent or not easily enforceable in many countries.
If we contrast the above with the situation prevailing in India we find that there are many
similarities. Commercial banks lead infrastructure financing in India like elsewhere. Also like
India most other developing countries lack alternative means of financing infrastructure.
There are some countries like Chile and Malaysia which also have a strong corporate bond
market which helps in raising infrastructure bonds. But even in these countries the tenure of
the bonds is not significantly more than the tenure being offered by the banks to
infrastructure projects in India.
As the Chinese example shows large involvement of the banks in financing infrastructure
can lead to deterioration in bank finances. Thus if the health of the banking sector has to be
maintained (or improved upon in light of Basel II guidelines) then alternatives to bank lending
in infrastructure projects will need to be found.
Also, going forward, a large proportion of the infrastructure financing will be local currency
based even though other countries have successfully implemented projects with external
commercial borrowing. This is because in India the RBI fears that a significant rise in liquidity
in the market will increase the inflation rate which it wants to keep in check. Also RBI is quite
stringent on exchange risk management.
While it is imperative that other sources of infrastructure financing will need to be tapped in
India there are very few successful templates that exist in the developing world for
developing markets for such financing. As a consequence India will have to largely chart its
own course on the matter taking cognizance of developments elsewhere. The aim of the
reforms will have to be to ease the constraints that are faced in infrastructure financing. In
the next section we discuss some of the changes required.
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September 2007
5 Objective 3: To Identify Changes Required to Reduce and

Ease the Identified Constraints
As discussed in the previous section, from a financing point of view there are several
changes required to help ease the requirements of the infrastructure sector in the long run.
Many of these issues are already recognized by the GoI and in particular the Ministry of
Finance. It is important to understand that these changes, even if forthcoming, will not yield
dramatic results. It is highly unlikely that the requirement of USD 320 billion will be financed
if the constraints are removed as results of many of these changes will only be seen in their
full force in the long run. That is why the changes required should be viewed at as forward
looking activities which need to be rolled out to streamline the financing requirement in the
future.
Changes are required both on the debt side and the equity side. On the debt side new
sources of funds need to be developed to reduce the reliance of infrastructure financing on
commercial bank lending. Also to continue the momentum of bank financing of infrastructure
changes need to take place so that banks do not concentrate risks from long term lending.
On the equity side as well new sources of equity need to be explored to ease the scarcity
being faced by excessive reliance on promoter’s equity.
It is important to keep in mind that changes required should not be such that they
compromise on risk assessment of projects or give out bad loans. India already has had
experience with such lending by development finance institutions to the corporate sector.
These institutions where saddled with large amounts of bad loans and fiscal imperatives post
the reform in 90’s led to a fading away of many such institutions. Thus while infrastructure
development is critical we assume that the Government will not take it up at the cost of
prudence.
This section will highlight the areas where we feel changes are needed. It will also present
some areas in which changes are already taking place. However, as already indicated at the
beginning this report does not involve giving recommendations on the policy changes
required as various other reports already describe them. Instead focus will be on detailing
out the possibility for change in various areas and then leave it to the Ministry of Finance and
other concerned stakeholders to decide on the exact path they want to follow to bring about
changes.
5.1 New Areas to Focus on the Debt Side

On the debt side the major changes required are the introduction of new sources of financing
to supplement bank lending to infrastructure projects and reducing the risk of bank lending to
infrastructure. Large volumes of funds are locally available in India both with institutional
investors as well as with the common public. Also funds can be accessed via external
commercial borrowings. Development of the bond market, securitization, syndicated loans
from international markets etc. are some of the ways of tapping the funds. In addition selling
down of the infrastructure loans held by banks will help in maintaining the level of lending by
banks. In this section we explore some of these issues in more detail.
5.1.1 Bonds as a Source of Fund

Bond market in India is one of the largest in the Asia and includes issuances by the
Government (Central & State Governments), public sector undertakings, other Government
bodies, financial institutions, banks and corporate. Despite there being a large number of
players bond issuances are dominated by Central and State Governments through the issue
of Government Securities (G-Sec). Current outstanding G-Secs are more than 25 percent of
our GDP. In direct contrast the corporate bond market is not that well developed with a total
bond issuance in 2005-06 of less than USD 20 billion. Also out of the total corporate bond
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September 2007
issuance more than 90 percent are privately placed with institutions because of the onerous
legal and regulatory requirements for attracting retail investors. The market for corporate
bonds are dominated by issues from financial institutions and bond issues by private sector
companies is limited. The lack of development of corporate bond market is an issue of
special concern as they are a strong alternative source for finding of infrastructure projects.
India has short history of infrastructure bond issuance by financial institutions. Many
development finance institutions used to issue infrastructure bonds for retail investors which
were made attractive by an option of saving taxes. However, these issues have become
limited. ICICI, one of the largest issuers of infrastructure bonds, has turned into a bank and
now has access to significantly cheaper funds from retail deposits. Therefore, it has almost
ceased any new issues of infrastructure bonds as the cost of the issue works out to more
than 9 percent. Some other financial institutions like IDBI and Rural Electricity Corporation
continue to issue infrastructure bonds but the volumes are not large.
Internationally project bonds are a significant source of financing in a few countries such as
Chile and Malaysia. Chile has a developed corporate bond market and most infrastructure
projects (particularly road projects) involve the issue of wrapped bonds or bonds that are
secured by an additional guarantee viz., monoline insurers. In Mexico there is some activity
in the issue of wrapped bonds However, the market is still in a nascent stage of development
with a promising future (as financial institutions are increasingly looking at Mexico as the
next market to develop after slowing down of concessioning activity in Chile). Malaysia too
has a strong infrastructure bond market which differs from the Chilean bond market in that
the market is dominated by Government Linked Companies who act as the project sponsors
or demand off takers. These institutions typically have implicit Government guarantee which
reduces the risk perception for investors. Unlike Chile bonds are not wrapped in Malaysia
with Malaysia lacking a monoline. Also while project bond market in Chile is dominated by
international banks as book runners and international rating agencies and monolines the
infrastructure bond market in Malaysia is almost completely controlled by local banks and
rating agencies. A separate paper has been prepared for the analysis of bond market
development in India and its comparison with the bond market in emerging economies like
Chile, Mexico and Malaysia. The paper highlights the role of bond markets in emerging
economies in more detail. Our analysis and experience from Chile, Mexico and Malaysia
suggests that there are four areas of reform that would provide a boost for bond market
development in India:
• Improving market efficiency through strengthening trading, clearing and settlement
systems for debt securities
• Lowering the regulatory burden and cost of raising debt
• Increasing institutional investor participation (insurance companies, pension funds and
provident funds)
• Credit enhancement/guarantee framework for the development of infrastructure bond
market
The Finance Ministry in India has already accepted the recommendations of the Patil
committee report on Corporate Bond Markets in India which goes a long way in discussing
the issues related to development of corporate debt securities market. Many of these are
also relevant for the infrastructure debt securities like development of a trading platform for
bond and securitised instruments as well as lowering the reporting burden for issuing debt
securities. Government has taken steps to implement the recommendations. BSE and NSE
have already been mandated to develop the trading platform for debt instruments within the
guidelines issued by SEBI (Reference SEBI Circular number
SEBI/CFD/DIL/BOND/1/2006/12/12 dated December 12, 2006). The Securities Contracts
(Regulation) Amendment Bill, 2007 has been passed by the parliament facilitating
dematerialisation of PTCs and hence paving the way for their listing and online trading.
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However, despite reforms infrastructure bond markets are unlikely to develop unless there is
a pool of large institutional investors willing to invest. Next we discuss the role that
insurance, pension and provident funds, large institutional investors in India, can play in the
development of alternative means of financing.
5.1.2 Funding from Insurance, Pension and Provident Funds

Insurance, Pension and provident funds in India hold large volumes of long term funds.
However, they have not been large scale players in the funding of infrastructure projects in
the private sector.
Insurance sector in India was largely dominated by public sector insurance companies. The
Government of India liberalised the insurance sector in March 2000 with the passage of the
Insurance Regulatory and Development Authority (IRDA) Bill which resulted in a host of
private insurance companies operating in both life and non-life segments. As on 31st March,
2006, total fund invested by insurance market (both life and non-life) in India was to the tune
of USD 97.7 Billion (please refer to Exhibit 17).
Exhibit 17: Investment by Life and Non-Life Insurer in Last Three Years (USD Million)
Insurer Infrastructure/ Social Sector Total
Financial Year Ended

2004 2005 2006 2004 2005 2006
(as on 31st March)
Public Sector Life Fund - LIC 8,475.8 9,924.5 10,707.2 67,652.6 80,317.5 86,543.9
(A)
Private Sector Life Fund (B) 110.2 191.2 323.6 638.2 1,064.7 1,720.3
Total Life Fund (A+B) 8,586.0 10,115.8 11,030.8 68,290.9 81,382.2 88,264.1
Public Sector Non-Life Fund (C) 735.4 889.1 980.7 7,161.0 7,745.9 8,559.9
Private Sector Non-Life Fund 64.6 86.3 126.4 411.2 567.9 847.3
(D)
Total Non-Life Fund (C+D) 800.1 975.5 1,107.1 7,572.2 8,313.8 9,407.2
GRAND TOTAL (A+B+C+D) 9,386.0 11,091.3 12,137.9 75,863.1 89,696.0 97,671.3
Percentage of Total 12.4% 12.4% 12.4%
Source: IRDA Annual reports
The major pension fund in India is the Employee Provident Fund Organisation (EPFO) which
has a total investment of USD49.67 billion (as on 31st March, 2006) and year on year fund
collection of USD5.26 billion under different schemes.
Exhibit 18: Year on Year Fund Collection by EPFO
Total Investment
Financial Year Ended FY 2003-04 FY 2004-05 FY 2005-06 st
as on 31 March 2006
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Draft Final Report
September 2007
Provident Fund (USD Million) 2745.8 2870.7 3683.7 33,295
Pension Fund (USD Million) 1320.6 1447.1 1530.1 16,251
Deposit Linked Insurance Fund 39.0 42.6 49.0 122

(USD Million)
Total (USD Million) 4105.3 4360.4 5262.8 49,668
Source- EPFO Website
Regulations mandate life insurance companies to keep invested a minimum of 15% of their
fund in infrastructure or social sector and non-life insurance companies to keep invested
minimum 10% of their fund in infrastructure or social sector. However, much of the
investment by the insurance companies is in infrastructure created by the public sector and
almost none in the private sector. This is because of a very high degree of risk averseness
dictated largely by regulations.
Current regulations essentially prevent insurance and pension funds from participating in the
bond market. Insurance funds are currently prohibited from investing in debt securities rated
below ‘Very Strong’ i.e. AA. Most of the PPP infrastructure projects are implemented through
SPV route. Hence, credit rating of a paper from a new company is unlikely to get AA or
higher rating.
Internationally, insurance companies (Exhibit 19) do invest in securities rated below AA. On
average 25% of the total investment by top ten insurance companies in the world is in
securities rated A or BBB.
Exhibit 19: Investment by Insurance Companies in Rated Securities
Total Life/ AA BBB+ Non -

A+ to Not
Investment General AAA to to Investment
A- Assigned
(USD billion) Insurance AA- BBB- Grade
Allianz 285 L.I & G.I 46% 18% 21% 5% 2% 9%
AIG 418 L.I & G.I 31% 27% 23% 14% 4% 1%
NYL 103 L.I 67% 25% 3% 4% 1% -
MetLife 243 L.I & G.I 74% 19% 4% 3% - -
SunLife 69 L.I 19% 17% 32% 29% 3% -
Prudential 165 L.I & G.I 69% 22% 5% 3% - -
Average 51% 21% 15% 10% 2% 5%
Source- Company Annual Report
In China, the guidelines for investment by insurance companies not only allow investment in
securities rated below AA (details in Exhibit 20) but also allow issuance of sub-debt subject
to prudential norms.
Exhibit 20: Chinese Insurance Regulation
“Provisional Measures Governing Bonds Investment by Insurance Institutional Investors” & “Provisional Measures
Governing Subordinated Fixed Term Debt of Insurance Companies” formulated by China Insurance Regulatory
Committee (CIRC), as stated on the Hong Kong Trade Development Council Website
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Draft Final Report
September 2007
Financial Bonds and Subordinated Bonds of Commercial Banks

• Grade A rated by domestic credit rating institutions or equivalent grade of long term credit
• in the case of listing overseas and being freed from domestic grading, the rating should be BB grade as rated by
international credit rating institutions
Enterprise (Corporate) Bonds
• AA grade granted by domestic credit rating institutions or long term credit rating equivalent to or above AA grade
Short Term Financing Bonds
• A-1 grade granted by domestic credit grading agencies or short term credit of equivalent grade
• for publicly listed companies that are freed from credit rating according to the Measures Governing Short Term
Financing Bonds, the credit rating and follow-up rating during the last three years shall meet any of the following
terms and conditions:
• AA grade granted by domestic credit rating agencies or long term credit grading equivalent to that of AA or higher;
• BBB grade granted by international credit rating agencies or long term credit grading equivalent to that of BBB or
higher.
In UK, Pension funds/ insurance buy long term paper and also tend to be primary lenders.
Also, investment grade i.e. BBB- is the cut-off for investment by insurance or pension funds.
Insurance or pension funds however, charge a higher margin for lending on lower rated
instruments.
Government of India has been reviewing the possibilities of channelising Insurance/
Pension/ Provident fund money into infrastructure projects. No firm proposal has been
accepted yet. One possible way is for banks to issue long term bonds in the market,
primarily targeting subscription from insurance/ pension funds. As long term bonds, floated
by commercial banks, have high probability of receiving ‘AA’ or above rating, there will be no
regulatory constraint for insurance/pension funds to invest in such bonds. The more
important issue will be the coupon rate at which these bonds would be issued. If the rate is
high, the costs to the banks and consequently to the projects will be high and not attractive.
If the rates are low, the investments will not be attractive to the insurance/ pension funds.
There is also a possibility that debt securities issued by holding companies for their
operational PPP projects may receive more than “AA” rating and hence fall within the current
limits for investment by Insurance/ Pension/ Provident funds.
However, the history of PPPs in India is only around 10 years old and there are not many
large PPP projects that are operational. As a result rating such products is not easy.
Currently the Central Government is also trying to appoint fund mangers for new pension
fund schemes. This may facilitate flow of funds from pension schemes to infrastructure
projects.
The Government has introduced the New Pension System (NPS) with effect from 01 January 2004. Under NPS retirement
savings of individual NPS subscribers will be managed by professional Pension Fund(s) appointed by the PFRDA
The newly incorporated Pension Fund(s) will carry out its operations as directed by the Board of Trustees of the NPS Trust to
be set up under the Indian Trust Act, 1882. Pension Fund (s) under the NPS shall be required to undertake wholesale asset
management as prescribed by PFRDA/GOI.
Under the New Pension System it is proposed that there would be four broad categories of pension scheme with differential
returns and portfolio (a mix of government securities, debt instrument and equity)
As demonstrated by the strong political opposition to Pension sector reforms in India the
path to greater participation of these institutions in infrastructure financing will not be easy. In
the meantime it will be important to look at ways by which commercial bank lending in
infrastructure can be supported. The next section explores just such a way.
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5.1.3 Improving Bank capacity to lend to Infrastructure Sector

Commercial bank lending to infrastructure projects is subject to various threats. On one hand
issues of asset liability mismatch generated by long term lending is leading RBI to advocate
increased caution in lending to infrastructure projects. On the other hand group exposure
norms, unless changed, are likely to make banks unable to lend to the large developers. The
impending implementation of the Basel II norms will mean that the banks will have to
significantly increase their risk weighting capital for lending long term.
Lending to infrastructure projects not only locks the banks’ fund for longer period but also
expose the banks to risks such as - Maturity, Credit and Interest risk. Therefore, it is
essential that they are able to manage their maturity risk by use of securitisation, credit risk
by use of credit derivatives and interest rate risk by use of interest rate derivatives. Better
management of infrastructure loan portfolio will help banks to release their locked up capital
and redeploy the money into infrastructure credit.
However, in India:
• though a huge securitisation market exists there is not liquidity or secondary
trading in these instruments;
• even with a huge market for Forward Rate Agreements (FRA) and Interest Rate
Swaps (IRS) there is lack of depth in the interest rate derivatives market; and
• the market for credit derivatives does not exist
To deal with ALM issues for banks developments need to take place in the above areas
(Annexure 5 provides a detailed discussion on these).
The other issue of concern is the group exposure norms which will affect the ability of banks
to lend to large infrastructure promoters in the long term. Many players are making
representations to the RBI and Finance Ministry for relaxing these norms. However, a final
decision on this is yet to be taken.
The spectre of Basel II also hangs on bank lending to infrastructure projects. Basel II norms
will require setting aside of larger amounts of capital than currently required for infrastructure
loans. Therefore, to continue at the current levels of lending banks will need to recapitalize.
Another way of dealing with the Basel II will be to securitize the loans on the books. The
development of the securitization market thus becomes important also from the point of view
of the impending implementation of the Basel II norms.
5.1.4 ECB as a Source of Infrastructure Financing

The demand for ECBs for infrastructure projects is a function of domestic interest rate
scenario. Until recently when domestic interest rates were low, ECBs were expensive when
compared to domestic term loans. As per the RBI database, total ECBs in last five years for
infrastructure is to the tune of USD1.9 billion, and ECBs for PPP infrastructure is to the tune
of USD227 million only.
The database on 104 projects accounts for USD254 million of ECB/FCNR loans in PPP
Projects.
Exhibit 21: ECBs in Infrastructure (March 2004 - February 2007)
Borrower Total
IRFC 704.31
IDBI 349.84
IDFC 175.00
GTL Ltd. 175.00
SREI Infrastructure Finance Ltd. 158.90
Nava Bharat Ventures Ltd. 68.34
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IVRCL Infrastructures & Projects Ltd. 65.00

L&T Interstate Rd Corridor Ltd. 55.00
Hazira Port Pvt. Ltd. 50.00
Gateway Terminals India Pvt. Ltd. 40.00
Gamuda-WCT (India) Pvt. Ltd. 14.93
Jabalpur Corridor (I) Pvt. Ltd. 13.08
Madhucon Project Ltd. 12.00
Maytas infra Pvt. Ltd. 10.00
Gujarat Pipavav Port Limited 7.10
Kalindee Rail Nirman (Engineer) Ltd. 7.00
ETA Port Operation & Rapid Transport Systems Ltd. 6.60
Indian Infrastructure Equipment Ltd. 4.27
Halcrow Consulting India Ltd. 0.34
Digiwave Infrastructure & Services Pvt. Ltd. 0.33
Pragmacs Financial Services (P) Ltd 0.10
Grand Total 1917.14
Source: RBI Website
However, in the current scenario where the Indian sovereign rating has improved and the
domestic lending rates have increased, ECBs have become cheaper than term loans. Even
after we include the hedging cost and the withholding tax, ECBs are cheaper when
compared to borrowings from domestic markets. Hence ECBs have become more attractive
for Indian companies.
“We have recently raised Rs.500 crore (USD110 million) financing through a mix of FCNR loan and
ECB for the Palanpur - Swaroopganj road project @ 6 month LIBOR +150 bps. 6 month LIBOR=
5.37%, thus interest rate was ~6.87%. Total cost of fund including hedging and withholding tax brings
the overall interest rate close to 9% p.a.” L&T
Description
Indian construction and engineering major Larson & Toubro pulled off the external borrowing for an Indian roads BOT
concession in September, 2006. L&T carried out the borrowing for L&T Interstate Road Corridor, an SPV floated by Larsen &
Toubro (L&T) for the 76 km Palanpur - Swaroopganj road project.
The deal comprised of a US dollar equivalent Rs 500 crore 50/50 mix of domestic FCNR (foreign currency loans) and external
commercial borrowing.
• The debt was priced at around 150 basis points above LIBOR.
• Citigroup was the Lead Banker and the Escrow Agent.
• The banks which did the deal were IFCL, Bank of Baroda and Abu Dhabi Commercial Bank.
• The deal also broke tenor (16.5 years) and debt equity ratio (9.09) records for an Indian project.
• L&T has an option of converting the FCNR portion of the loan into rupee loan after 3 years.
The financing is symptomatic of both the growing standing of the sponsor in the international debt market and a highly
structured approach to long-term financing for infrastructure projects
Source: Project Finance Magazine February Issue
Cost of ECBs Reducing

“A fully-hedged dollar loan on a five-year basis would be at 9-10% for an AAA-rated company, whereas it is in the range of 11-
12% in India. Yen is even cheaper due to its lower coupon rate and a subsequently lower withholding tax,” says Standard
Chartered Bank director & regional head (South Asia, capital markets) Prakash Subramanian. In the current liquidity conditions,
a large domestic firm can borrow 70-80 basis points above the Libor, the internationally-accepted benchmark rate for short-term
interest rates. Add to this the hedging cost and the withholding tax — levied on payments made to non-residents — and the
total cost of borrowing comes to 9.2-9.3%. Given the lower interest rate in Japan, ECBs in yen would be cheaper by another
15-20 basis points.
Despite the coming together of a few transactions ECBs are not likely to become a
significant source for infrastructure financing. One of the important reasons for this is that In
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India the derivatives market is not developed enough to offer forward cover for more than 5
years. As a result RBI prescribes an all in price ceiling of 250 basis points over 6 month
LIBOR. Even at this cost ECB seem to be a good source for financing/ refinancing of
infrastructure projects. However, the new RBI guidelines in August 2007 have further curbed
ECBs clearly indicating that the RBI is not in favour of ECB as a significant source of
financing.
5.2 New Areas to Focus on the Equity Side

Changes are required on the equity side to make sure that the scarcity of equity with
developers does not lead to a truncation of the number of projects reaching financial close.
New sources of equity need to be explored, whether be it from private equity funds,
securitization, accessing of capital markets etc to ensure that that a concomitant level of
debt can be raised. This section highlights the issues around this.
5.2.1 Holding Company Structure Creates Issue in Raising Equity

Infrastructure projects in India are generally developed through individual project companies
called Special Purpose Vehicles (SPVs). Group of SPVs are then held by a single company
(Holding Company) separate from the main company of the developer. Creation of the
holding company better protects the parent company from possible adverse impact in the
concession business.
However, the creation of holding company structure also creates several problems. The
holding companies are classified as non banking finance companies under RBI guidelines.
This restricts accessing Foreign Direct Investment in a holding company as rules do not
allow FDI under the automatic approval route17. Also the use of holding company structure
brings about issues in terms of extra regulatory compliances because of their classification
as NBFCs. Another significant issue with the holding company structure relates to the
cascading effect of dividend distribution tax.
Maintaining a two/multi-tier SPV- Holding Company structure in India has some inherent tax
inefficiencies resulting from the levy of Dividend Distribution Tax (DDT) at two levels and a
cash trap issue on account of statutory transfer to reserves prior to dividend declaration. The
situation has been presented by way of diagram below-
17
Under the existing FDI policy in India, any foreign investment in Indian holding companies / investment companies require a
specific FIPB approval. Therefore,, it restrains infrastructure holding company to raise equity outside India.
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Exhibit 22: Holding Company Structure and its Implications
Parent company
Dividend + 12.5% Dividend + 12.5%
dividend tax dividend tax
Double Taxation
Double taxation Holding Company
Dividend + 12.5%
Dividend + 12.5% dividend tax
dividend tax
SPV 1 SPV 2 SPV 3
As can be seen from the above when an SPV declares dividend to its holding company, it
has to pay “Dividend Distribution Tax (DDT)18” on the amount of dividend paid. Dividend is
income for holding company and therefore, when it declares dividend to its parent company,
it has to again pay DDT on the amount of dividend paid. This double taxation also acts as a
deterrent to infrastructure companies trying to divest their equity in an existing concession.
The next section explores this issue. DDT also makes it difficult for the promoters to try and
take out equity through the securitization route.
5.2.2 Private Equity Investment to Shore up Promoter Equity

Many national and international private equity (PE) funds are showing interest in
infrastructure sectors. Government’s recent approval of the USD 2 billion PE fund for
infrastructure is an example of this trend.
In order to fill the gap of equity requirement in infrastructure sector “India Infrastructure Finance Initiative” was launched
during February 2007 wherein IDFC Citigroup Inc. IIFCL and Blackstone Group Holding L.P came together to deploy USD5
billion in infrastructure projects. It has been reported that while USD2 billion would be deployed as equity USD3 billion would be
deployed as long term finance with tenor of more than 10 years.
However, there are many issues around investment by the PE firms which prevents them
from becoming a significant source of equity for infrastructure projects. Current regulations
do not provide for private equity funds to participate as either bidder in the initial stage of an
infrastructure project or to become majority owners of a concession after the project has
been awarded through buying of shares. Promoters are also not too keen to explore the
private equity route just as yet because it is expensive to take out equity got from a PE deal
because of DDT.
A consequence of this is that PE deals in infrastructure during Calendar Year 2006 was very
low at USD265 million forming only around 3.5% of total PE deals in the country in the same
year (please refer Exhibit 23 below).
Exhibit 23: PE deals for the Year 2006
Particulars Amount
18
DDT is a tax payable by an Indian company on any amount of dividend distributed by it and the same is levied
@ 14.03 % (12.5% plus 10% surcharge plus 2% education cess).
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(USD Million)
Total PE deal Value 7460
PE deals in Infrastructure sector 265+
PE in Infrastructure/ Total PE deals 3.55%+
Source- PwC Research
Though the above table suggests that PE deals in infrastructure space are low our
interviews have revealed that the trends are encouraging and investments are expected to
rise especially because there is a perception in the market that issues around DDT will soon
be addressed. The details of PE deals in infrastructure sector are also presented below-
Exhibit 24: Private Equity Investments in the year 2006
Investment Value
# Investor Investee Sector Stake
(USD Million)
a. IDFC Private Equity’s Delhi Airport Aviation 8% N.A.

India Development Modernisation Project
Fund
b. JP Morgan Chase, L&T- Infrastructure Infrastructure 21.6% 124.0

IDFC PE- led Projects
Consortium
c. Farallon Capital Indiabulls Infrastructure & 60% 3.4

Infrastructure Construction
d. UTI Venture Fund & Consolidated Infrastructure & NA 26.6

Middle Investor Construction Construction
Consortium
e. India development GMR Infrastructure Real Estate & 4% N.A.

Fund (IDF) Infrastructure
f. ICICI Venture Funds GMR Infrastructure Real Estate & 5% 56.6

& IDFC Infrastructure
g. Quantum Group of GMR Infrastructure Real Estate & 1% 15.6

Funds (QGF) Infrastructure
h. Citigroup GMR Infrastructure Real Estate & 1.4% 38.9

Infrastructure
Total >265.1
Source- PwC Research
As issues around participation of PE funds get resolved they will ultimately become strong
alternate avenues for raising equity for infrastructure projects19.
19
During our discussion with PE funds, it was understood that the critical factors they consider for investing to projects are
three -
1. Promoter Group
2. Exit options
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5.2.3 Equities Market as a Source

Equities market is highly liquid in India at the moment and is scaling new heights. A strong
secondary market has seen unprecedented interest from retail investors leading to a large
number of companies tapping the primary market. Infrastructure companies in India too have
been tapping the equity market through issuing shares for the holding companies in the
primary markets. Interest in the stock issuances of the holding companies has been strong.
However, here too the issue of DDT deters promoters from taking out equity because of
DDT.
The growth story in infrastructure sector has also attracted Mutual Funds. Many MFs have
started infrastructure focused fund where funds are invested in different sub-sectors of
infrastructure. MFs so far have around USD1.65 billion of AUM in different infrastructure
funds as presented below-
Exhibit 25: Infrastructure fund by Mutual Funds
# Fund name AUM (USD Million)
1. Reliance Diversified Power Sector Fund 207.2
2. ICICI Prudential Infrastructure Fund 380.4
3. DSP Merrill Lynch T.I.G.E.R. Fund 347.1
4. JM Basic Fund (Energy) 2.4
5. Birla Infrastructure Fund 100.8
6. UTI Infrastructure Fund 203.6
7. Tata Infrastructure Fund 293.0
8. Principal Infrastructure and Service Industries Fund 57.3
9. Sahara Infrastructure Fund 3.4
10. UTI Petro Fund 36.7
3. Equity Returns
Strength and reputation of the promoter group is a factor that influences PE firm’s investment to some extent. However,, the
most important aspect considered before finalisation of their investment is the exit options available. Many of these PE firm
would like to exit their investment much quicker than it can currently happen in the infrastructure sector. Essentially most of the
infrastructure investment requires them to stay invested for 10 to 12 years while they prefer to exit the investment in not more
than 6 to 7 years.
PE firm’s investment in infrastructure currently is mostly in the holding company of the infrastructure SPVs. They either invest in
the developer company directly (mostly unlisted companies) or approach a listed company and take the preference share. This
is because their investment at Holding company level not only gives them the high returns but also options for exit and a
diversified risk portfolio.
However,, there are instances of private equity fund investing directly in project SPV. For example, IDFC private Equity Fund
has invested directly in Delhi International Airport and Pipavav Port. PE firms have also invested in Gujarat State Petronet
Limited. PE funds normally invest at SPV level when returns on investment are very lucrative. Generally the desired returns on
the investment by PE fund are over 20%.
It may also be noted from the above table that most of investment under PE segment has been made by IDFC Private Equity
which has raised fund from overseas institutions like- ADB, KfW and Pension Funds.
Since gestation period in infrastructure projects is long, PE funds like to invest in such companies which are not listed and have
potential to grow. The idea is to invest in an unlisted company, grow the business to a level and exit the investment with
premium after getting the company listed.
With the success of IDFC in PE space, many other players like- ACTIS & UTI have announced their plans to create similar
funds for investment in infrastructure segment. As more and more such funds are established, it would assist a great deal in
infrastructure development by way of meeting equity requirements of the developers.
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11. Can Infrastructure 17.6
12. JM Telecom Fund 2.0
Total 1651.7
Source- PARK Financials Advisors Ltd
However, definition of infrastructure is very wide for MFs. Infrastructure here includes many
other sectors which have not been included in our study like – Oil & Gas, Cement, and
Capital Goods etc. For the core infrastructure sectors the mutual funds currently invest only
in publicly traded shares of holding companies. MFs provide another and possibly safer
route for investors to participate in the infrastructure sector.
To increase the flow of investment in infrastructure sectors through tapping the institutional
and retail investors Government of India is promoting the launching of Dedicated
Infrastructure Funds (DIFs). The report of the committee established to suggest guidelines
for operations of such funds has recommended that the DIFs will invest in the unlisted
shares of infrastructure SPVs. The fund will operate as a close ended scheme of seven
years with a possibility for extension and will be listed. The proposal shows how seriously
the Government is working to bring about new avenues for increasing the level of equity
available for infrastructure projects. The present proposal has a series of issues relating to
concentration of risks and lack of returns to justify the risks. However, we feel that the
proposal will be developed further to bring about a robust scheme.
In addition to these efforts to increase the level of availability of equity for Indian developers
another way of spurring on the financing of infrastructure projects is to attract international
developers in India. International developers will be able to bring with them much needed
equity. The next section highlights this.
5.2.4 Role of International Developers

Currently International developers play an insignificant role in the development of
infrastructure in India. The exceptions are a few instances of investment by international
developers like Dubai Ports mainly in the ports sector. However, an increased role for such
players will help, as these players will be able to tap project equity from their global
operations.
International developers look for various comfort factors in a market before entering and
investing in it. These comfort factors generally include the following:
• Legal and Regulatory framework i.e. the BOT Legislation, Road Fund Governance, NHAI
autonomy and authority, Regulation of Traffic. In India while there a lot of the legislation
exists there is still ambiguity in terms of Road Fund Governance and NHAI’s autonomy
and authority.
• Currency risk, Local Financial markets and Taxation issues: i.e. infrastructure projects
will have Rupee revenues which are very volatile and Bond market not well developed in
India.
• Size of the projects: In India NHDP has individual project sizes that are generally too
small to attract international investors.
• Return expectations of international developers vary with risk perceptions of a country.
Risk perception of Foreign Investors increases as they venture out of familiar markets
and increases exponentially in case of emerging markets like India because of greater
uncertainty
Despite some uncertainty about certain factor for India, lot of international developers (UK
and Spanish developers) have shown interest in investing in India. NHAI is also looking to
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bring out larger projects and this is likely to encourage international invertors to invest in
Roads sector.
5.3 Conclusion
This report demonstrates that securing infrastructure financing for USD 320 billion worth of
infrastructure requirement will prove challenging. The private sector has been playing an
increasingly strong role in the development of infrastructure through the PPP route. But to
continue growing several innovations will be needed in the way projects are financed in
India.
New sources of funding need to be developed on both the debt and equity side. The current
sources of financing in the form of commercial bank financing of debt requirements and
equity from promoters have performed admirably in funding PPP projects and will continue
to do so in the years to come. However, to take up a significant share of the infrastructure
financing requirement through the PPP route these sources will need supplementing. Also
possible impediments will need to be removed so that the current sources of debt and equity
can be utilized more effectively.
This report has highlighted the issues around the current sources of debt and equity through
evidence from an extensive primary survey. This is the unique contribution of this report for
this is the first time such an exercise has been attempted at this scale. The report has also
suggested areas in which changes need to happen to tackle the issues emanating form the
reliance on current sources of infrastructure financing.
We feel that this report will significantly add to refining of policies needed to build a more
robust infrastructure financing market in India as it is grounded on empirical data. This report
presents the key aspects of financing. However, there is a significant level of other
information which we have collected on PPP infrastructure development in India which has
been either presented through annexure or through presentation to the Ministry of Finance,
World Bank and other relevant stakeholders.
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6 Annexure 1 - Process for Selection of PPP Infrastructure

Sectors for the Detailed Study
6.1 What is Infrastructure?
A more comprehensive definition of infrastructure has been provided by UNESCAP as - a
term used to refer to the basic architecture of any system; mechanical, social, political or
cultural. The expanded definition of infrastructure includes transport (for example Roads,
Railways, Ports and Airports), public utilities (for example Power and Water Supply), public
services (for example fire service, flood protection, police), national services (for example the
defence, monetary and postal systems and the legal and regulatory system) along with “soft
infrastructure,” which denotes institutions that maintain the health and cultural standards of
the population (for example public education, health and social welfare).20
In India there is no one widely accepted definition of infrastructure mostly because no
Government agency has clearly specified it. However, Government agencies do specify the
sectors which fall under their definition of infrastructure. In the absence of any clear, all-
accepted, common definition of infrastructure we use these sectors as surrogates for a direct
definition of infrastructure.
20
http://www.unescap.org/pdd/ publications/ themestudy2006/ 8_ch2.pdf#search=%22definition%
20of%20infrastructure%20oxford%22
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A comparison of the sectors considered to be forming infrastructure as per definitions by various agencies is given in the following table:
Exhibit 26: Sectors Considered by Infrastructure Definitions by Various Agencies
Agency Twelfth Finance

Ministry of Statistics and Committee on
Commission
Ministry of Finance Programme Infrastructure, Planning Reserve Bank of India State Bank of India
(Infrastructure
Implementation Commission
Index)
Definition details
Importance / Objective Economic survey of Study to rank Central Government Planning commission is Controls and regulates the issue The largest commercial
of the Organisation India :A survey states in terms organisation responsible for planning of Bank Notes, reserves, and bank in India having
carried out every of their level of responsible for and allocation of plan currency & credit system in India largest lending portfolio
year under the infrastructure planning integrated fund for different projects. in project finance in
Ministry of Finance development development of the Committee on India
for statistical system in the infrastructure has a
country development mandate to initiate
Finance Budget policies on PPP in
Infrastructure
Sectors Included
Transport √ √½ √ √ √ √
Energy √½ √½ √½ √½ √ √
Communication √ √ √½ √ √ √
Urban Infrastructure X X X X √ X
IT X X X X √ X
Real Estate/ Industrial X X X X √ X

Parks
Sub Sectors Included • Power • Power • Power • Highway, • Highway, toll road, a bridge or • Road, urban
Generation, a rail system, port, airport, infrastructure, ports
• Highways and Transmission • Coal • Railway, inland waterway or inland port and airports,
roads, railways, , Distribution
ports, airports, • Steel • Ports, • irrigation, water treatment • Power and utilities,
urban transport. • Telecom • Railways • Airports, system, sanitation and Oil & Gas, other
(Steel and sewerage system or solid natural resources,
cement industry • Roads, • Ports • Telecom, waste management system
have been Railways, • Telecommunications
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Draft Final Report
September 2007
considered to as Private • Telecommunications • Power • basic telephony or cellular,

industries that Transport including radio paging,
contribute • Fertilizers domestic satellite service,
heavily to network of trunking,
• Cement
infrastructure broadband network and
development) • Petroleum internet services;
• Telecom, post, • Airports • power generation,
transmission and distribution
• Roads
Source of Definition Infrastructure Capsule Report on http://infrastructure.gov.in Guidelines on infrastructure Project Finance -
Chapter of the Infrastructure Sectors financing” issued by RBI vide its Strategic Business Unit
Economic Survey Performance (April Order No. DBOD. No. BP. BC. 67 / of State Bank of India
report 2004-2005 2005) 21.04.048/ 2002- 2003 dated 4th
February 2003
Note: ½ though the sector is included but all its sub-sectors are not included
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6.2 Defining PPP Infrastructure for this Study

For defining infrastructure for the purpose of this report we start with taking a
comprehensive approach to the definition of infrastructure, basing it on as many relevant
sectors as is done commonly by the Government agencies highlighted in the table above.
However, for analysis in this report we have not included all the above sectors as the focus
of this report is on PPP infrastructure projects in particular and not on all infrastructure
projects. And in India PPP have not taken place in all infrastructure sectors and not all
sectors are looked upon as equally amenable to PPP.
Government of India has specifically defined PPP in the “Scheme for financial support to
Public Private Partnerships in Infrastructure” (also commonly known as Viability Gap
Funding or VGF) as follows –
“PPP means a project based on a contract or concession agreement between a Government
or Statutory entity on the one side and a private sector company on the other side for
delivering an infrastructure service on payment of user charges.”
Public Private Partnerships

The understanding on PPP is also different across different countries. Some of these
definitions are as follows:
Government of Australia defines PPP as:
A PPP can be described as a collaboration between the public and private sector to provide
significant public infrastructure (or other facilities and services based on such infrastructure
or facilities) premised on the allocation of risk to the party (either Government or the private
sector) best able to manage it. The development of a policy supporting a PPP arrangement
provides a structured framework for the procurement of Government social and economic
infrastructure.
Ministry of Finance, Singapore defines PPP as:
PPP refers to long-term partnering relationships between the public and private sector to
deliver services. It is a new approach that Government is adopting to increase private sector
involvement in the delivery of public services.
Government of United Kingdom defines PPP as:
In UK PPP is more often referred to as PFI i.e. Private Finance Initiative. Private Finance
Initiative (PFI) projects are arrangements where the public sector contracts to purchase quality
services on a long-term basis so as to take advantage of private sector management skills
incentivised by having private finance at risk. This includes concessions and franchises,
where a private sector partner takes on the responsibility for providing a public service,
including maintaining, enhancing or constructing the necessary infrastructure. Sometimes PFI
is considered a form of PPPs other time it is used interchangeable with PPPs.
Government of Germany defines PPP as:
The German Government defines PPP as cooperation between the public and the private
sector based on the following key aspects:
• Long-term contractual relationship,
• Lifecycle approach (combination of construction and operation services),
• Risk-transfer to the private partner (optimisation of the allocation of risk between public
and private partner),
• Functional specification of services, appropriate scope for management decisions,
• Incentive and penalty mechanisms to achieve cost efficiency."
Source: World Bank and Individual Government Websites and PwC Research
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The guidelines define PPP in the infrastructure sectors (Roads & Bridges, Railways, Ports,
Airports, Power, Urban Infrastructure, Water, Solid Waste Management, Sewerage, and
Special Economic Zone) as eligible for Viability gap funding under the scheme.
To draw the boundary on the sectors to be included in the study, we consider those sectors
which meet the following 5 criteria:
1. Sectors which have been defined as PPP in India (under VGF, etc),
2. “Level of commercialisation”: by which we imply level of existing privatisation and
whether there is a scope for a public-private partnership. For example, telecom sector is
largely private and we believe that it does not provide best model to study issues for PPP
financing.
3. Existence of a significant number of PPPs in India in that sector,
4. Level of public authority executing the PPP project and
5. Scale of investment on the PPP project21
We use these criteria to identify the infrastructure sectors (sub-sectors) for this assignment.
The figure below explains these criteria in more detail.
Sectordefined
Sector definedas
as Stageof
Stage of Existenceof
Existence of Levelof
Level of Scaleof
Scale of
PPP in India
PPP in India Development
Development PPP in India
PPP in India Authority
Authority Investment
Investment
Definitions
VGF guidelines Infrastructure sectors Sectors in which a PPPs in infrastructure
defines some PPP which are already medium or large can be important Infrastructure sectors
infrastructure prominent in India are number of PPP irrespective of the with an investment of
sectors and we not included but projects exist are level of public less than $1 million
take the definition. others are. included. authority. are not included.
Examples
Some examples of Sectors such as Sectors such as Sectors in which PPP We posit that
sectors included housing, telecom airports and roads contracts are typically infrastructure projects
are roads, power etc. already have a are included but entered into by ULBs , below that size are not
etc. while some momentum of their SEZs, due to a e.g. some solid waste very complex projects
sectors not own in India are small number of management projects, and are not thus not
included are health, classified as PPPs are not are also included. very relevant from the
education etc. advanced and not included. point of view of this
included study.
An additional criterion that has been used only for Urban Infrastructure projects is looking at
PPP projects in only those cities with a population of 1 million or more.
The final list of sectors to be included and hence the list of projects to be studied is arrived at
by applying the above mentioned criteria to the comprehensive list of infrastructure sectors
and sub-sectors. The sectors included in our study based on the above mentioned criteria
are marked as √ in Exhibit 27.
21
In some countries like Germany, the accommodation sector (e.g. schools, administration buildings, town halls, sport centres,
day care centres) is a major area of PPPs. However, we have not included these sectors since they do not meet the criteria of
scale of investment and level of authority involved.
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Exhibit 27: Selection of Sectors
Criteria Final
Level of Is the sector
Level of selection
Existence of authority Scale of named under
Commerciali in the
PPPs in India handling Investment Indian PPP
sation scope of
Sector the project scheme?
the study
Transportation
• Roads & Highways & High Centre High Yes Intermediary

Bridges /State
• Railways Low Centre High Yes Preliminary
• Airports Medium Centre High Yes Intermediary
• Ports Medium Centre High Yes Intermediary

/State
• Mass transport (bus) High (Open State High No Advanced X

Competition)
• Mass transport (rail) Low Centre High No Advanced X

/State
• Mass transport (Airlines) High (Open Centre High No Advanced X

Competition)
• Mass transport (Ship, High (Open State High No Advanced X

ferry and barge) Competition)
Energy
• Power22

o Generation High (Open Centre High Yes Intermediary
Competition) /State (LIMITED
EXTENT)
o Transmission Low Centre/ High Yes Intermediary

State
o Distribution Low State High Yes Intermediary
• Oil and Gas:
o E&P High (Open Centre High No Advanced X

Competition)
o Transmission High Centre High No Advanced X
o Distribution (piped Low Centre High No Advanced X

and retail)
Urban Infrastructure
• Water Supply23
22
In case of power, only those new IPPs will be considered which are formed through SPVs and which provide an opportunity
to understand refinancing, financial restructuring, etc. Other private IPPs, captive power plants which are balance sheet
financed will be excluded.
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September 2007
o Treatment Low State/ULB Low Yes Preliminary
o Transmission Low State/ULB Low Yes Preliminary
o Distribution Low ULB Low Yes Preliminary
• Waste water
o Disposal Low ULB Low Yes Preliminary
o Treatment Low ULB Low Yes Preliminary
• Solid Waste Management Medium ULB Low Yes Preliminary
• SEZ Low (Open State High Yes Intermediary X

Competition)
• Housing /real estate High (Open State /ULB High Yes Advanced X
Competition)
Telecommunication High (Open Centre High No Advanced X

Competition)
23
If a water supply system caters water to general public as well as industrial units, the same will be considered. However,
when such a system is built up dedicated for specific bulk industrial water consumers, the same has been excluded from the
survey and analysis.
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Draft Final Report
September 2007
7 Annexure 2 - Approach and Methodology of the Study

To achieve these objectives a detailed methodology was discussed and agreed upon during
the inception stage. This is pictorially depicted in Exhibit 28.
Exhibit 28: Project Methodology
Defining Infrastructure
Inception Stage
Defining PPP
Defining PPP Infrastructure
Developing Methodology
Financing Details of Views & Expressions

Existing PPP of Stakeholders
Phase I
Infrastructure Projects
Survey and
Interview Tools
Analysis of Information Gathered

Phase II
Project Survey Analysis Stakeholder Interviews
Identification of Key issues on PPP Infrastructure Financing
Debt Side Equity Side
Second Round of Stakeholder Interviews

Phase III
Recommendations Debt Side Recommendations Equity Side
Stakeholder Workshop
Finalisation of the Recommendations
Briefly, the methodology depicted above had the following steps:
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September 2007
1. As the first step the work involved short-listing projects from the entire universe of PPP
infrastructure projects in India that we would survey for the purpose of this study. This
was done through a step by step selection & elimination process described below:-
a. Selecting sectors to be included in the infrastructure project list, as there is no one
widely accepted definition of infrastructure or the sectors it encompasses in India.
This was done by comparing the definition of infrastructure & its sectors adopted by
various Government agencies and arriving at the final list of sectors. The sectors that
were short-listed for this study include:
i. Roads & Highways;
ii. Railways;
iii. Airports;
iv. Ports;
v. Water treatment, Transmission and Distribution;
vi. Waste Water and Solid Waste;
vii. Power Distribution and Transmission
b. The list of projects arrived at went through a process of elimination for projects that
do not fall under the definition of PPP. The term ‘PPP in infrastructure’ is wide
ranging and covers a number of ways in which the Government & private parties
collaborate, invest and share risks to develop and/or operate and maintain
infrastructure services. A lot of PPP’s however, like construction contracts to private
contractors, lack any element of risk sharing built into them thus these interactions
should not be mistaken for a PPP and were removed from the list.
2. Survey tools were then designed in consultation with the World Bank and the DEA for
conducting interviews and collecting information on the short-listed projects. Two types
of tools were used for the surveys.
a. Project Questionnaire for project financing information collection; and
b. Interview questionnaire for interviews of the key stakeholders.
3. The project information collected was then documented, analysed and presented in
two levels. (Data coverage and characteristics is presented In Annexure 3)
a. Level one- involved analysing the PPP landscape in the country. This analysis was
based on the basic project information available for the short-listed 231 projects
(Please Refer 7.2 List of PPP Projects).
b. Level two- involved analysing the detailed financial information collected for a
sample of 104 projects. This section presents the specific trends observed in the
financing of PPP infrastructure in the country and substantiates our findings with
views got from interviewing the various players involved. (Please refer 7.1 List of
Interviews Conducted).
Assumptions for the project data analysis are also summarised in Section 7.4
Assumptions.
4. Analysis of interview information helped in understanding the key issues and priority
attached to these issues by the stakeholders. Interviews were conducted through semi
structured questionnaires which were a combination of qualitative and open-ended
questions, designed to identify and capture interviewee’s needs, views and preferences
across a broad range of issues and topics relevant to infrastructure financing in India.
5. Certain key issues on the debt and equity side have been identified from the analysis
of the project database and inferences from stakeholders’ interviews. These key issues
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September 2007
have been detailed out in this report. Subsequently, various options for removing the
constraints have also been suggested and presented for both the debt and equity side.
6. These issue and the suggestions were then discussed with few select key stakeholders
in the second round of interviews. This led to making more specific suggestions.
7. It is proposed that, further to the submission of this report and acceptance by the
Department of Economic Affairs (DEA) Ministry of Finance, a workshop will be
conducted where the report will be discussed with the key stakeholders. Subsequent to
incorporation of the views of the key stakeholders, the final report will be submitted.
7.1 List of Interviews Conducted

# Type Organisation
1. Developer & FI IL&FS
2. Developer/ SPV Amma Lines
3. Developer/ SPV Balaji Infra Projects Ltd
4. Developer/ SPV Balaji Leasing & Industries Co. ltd
5. Developer/ SPV Bangalore International Airport Ltd
6. Developer/ SPV DS Constructions
7. Developer/ SPV Dubai Port International
8. Developer/ SPV Gangavaram Port Ltd.
9. Developer/ SPV GE Infrastructure
10. Developer/ SPV GMR Hyderabad International Airport Ltd.
11. Developer/ SPV GMR Infrastructure Ltd
12. Developer/ SPV Gujarat Pipava Port Limited
13. Developer/ SPV GVK
14. Developer/ SPV GVK (Alaknanada Hydro Power Company Ltd.)
15. Developer/ SPV Ideal Road Builders Private Limited
16. Developer/ SPV IDeCK (Infrastructure Development Corporation of Karnataka)
17. Developer/ SPV Macquarie Bank
18. Developer/ SPV Marg Constructions Ltd.
19. Developer/ SPV Nagarjuna Construction Company Limited
20. Developer/ SPV Nandi Infrastructure Corridor Enterprise Ltd
21. Developer/ SPV Noida Toll Bridge Company Limited
22. Developer/ SPV Petronet LNG
23. Developer/ SPV Ramky Enviro Engineers Ltd.
24. Developer/ SPV Ramky Infrastructure Ltd.
25. Developer/ SPV Reliance Energy
26. Developer/ SPV Road Infrastructure Development Company of Rajasthan Ltd
(RIDCOR)
27. Developer/ SPV Veolia Environmental Services (earlier CES Onyx)
28. Developer/ SPV Zoom Developers
29. Financial Institution Bank Of Baroda
30. Financial Institution Canara Bank
31. Financial Institution DCB
32. Financial Institution ICICI
33. Financial Institution ICICI Bank
34. Financial Institution India Infrastructure Finance Company Limited (IIFCL)
35. Financial Institution Industrial Development Bank of India Ltd. (IDBI Bank)
36. Financial Institution Industrial Finance Corporation of India
37. Financial Institution Infrastructure Development Finance Company Limited (IDFC)
38. Financial Institution Life Insurance Corporation of India
39. Financial Institution NV Advisory Services Private Limited
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40. Financial Institution Old Lane (Private Equity Firm)

41. Financial Institution Power Finance Corporation
42. Financial Institution PPIAF
43. Financial Institution Royal Bank of Scotland London Office
44. Financial Institution State Bank of India – Corporate Banking and Project Finance (SBI) -
SBI Caps
45. Financial Institution State Bank of India (SBI)
46. Financial Institution State Bank of India Lending Division
47. Financial Institution State Bank of India Resources Division
48. Financial Institution UTI Bank-Infrastructure Division
49. Government Agency Airports Authority of India (AAI)
50. Government Agency APIIC
51. Government Agency APRDC
52. Government Agency Chennai Municipal Corporation
53. Government Agency Cochin International Airport
54. Government Agency Cochin Port Trust
55. Government Agency Department of Economic Affairs, Ministry of Finance, Government of
India
56. Government Agency Ennore Port Trust Ltd
57. Government Agency Government of Karnataka
58. Government Agency Government of Karnataka
59. Government Agency Gujarat Infrastructure Development Board (GIDB)
60. Government Agency Gujarat Maritime Board
61. Government Agency Gujarat State Road Development Corporation
62. Government Agency InCAP
63. Government Agency Karnataka PWD Department
64. Government Agency Karnataka Road Development Corporation
65. Government Agency Karnataka Urban Infrastructure Development & Finance Corporation
66. Government Agency KSIDC
67. Government Agency Maharashtra Maritime Board
68. Government Agency Maharashtra State Road Development Corporation (MSRDC)
69. Government Agency Ministry of Civil Aviation
70. Government Agency Mumbai Metropolitan Region Development Authority (MMRDA)
71. Government Agency National highway Authority of India (NHAI)
72. Government Agency New Delhi Municipal Corporation (NDMC)
73. Government Agency New Tirupur Area Development Corporation Ltd.
74. Government Agency PowerGrid Corporation of India
75. Government Agency Public Works Department (PWD) Rajasthan
76. Government Agency Public Works Department (PWD) Madhya Pradesh
77. Government Agency Punjab Infrastructure Development Board (PIDB)
78. Government Agency Rail Vikas NIgam Limited (RVNL)
79. Government Agency Rajasthan State Roads Development and Construction Company
(RSRDC)
80. Government Agency Tamil Nadu Industrial Development Corporation (TIDCO)
81. Government Agency Tamil Nadu Urban development Fund (TNUDF)
7.2 List of PPP Projects

We have taken following projects as complete set of PPP Projects in India (Total Number,
231 Total Value USD15.8. billion), which have achieved financial closure. It is to be noted
that this list consists of projects from sectors chosen for this study and projects which are
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September 2007
larger than USD1 million in size. Urban projects which are in cities smaller than 1 million in
population are not considered.
# Sub-Sector Project Name
1. Airports Delhi International Airport (DIAL)
2. Airports Hyderabad International Airport
3. Airports Bangalore International Airport
4. Airports Mumbai International Airport (MIAL)
5. Ports Multipurpose berths at Visakhapatnam Port EQ8 & EQ9 (2 MT)
6. Ports Multipurpose General Cargo Berths 5A and 6A (5 MT), Mormugao
7. Ports Dahej Solid cargo terminal
8. Ports Hazira LNG Terminal
9. Ports Pipavav Port
10. Ports Jawaharlal Nehru Port Trust-Container Terminal III
11. Ports Multipurpose berth No.12 (0.50 MT/35000 TEUs) , Haldia
12. Ports Container Terminal at Multipurpose Berth outer harbour (4.8 MT),
Vizag
13. Ports Gangavaram Port
14. Ports Kakinada Port
15. Ports Krishnapatnam Port
16. Ports Dahej LNG Terminal
17. Ports Mundra Port (Development of Jetty, Approach Road, Railway Line
from Adipur to Mundra, Quay and related works)
18. Ports Karaikal Port
19. Ports Development of Container terminal (3.6) Mt at Tuticorin Port, Tamil
Nadu
20. Ports Development, Construction, Operation and Management of
International Container Transhipment Terminal at Vallarpadam, Cochin
21. Ports Jawaharlal Nehru Port Trust-Container Terminal I
22. Ports Multipurpose Berth No.4 A at Haldia (1.5 MT)
23. Ports Container Terminal at Chennai Stage 1 - 600 m Berth (5.60 MT)
24. Power Distribution Delhi distribution privatisation South West
25. Power Distribution Delhi distribution privatisation North West
26. Power Distribution Delhi Distribution Privatization Central Zone
27. Power Distribution Orrisa Distribution privatisation of CESCO
28. Power Distribution Orrisa Distribution privatisation of WESCO, NESCO & SOUTHCO
29. Power Transmission Transmission system associated with Tala HEP, East-North
Interconnector and Northern Region Transmission system
30. Railways Gandhidham-Palanpur GC project
31. Railways GC of Hassan-Mangalore metre gauge section
32. Railways Viramgam-Mehsana
33. Railways Surendranagar Mahuva Gauge Conversion
34. Roads & Bridges Ahmedabad - Mehsana Road
35. Roads & Bridges Vadodara - Halol Road
36. Roads & Bridges Development of Bypass Roads for Sandur Town Bellary district Under
Direct Tolling System
37. Roads & Bridges Four laning of Bangalore Mysore Road (Bangalore Maddur)
38. Roads & Bridges Widening and strengthening of Wadi Raichur Road
39. Roads & Bridges Development of New Mattancherry Bridge Build – Operate – Transfer
project in Cochin
40. Roads & Bridges Trivandrum City Road Improvement Project
41. Roads & Bridges Dewas-Ujjain-Badnagar-Badnawar Road
42. Roads & Bridges Hoshangabad-Piparia-Pachmarhi Road
43. Roads & Bridges Indore-Sanawad-Burhanpur-Edlabaad Road
44. Roads & Bridges Jabalpur-Narsinghpur-Pipana Road
45. Roads & Bridges Katni Bypass
46. Roads & Bridges Rewa-Jaisinghnagar-shahdol-Amarkantak Road
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47. Roads & Bridges Sagar-Damoh-Jabalpur Road

48. Roads & Bridges Satna-Maihar-Tala-Umaria Road
49. Roads & Bridges Seoni-Balaghat-Gondia Road
50. Roads & Bridges Ujjain-Agar-Susner-Jhalawad Road
51. Roads & Bridges Vadgaon Chakan Shikrapur repair work 23 Km Stretch
52. Roads & Bridges National Highway No 4, Mumbra Valan 5.4 Km Stretch, 4 Subways
and 1 ROB
53. Roads & Bridges Punjab Road Sector Project, Phase 2,Tranche III Development of
Dakha - Raikot - Barnala Road Project Road on BOT Basis
54. Roads & Bridges Bharatpur Bye Pass
55. Roads & Bridges Construction of Four lane road with Median strip of 1.2 mt. wide on
Bar-Bilara-Jodhpur Road SH-5 (km.90/0 to 105/0)
56. Roads & Bridges Construction of Kelva – Amet Road km. 0/0 to 18/0.
57. Roads & Bridges Construction of Nimbahera Bye Pass on NH-79 (Ajmera-Bhilwara-
Chittorgarh-Nimbhera-Ratlam-Indore Road) (km.209/087 to 217/400)
58. Roads & Bridges Construction of Pali Bye Pass on Jodhpur – Sumerpur Road NH-65 at
km.366
59. Roads & Bridges Construction of Udaipur Bye Pass Phase II
60. Roads & Bridges Improvement & Strengthening of Hanumangarh-Suratgarh road via
Peelibanga Km. 0/0 to 26/0
61. Roads & Bridges Improvement of Alwar-Bhiwari Road SH-25 (km.146/0 to 225/0)
62. Roads & Bridges Improvement of Banaswara-Udaipur Road SH-32 (Km.91/500 to
165/0)
63. Roads & Bridges Improvement of Jhalawar-Indore Road SH-1A (strengthening &
widening km.9/700 to 29/900), 6.0 km. away from Patan to State
Border
64. Roads & Bridges Improvement of Manglana –Makrana Road (km.400/0 to 415/0 and
Makrana – Bidiyad Road km.0/0 to 6/0).
65. Roads & Bridges Improvement of Sirohi-Mandar-Deesa Road SH-27 upto State Border
(km.214/0 to 268/400)
66. Roads & Bridges Pali Bye Pass
67. Roads & Bridges Sikar Bye Pass
68. Roads & Bridges Upgradation/Strengthening & Renewal of SH-32 Udaipur-Salumber-
Banaswara Road (Km.5/0 to 72/0)
69. Roads & Bridges Widening & Improvement Kama – Nandgaon-Kausi Road 56/200 to
64/200
70. Roads & Bridges Widening & Improvement of Dantiwara – Piper City- Merta City Road
(Km.0/0 to 26/500)
71. Roads & Bridges Widening & Strengthening & Improvement of Mangalwar-Nimbhahera
Road (Km.0/0 to 40/0)
72. Roads & Bridges Widening & Strengthening of Challa-Neem-ka-thana-Kotpuli Road SH-
13 and MDR-25 (km.64/800 to 125/0)
73. Roads & Bridges Widening & Strengthening of Sikar-Jhunjunu-Loharu Road SH-8
(km.0/0 to 119/700)
74. Roads & Bridges Widening and Strengthening of Sri Ganganagar – Hanumangarh Road
SH-36 (km.1/500 to 56/0)
75. Roads & Bridges Widening Strengthening & Improvement of Nasirabad-Kekri-Deoli
Road SH-26 (km.25/0 to 56/500)
76. Roads & Bridges Construction of Additional two lane bridge and improvements to the
existing bridge across river Korathalayar at Km.26/4 of N.H.5
77. Roads & Bridges Karur Toll Bridge by Tamil Nadu Urban Infrastrucsture Financial
Services Ltd., (TNUIFSL)
78. Roads & Bridges Satara - Kagal km 725 - km 592.24 Maharashtra
79. Roads & Bridges Tumkur - Neelmangala km 62 - km 29.5 Karnataka
80. Roads & Bridges Maharastra Border-Belgaum km 592 - km 515 Karnataka
81. Roads & Bridges Hyderabad Bangalore section (NS-2/BOT/AP-5)/ Km 135.469 to Km
211/ Andhra Pradesh
82. Roads & Bridges Aadloor Yellareddy to Gundla Pochampalli (NS-2/BOT/AP-2) Km 367
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to Km 447/ Andhra Pradesh

83. Roads & Bridges Tuni - Dharmavaram (AP-16) km 300 - km 253 Andhra Pradesh
84. Roads & Bridges Dharmavaram - Rajahmundry (AP-15)/ km 253 -km 200/ Andhra
Pradesh
85. Roads & Bridges Nellore Bypass km 178 .2- km 161 Andhra Pradesh
86. Roads & Bridges Nellore - Tada (AP-7) km 163.6 - km 52.8 Andhra Pradesh
87. Roads & Bridges Rajkot Bypass & Gondal Jetpur (Package-VII)/ km 185.00 to km
175.00/ Gujarat
88. Roads & Bridges Thrissur to Angamali (KL-I)/ Km. 270.000 to Km. 316.70/ Kerala
89. Roads & Bridges Nandigama – Vijayawada/ Andhra Pradesh
90. Roads & Bridges Strengthening and Improvement of Mangalwar - Nimbahera- Neemuch
(km 40 to 50)
91. Roads & Bridges Strengthening and Improvement of Sirohi - Anadara - Reodar-
Mandar Road
92. Roads & Bridges Widening Strengthening & Improvement of Nasirabad-Kekri-Deoli
Road SH-26 (km.25/0 to 56/500)
93. Roads & Bridges Bhiwandi Chinchoti , Repair of 22 KM Strecth
94. Roads & Bridges Bhiwandi - Repair of 18.35 Km Stretch
95. Roads & Bridges Vadgaon Chakan - 30 Km Repair work
96. Roads & Bridges Malhar Peth Pandarpur - 36 Km Repair work
97. Roads & Bridges Pune - Ahmednagar 4 lanning
98. Roads & Bridges Vellhe Shrikrapur Jijuri Nera Lonand 7.27 Km, 1 bridge, 1 ROB
99. Roads & Bridges Nagpur Vardha Yevatmal - Bridge on Krishna River
100. Roads & Bridges Seri Talayajval - Bridge on Krishna River
101. Roads & Bridges Ahmednagar Karmala Temuni Repair of 59 Km Stretch
102. Roads & Bridges Mohol Kurul Kamdhi Repair work for 24 Km Strech
103. Roads & Bridges Pandarpur Bypass Repair work - 10 Km Stretch
104. Roads & Bridges Pandarpur Mohol - Repair of 11.12 Km
105. Roads & Bridges Pune - Pond repair of 31.8 Km Stretch
106. Roads & Bridges Ahmednagar Karmala (Sholapur Dist) Temuni 6.56 Km Stretch with a
Bridge
107. Roads & Bridges Sholapur Dist a) Mangalveda Vijapur repair b) Begampur Mangalveda
( Total 31.85 Km)
108. Roads & Bridges Sholapur Dist - Kuduvadi Latur 1 Railway ROB and 4.83 Km Stretch
109. Roads & Bridges Surat Dhule Edlabad - 5.1 Km Stretch
110. Roads & Bridges Nashik to Sukedi Phata 15 Km Stretch and 1 ROB
111. Roads & Bridges Prakasha-Chadvel-Samoda-Vindur, 76 Km Stretch and 3 Bridges
112. Roads & Bridges Ahmednagar Karmala 70.60 Km Stretch Repair work
113. Roads & Bridges Ahmednagar - Dond 44.6 Km Stretch Repair work
114. Roads & Bridges Ahmednagar - Takli - kajhi - Bhum , Repair and Maintainance of 41
Km stretch and 2 Bridges
115. Roads & Bridges Nasik Vani - Repair of 44 Km Stretch
116. Roads & Bridges Jalgaon Neri Puhur repair work for 48.4 km Stretch
117. Roads & Bridges Muktanagar - Banhanpur repair work for 31.4 Km Stretch
118. Roads & Bridges Tuljapur Ugni - repairework for 28.5 Km
119. Roads & Bridges District Nanded, Sirur Mukhed Narsi Bilol, Repair work for 32 Km
Stretch
120. Roads & Bridges Nanded - Narsi Reapairwork for 43 Km Stretch
121. Roads & Bridges Nanded - Ardhapur - Varnaga 30 Km Stretch
122. Roads & Bridges Nagpur - APMC Market and Ring Road Connecting Road Repairwork
for 8.2 Km Strech
123. Roads & Bridges Devri - Sirpur reapirwork for 13.4 Km Stretch
124. Roads & Bridges Varil Bandra 4.11 Km of Road Stretch and 1 Bridge on Vanganga
125. Roads & Bridges Thane-Bhiwandi Bypass
126. Roads & Bridges Construction of additional 2-lane with tunnel in Khambatki Ghat on NH
4
127. Roads & Bridges Construction of Six Bridges
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128. Roads & Bridges Kosasthalyar Bridge

129. Roads & Bridges Wainganga Bridge
130. Roads & Bridges Mahi Bridge
131. Roads & Bridges Bridge across river Watrak
132. Roads & Bridges Narmada bridge
133. Roads & Bridges Patalganga Bridge & ROB
134. Roads & Bridges 4-laning of Pune-Sholapur road Km. 14/00 to 40/00 of NH 9
135. Roads & Bridges Construction of Bridge across Pinglai river in km 113/800 on NH 6
136. Roads & Bridges Pune-Nasik( Khed) (km 12.90 to 42.00)
137. Roads & Bridges Nardhana ROB
138. Roads & Bridges Chalthan Road Over Bridge
139. Roads & Bridges ROB at Derabassi
140. Roads & Bridges Nasirabad ROB
141. Roads & Bridges 4-laning of Raipur-Durg section of NH 6 from Km. 282.0 to Km.308.6
in the State of Chhatisgarh
142. Roads & Bridges Bhuj-Nakhtrana Road
143. Roads & Bridges Chhayapuri ROB
144. Roads & Bridges Himmatnagar bypass
145. Roads & Bridges Kim Mandvi Road
146. Roads & Bridges Western Expressway
147. Roads & Bridges Hoshangabad-Harda-Khandwa Road
148. Roads & Bridges Raisen-Rahatgarh Road
149. Roads & Bridges Upgradation, Operation and Maintenance of Patiala - Malerkotla Road
on B.O.T.Basis
150. Roads & Bridges Upgradation, Operation and Maintenanceof Balachaur Dasuya Road
on B.O.T.Basis
151. Roads & Bridges Upgradation, Operation and Maintenanceof Hoshiarpur - Tanda Road
on B.O.T. Basis
152. Roads & Bridges Upgradation, Operation and Maintenanceof Kiratpursahib - Una Road
on B.O.T. Basis
153. Roads & Bridges Upgradation, Operation and Maintenanceof Patiala Patran Road on
B.O.T. Basis
154. Roads & Bridges Mahapura (near Jaipur) - Kishangarh (6 Lane) km 273.5 - km 363.885
Rajasthan
155. Roads & Bridges Ahmedabad-Vadodara Exp. Way Phase-I & II / km 0.0 - km 43.4/
Gujarat
156. Roads & Bridges Bharuch to Surat Package BOT- II / 4 lanning/ Gujarat
157. Roads & Bridges Vadodara to Bharuch Package BOT-1/ 6 lanning/ Gujarat
158. Roads & Bridges Delhi - Gurgaon Section (Access Controlled 8/6 Lane)/ km 14.3 - km
42/ Delhi(9.7)/Haryana(18)
159. Roads & Bridges Farukhanagar to Kottakata (NS-2/AP-3)/ Km. 34.140 to km 80.050/
Andhra Pradesh
160. Roads & Bridges Farukhanagar to Kotakatta (NS-2/AP-4)/ Km 80.050 to km 135.469/
Andhra Pradesh
161. Roads & Bridges Four laning from km 53.0 to km 100.0 of Kumarapalayam-Chengapalli
section of NH-47 on BOT basis.(Contract Package No. NS-
2/BOT/TN-7)
162. Roads & Bridges Four laning from km 0.0 to km 53.0 of Salem – Kumarapalayam on
NH-47 on BOT basis.(Contract Package No. NS-2/BOT/TN-6)
163. Roads & Bridges Karur to Madurai (TN-5) Km 373.275 to km 426.6Tamil Nadu
(Dindigul-Samyanallore)
164. Roads & Bridges Karur to Madurai (TN-4) Km 305.6 to Km 373.275 Tamil Nadu (Karur
to Dindigul)
165. Roads & Bridges Salem to Karur (NS-2/TN-3) Km 258.645 to Km 292.6 Tamil Nadu
(Widening of Namakkal)
166. Roads & Bridges Salem to Karur (NS-2/TN-2) Km. 207.050 to Km 248.625 Tamil Nadu
167. Roads & Bridges Krishnagiri to Thopurghat (NS-2/TN1) Km. 94.000 to 156 Tamil Nadu
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168. Roads & Bridges Nagpur – Kondhali/ Km 9.2 to Km 50/ Maharashtra

169. Roads & Bridges Kondhali – Telegaon/ Km 50 to Km 100/ Maharashtra
170. Roads & Bridges Aurang - Raipur Km 232 to Km. 281 Chattisgarh
171. Roads & Bridges Durg Bypass/ (2 Laned new facility)/ Chattisgarh
172. Roads & Bridges Ankapalli – Tuni/ km 359.2 - km 300/ Andhra Pradesh
173. Roads & Bridges Haldia Port NH-41 (from Kolaghat on NH-6 to Haldia) West Bengal
174. Roads & Bridges Vishakhapatnam Port 3.6 km 4 laned, 8.57 km 2 laned Andhra
Pradesh
175. Roads & Bridges Bara to Orai/ km 449 to 422 on NH-2 & km 255 to km 220/ Uttar
Pradesh
176. Roads & Bridges Jhansi to Lalitpur (NS-1/BOT/UP-2)/ Km 0 to Km 49.79/ Uttar Pradesh
177. Roads & Bridges Jhansi to Lalitpur (NS-1/BOT/UP-3)/ Km 49.7 to Km 99/ Uttar Pradesh
178. Roads & Bridges Jawaharlal Nehru Port Phase-I/ Maharashtra
179. Roads & Bridges New Mangalore Port NH-17 (Suratkal-Nantur Section), NH-48 (Padil
Bantwal Section)/ Karnataka
180. Roads & Bridges Meerut-Muzaffarnagar/ Km 52.250 to Km.131.00/ Uttar Pradesh
181. Roads & Bridges Moradabad Bypass/ (2 Laned new facility)/ Uttar Pradesh
182. Roads & Bridges Gwalior Bypass (NS-1/BOT/MP-1)/ Km 0 to Km 42.033/ Madhya
Pradesh
183. Roads & Bridges Tuticorin Port/ NH-7A (Tuticorin - Tirunelveli section)/ Tamil Nadu
184. Roads & Bridges Second Vivekananda Bridge and Approach/ West Bengal
185. Roads & Bridges Panagarh – Palsit/ km 517 - km 581/ West Bengal
186. Roads & Bridges Palsit – Dankuni/ km 581 - km 646/ West Bengal
187. Roads & Bridges Tindivanam - Ulundurpet (Pkg -VI-A) km 121 - km 192.25/ Tamil Nadu
188. Roads & Bridges Ulundurpet - Padalur (Pkg- VI-B) km 192.25 - km 285.00 Tamil Nadu
189. Roads & Bridges Padalur - Trichy (Pkg - VI-C)/ km 285.00 - km 325.00/ Tamil Nadu
190. Roads & Bridges Chennai - Ennore Express Way
191. Roads & Bridges Palanpur to Swaroopganj (Rajasthan -42 km & Gujarat-34 km )/ km
264 to km 340 (Rajasthan 42 km & Gujarat -34 km)/
Gujarat[34]/Rajasthan[42]
192. Roads & Bridges Cochin Port/ km 348/382 - km 358 750 Including 5 Major Bridges/
Kerala
193. Roads & Bridges Panipat Elevated Highway/ Km 96.00 to 86.00/ Haryana
194. Roads & Bridges Port Connectivity to Mormugoa/ NH-17B (from Port to Verna Junction
on NH-17)/ Goa
195. Roads & Bridges Tambaram - Tindivanam km 28 - km 121/ Tamil Nadu
196. Roads & Bridges Jawaharlal Nehru Port Phase-II/ SH-54 + Amramarg + Panvel Creek
Bridge/ Maharashtra
197. Roads & Bridges Paradip Port/ NH-5A (from km 0 to km 77)/ Orissa
198. Roads & Bridges Bharatpur-Mahua/ km. 63 to Km. 120/ Rajasthan
199. Roads & Bridges Mahua-Jaipur/ Km. 120 to Km 228/ Rajasthan
200. Roads & Bridges Agra – Bharatpur/ Rajasthan[20]/Uttar Pradesh[25]
201. Roads & Bridges Thanjavur – Trichy/ km 80 - km 135.750/ Tamil Nadu
202. Roads & Bridges Sitapur – Lucknow/ Km 488.27 to km 413.20/ Uttar Pradesh
203. Roads & Bridges Madurai-Arupukottai-Tuticorin/ km 138.8 to km 264.5/ Tamil Nadu
204. Roads & Bridges Four laning from km 407.100 to km 456.100 of NH-1 (Jalandhar –
Amritsar Section) in the State of Punjab on BOT basis
205. Roads & Bridges Ambala – Zirakpur/ Km. 5/735 to Km. 39/961 of NH-22 and Km. 0/0 to
Km. 0/871 of NH-21 Haryana[6]/ Punjab[30]
206. Roads & Bridges Gonde-Vadape (Thane)/ Km. 440/000 to Km. 539/500 Maharashtra
207. Roads & Bridges Dhule - Pimpalgaon Km. 380/0 to Km. 265/0 Maharashtra
208. Roads & Bridges Indore-Khalghat/ Madhya Pradesh
209. Roads & Bridges Guna Bypass/ Km. 319/700 to Km. 332/100 / Madhya Pradesh
210. Roads & Bridges Ahmedabad Ring Road
211. Roads & Bridges Pachpatre to Raniji ki Gol (TR-1)
212. Roads & Bridges Pachpatre to Raniji ki Gol (TR-2)
213. Roads & Bridges Hanumangarh to Kishangarh (HK-1)
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214. Roads & Bridges Hanumangarh to Kishangarh (HK-2)

215. Roads & Bridges Alwar-Sikandara
216. Roads & Bridges Lalsot to Jhalawad (LJ-1)
217. Roads & Bridges Lalsot to Jhalawad (LJ-2)
218. Roads & Bridges Noida Toll Bridge
219. Roads & Bridges East Coast Road
220. Roads & Bridges Coimbatore Bypass & Athupalam bridge
221. Roads & Bridges Hubli-Dharwad Bypass
222. Solid Waste Collection and Transportation of Municipal Solid Waste
Management
223. Solid Waste Sanitary Landfills in Bangalore
Management
224. Solid Waste Waste to Energy Project Mandur
Management
225. Solid Waste Solid waste management in Chennai (CONSERVANCY
Management OPERATIONS IN ZONES 6, 8 AND 10 OF CORPORATION OF
CHENNAI (WITH SUPPORT FROM -TIDCO)
226. Solid Waste Solid Waste Management at Haldia
Management
227. Waste Water Sewerage Treatment Plant for underground drainage in Alandur by
Tamil Nadu Urban Infrastructure Financial Services Ltd. (TNUIFSL)
228. Water Supply Sheonath River, Industrial water supply in Boarai
229. Water Supply Dewas Industrial water supply project
230. Water Supply Tirupur Water Supply and Sewerage Project
231. Water Supply CMWSSB-CWSAP-100MLD Sea Water Desalination Plant at Minjur,
Chennai on DBOOT basis in the State of Tamil Nadu
7.3 Sources for Project Information

Following is the list of PPP Projects for which we have collected detailed financial
information and analysed.
Total Number = 104
Total Value = USD11.48 billion
Mode of
# Name State Sub-Sector Type of Source Information
Collection
1. Hyderabad International Airport Andhra Pradesh Airports Project Developer
Questionnaire
2. New Bangalore International Karnataka Airports Project Developer
Airport Questionnaire
3. Mumbai International Airport Maharashtra Airports From Loan Financial Institution
(BIAL) Documents
4. Gangavaram Port Andhra Pradesh Ports Project Developer
Questionnaire
5. Kakinada Seaports Ltd Andhra Pradesh Ports From Loan Financial Institution
Documents
6. Krishnapatnam Port Andhra Pradesh Ports Project Developer
Questionnaire
7. Dahej LNG Terminal Gujarat Ports Project Developer
Questionnaire
8. Mundra Port (Development fo Gujarat Ports Board Memo on Financial Institution
Jetty, Approach Road, Ralway Infra Projects
Line from Adipur to Mundra,
Quay and related works)
9. Karaikal Port Pondicherry Ports From Loan Financial Institution
Documents
10. Development of Container Tamil Nadu Ports Project Developer
terminal (3.6) Mt at Tuticorin Port, Questionnaire
Tamil Nadu
11. Development, Construction, Kerala Ports Project Developer
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Operation and Management of Questionnaire

International Container
Transshipment Terminal at
Vallarpadam, Cochin
12. Nhava Sheva International Maharashtra Ports Project Developer
Container Terminal Pvt Ltd. Questionnaire
13. Multipurpose Berth No.4 A at West Bengal Ports Verbal Others/Project
Haldia (1.5 MT) Communication Atlas Report
14. Container Terminal at Chennai Tamil Nadu Ports Project Developer
Stage 1 - 600 m Berth (5.60 MT) Questionnaire
15. Transmission system associated West Bengal Power Project Developer
with Tala HEP, East-North Transmission Questionnaire
Interconnector and Northern
Region Transmission System
16. Gandhidham-Palanpur GC Gujarat Railways Project Government
project Questionnaire Agency
17. GC of Hassan-Mangalore Metere Karnataka Railways Project Government
gauge section Questionnaire Agency
18. Viramgam-Mehsana Gujarat Railways Others Others
19. Surendranagar Mahuva Gauge Gujarat Railways Project Government
Conversion (Pipavav Railway Questionnaire Agency
Corporation Ltd PRCL)
20. Bhuj Nakthrana Road Gujarat Roads & Bridges Project Government
Questionnaire Agency
21. Chayyapuri ROB Gujarat Roads & Bridges Project Government
22. Himmatnagar Bypass Gujarat Roads & Bridges Project Government
23. Kim - Mandvi Road Gujarat Roads & Bridges Project Government
24. Western Expressway Haryana Roads & Bridges From Loan Financial Institution
Documents
25. Hoshangabad-Harda-Khandwa Madhya Pradesh Roads & Bridges Verbal Developer
Road Communication
26. Raisen-Rahatgarh Road Madhya Pradesh Roads & Bridges Verbal Developer
Communication
27. Upgradation, Operation and Punjab Roads & Bridges Project Government
Maintenance of Patiala - Questionnaire Agency
Malerkotla Road on B.O.T.Basis
28. Punjab Road Sector Project: Punjab Roads & Bridges Project Government
Phase II – Upgradation, Questionnaire Agency
Operation and Maintenance of
Balachaur – Dasuya Road on
B.O.T Basis
Maintenanceof Hoshiarpur - Questionnaire Agency
Tanda Road on B.O.T. Basis
Maintenanceof Kiratpursahib - Questionnaire Agency
Una Road on B.O.T. Basis
Maintenanceof Patiala Patran Questionnaire Agency
Road on B.O.T. Basis
32. Mahapura (near Jaipur) - Rajasthan Roads & Bridges Project Developer
Kishangarh (6 lane) km 273.5 - Questionnaire
km 363.885 Rajasthan
33. Ahmedabad-Vadodara Exp. Way Gujarat Roads & Bridges From Loan Government
Phase I - km 0.0 to km 43.4 Documents Agency
Gujarat & Phase II - - km 43.4 to
km 93.302 Nadiad-Dakod SH-
Gujarat
34. Bharuch-Surat package BOT-II / Gujarat Roads & Bridges From Loan Government
4 laning / Gujarat Documents Agency
35. Vadodara to Bharuch Package Gujarat Roads & Bridges From Loan Financial Institution
BOT-1/ 6 lanning/ Gujarat Documents
36. Delhi-Gurgaon Delhi Roads & Bridges From Loan Government
Documents Agency
37. Farukhanagar to Kottakata (NS- Andhra Pradesh Roads & Bridges Project Developer
2/AP-3)/ Km. 34.140 to km Questionnaire
80.050/ Andhra Pradesh
38. Farukhanagar to Kotakatta (NS- Andhra Pradesh Roads & Bridges From Loan Financial Institution
2/AP-4)/ Km 80.050 to km Documents
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39. Four laning from km 53.0 to km Tamil Nadu Roads & Bridges Project Developer
100.0 of Kumarapalayam- Questionnaire
Chengapalli section of NH-47 on
BOT basis.(Contract Package
No. NS-2/BOT/TN-7)
40. Four laning from km 0.0 to km Tamil Nadu Roads & Bridges Project Developer
53.0 of Salem – Kumarapalayam Questionnaire
on NH-47 on BOT basis.(Contract
Package No. NS-2/BOT/TN-6)
41. Karur to Madurai (TN-5) Km Tamil Nadu Roads & Bridges From Loan Financial Institution
373.275 to km 426.6Tamil Nadu Documents
42. Karur to Madurai (TN-4) Km Tamil Nadu Roads & Bridges Project Financial Institution
305.6 to Km 373.275 Tamil Nadu Questionnaire
(Karur to Dindigul)
43. Salem to Karur (NS-2/TN-3) Km Tamil Nadu Roads & Bridges From Loan Financial Institution
258.645 to Km 292.6 Tamil Nadu Documents
44. Salem to Karur (NS-2/TN-2) Km. Tamil Nadu Roads & Bridges Verbal Others
207.050 to Km 248.625 Tamil Communication
Nadu
45. Krishnagiri to Thopurghat (NS- Tamil Nadu Roads & Bridges Verbal Others
2/TN1) Km. 94.000 to 156 Tamil Communication
Nadu
46. Nagpur – Kondhali/ Km 9.2 to Km Maharashtra Roads & Bridges From Loan Government
50/ Maharashtra Documents Agency
47. Kondhali – Telegaon/ Km 50 to Maharashtra Roads & Bridges From Loan Government
Km 100/ Maharashtra Documents Agency
48. Aurang - Raipur Km 232 to Km. Chattisgarh Roads & Bridges From Loan Government
281 Chattisgarh Documents Agency
49. Durg Bypass/ (2 Laned new Chattisgarh Roads & Bridges From Loan Government
facility)/ Chattisgarh Documents Agency
50. Ankapalli – Tuni/ km 359.2 - km Andhra Pradesh Roads & Bridges Project Developer
300/ Andhra Pradesh Questionnaire
51. Haldia Port NH-41 (from Kolaghat West Bengal Roads & Bridges From Loan Government
on NH-6 to Haldia) West Bengal Documents Agency
52. Vishakhapatnam Port 3.6 km 4 Andhra Pradesh Roads & Bridges From Loan Government
laned, 8.57 km 2 laned Andhra Documents Agency
Pradesh
53. Bara to Orai/ km 449 to 422 on Uttar Pradesh Roads & Bridges From Loan Financial Institution
NH-2 & km 255 to km 220/ Uttar Documents
Pradesh
54. Jhansi to Lalitpur (NS-1/BOT/UP- Uttar Pradesh Roads & Bridges From Loan Financial Institution
2)/ Km 0 to Km 49.79/ Uttar Documents
Pradesh
55. Jhansi to Lalitpur (NS-1/BOT/UP- Uttar Pradesh Roads & Bridges From Loan Financial Institution
3)/ Km 49.7 to Km 99/ Uttar Documents
Pradesh
56. Jawaharlal Nehru Port Phase-I/ Maharashtra Roads & Bridges From Loan Government
Maharashtra Documents Agency
57. New Mangalore Port NH-17 Karnataka Roads & Bridges From Loan Government
(Suratkal-Nantur Section), NH-48 Documents Agency
(Padil Bantwal Section)/
Karnataka
58. Meerut-Muzaffarnagar/ Km Uttar Pradesh Roads & Bridges From Loan Government
52.250 to Km.131.00/ Uttar Documents Agency
Pradesh
59. Moradabad Bypass/ (2 Laned Uttar Pradesh Roads & Bridges From Loan Government
new facility)/ Uttar Pradesh Documents Agency
60. Gwalior Bypass (NS-1/BOT/MP- Madhya Pradesh Roads & Bridges Project Developer
1) km 0 to km 42.033 / Madhya Questionnaire
Pradesh
61. Tuticorin Port/ NH-7A (Tuticorin - Tamil Nadu Roads & Bridges From Loan Government
Tirunelveli section)/ Tamil Nadu Documents Agency
62. Second Vivekananda Bridge and West Bengal Roads & Bridges From Loan Government
Approach/ West Bengal Documents Agency
63. Panagarh – Palsit/ km 517 - km West Bengal Roads & Bridges From Loan Government
581/ West Bengal Documents Agency
64. Palsit – Dankuni/ km 581 - km West Bengal Roads & Bridges From Loan Government
646/ West Bengal Documents Agency
65. Tindivanam - Ulunderpet package Tamil Nadu Roads & Bridges Verbal Others
VI-a / km 121 to km 192.25 / Communication
Tamil Nadu
66. Ulundurpet - Padalur (Pkg- VI-B) Tamil Nadu Roads & Bridges From Loan Government
km 192.25 - km 285.00 Tamil Documents Agency
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Nadu
67. Padalur-Trichy Package VI-6 / km Tamil Nadu Roads & Bridges Verbal Others
285.00 to km 325.00 / Tamil Communication
Nadu
68. Chennai - Ennore Express Way Tamil Nadu Roads & Bridges From Loan Government
Documents Agency
69. Palanpur to Swaroopganj Rajasthan Roads & Bridges From Loan Financial Institution
(Rajasthan -42 km & Gujarat-34 Documents
km )/ km 264 to km 340
(Rajasthan 42 km & Gujarat -34
km)/ Gujarat[34]/Rajasthan[42]
70. Cochin Port/ km 348/382 - km Kerala Roads & Bridges From Loan Government
358 750 Including 5 Major Documents Agency
Bridges/ Kerala
71. Panipat Elevated Highway/ Km Haryana Roads & Bridges Project Financial Institution
96.00 to 86.00/ Haryana Questionnaire
72. Port Connectivity to Mormugoa/ Goa Roads & Bridges From Loan Government
NH-17B (from Port to Verna Documents Agency
Junction on NH-17)/ Goa
73. Tambaram - Tindivanam km 28 - Tamil Nadu Roads & Bridges Project Developer
km 121/ Tamil Nadu Questionnaire
74. Jawaharlal Nehru Port Phase-II/ Maharashtra Roads & Bridges From Loan Government
SH-54 + Amramarg + Panvel Documents Agency
Creek Bridge/ Maharashtra
75. Paradip Port/ NH-5A (from km 0 Orissa Roads & Bridges From Loan Government
to km 77)/ Orissa Documents Agency
76. Bharatpur-Mahua/ km. 63 to Km. Rajasthan Roads & Bridges From Loan Government
120/ Rajasthan Documents Agency
77. Mahua-Jaipur/ Km. 120 to Km Rajasthan Roads & Bridges From Loan Government
228/ Rajasthan Documents Agency
78. Agra – Bharatpur/ Uttar Pradesh Roads & Bridges From Loan Government
Rajasthan[20]/Uttar Pradesh[25] Documents Agency
79. Thanjavur – Trichy/ km 80 - km Tamil Nadu Roads & Bridges From Loan Government
135.750/ Tamil Nadu Documents Agency
80. Sitapur – Lucknow/ Km 488.27 to Uttar Pradesh Roads & Bridges From Loan Government
km 413.20/ Uttar Pradesh Documents Agency
81. Madurai-Arupukottai-Tuticorin/ Tamil Nadu Roads & Bridges Verbal Others
km 138.8 to km 264.5/ Tamil Communication
Nadu
82. Four laning from km 407.100 to Punjab Roads & Bridges Project Developer
km 456.100 of NH-1 (Jalandhar – Questionnaire
Amritsar Section) in the State of
Punjab on BOT basis
83. Ambala – Zirakpur/ Km. 5/735 to Punjab Roads & Bridges From Loan Government
Km. 39/961 of NH-22 and Km. Documents Agency
0/0 to Km. 0/871 of NH-21
Haryana[6]/ Punjab[30]
84. Gonde-Vadape (Thane)/ Km. Maharashtra Roads & Bridges From Loan Government
440/000 to Km. 539/500 Documents Agency
Maharashtra
85. Dhule - Pimpalgaon Km. 380/0 to Maharashtra Roads & Bridges Project Financial Institution
Km. 265/0 Maharashtra Questionnaire
86. Indore-Khalghat/ Madhya Madhya Pradesh Roads & Bridges From Loan Government
Pradesh Documents Agency
87. Guna Bypass/ Km. 319/700 to Madhya Pradesh Roads & Bridges From Loan Government
Km. 332/100 / Madhya Pradesh Documents Agency
88. Ahmedabad Ring Road Gujarat Roads & Bridges From Loan Financial Institution
Documents
89. Pachpatre to Raniji ki Gol (TR-1) Rajasthan Roads & Bridges Project Government
90. Pachpatre to Raniji ki Gol (TR-2) Rajasthan Roads & Bridges Project Government
91. Hanumangarh to Kishangarh Rajasthan Roads & Bridges Project Government
(HK-1) Questionnaire Agency
92. Hanumangarh to Kishangarh Rajasthan Roads & Bridges Project Government
(HK-2) Questionnaire Agency
93. Alwar-Sikandara Rajasthan Roads & Bridges Project Government
94. Lalsot to Jhalawad (LJ-1) Rajasthan Roads & Bridges Project Government
95. Lalsot to Jhalawad (LJ-2) Rajasthan Roads & Bridges Project Government
96. Noida Toll Bridge Uttar Pradesh Roads & Bridges Verbal Others
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Communication
97. East Cost Road Tamil Nadu Roads & Bridges Verbal Others
Communication
98. Coimbatore Bypass Tamil Nadu Roads & Bridges Verbal Others/Project
Communication Atlas Report
99. Hubli-Dharwad Bypass Karnataka Roads & Bridges Verbal Others/ ICICI
Communication Memo
100. Solid waste management in Tamil Nadu Solid Waste Project Government
Chennai (Conservancy Management Questionnaire Agency
operations in zones 6, 8 and 10
of corporation of Chennai (with
support from
Tamil Nadu Industrial
Development Corporation-
TIDCO)
101. Solid Waste Management at West Bengal Solid Waste Project Developer
Haldia Management Questionnaire
102. Dewas Industrial water supply Madhya Pradesh Water Supply Verbal Developer
project Communication
103. Tirupur Water Supply Tamil Nadu Water Supply Project Developer
andSewerage Project Questionnaire
104. CMWSSB-CWSAP-100MLD Sea Tamil Nadu Water Supply Project Developer
Water Desalination Plant at Questionnaire
Minjur, Chennai on DBOOT basis
in the State of Tamil Nadu
7.4 Assumptions
7.4.1 Analysis Assumptions
o Currency Conversion
1 USD = 45 INR for all currency conversions.
o Time of Financial Information
Financial information for any projects is captured as it was at the time of financial closure
of the project. A year has been taken from January to December and not the financial
year unless states otherwise.
o Total project Cost (TPC)
Total Project Cost is calculated based on following equation:
TPC = Debt + Equity + Sub-Debt + Grant
Negative grant is not considered in TPC in any way. Effect of negative grant on volume
of financing, if any, has also been taken out.
o Debt-Equity Ratio
For analysis, Debt Equity Ratio has been calculated as ratio of Senior Debt with Pure
Equity. Sub-Debt and Grant portions are not considered on either for this calculation.
o Centre/State Projects
Projects awarded by Port trusts are considered as Centre awarded projects.
o IRRs
Project IRR, Equity IRR, and Dividend IRR are taken post-tax figures as provided by the
information source.
o Senior Lenders
Senior lenders are taken as those lenders which have first charge on assets.
o Tenures
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Tenure of loans include Moratorium period.

o Interest Free Loans
Interest free loans by Government or Government entities is considered as debt while
calculating Debt-Equity ratio but in not considered in volume of debt or in analysis of
interest rates.
o Multi-project SPVs
Details of projects are captured per project and not by per SPV. For example in
Rajasthan RIDCOR is a single SPV which handles 7 Road projects and these are
treated as 7 separate projects.
o NHAI Projects
Complete set of NHAI projects is taken as it is given on NHAI web-site. Same has been
cross-checked with NHAI for consistency and some non-listed projects have been added
after getting confirmation from NHAI officials.
o Contract Period/Concession Period
Contract periods include construction period.
Extendable portions of contract periods/concession periods are taken out from
concession period for calculation.
o Sources of Equity
Source of Equity is taken in “Government” category where equity is provided by
Central/State Government, Port trusts, or other quasi-Government entities like, NHAI,
APIIC, AAI, KSIIDC, CONCOR, RVNL etc.
Source of Equity is taken in “Strategic Investors/Financial Institutions” category where
equity is provided by strategic investors like Zurich Airport or by Financial Intuitions like
IDFC, IL&FS, IFCI or by organisations like LIC, GIC etc.
o Sources of Debt
Source of Debt is taken in “Commercial Banks” category where debt is provided by
institutions like ICICI Bank, State Bank of India, Canara Bank, Bank of Baroda, Union
Bank of India, Punjab National Bank, UTI Bank, Indian Bank, etc.
Source of Debt is taken in “Financial Institutions” category where debt is provided by
institutions like IDFC, IL&FS, LIC, IIFCL, SIDBI, IDBI and Government or Quasi-
Government entities.
Source of Debt is taken in “Others” category where debt is provided through internal
accruals, customer’s deposit etc
7.4.2 Regions
Region States
North Delhi, Jammu and Kashmir, Haryana, Punjab, Uttrakhand, Uttar Pradesh,
Madhya Pradesh, Chattisgarh
West Maharashtra, Gujarat, Rajasthan, Goa
East Orissa, West Bengal, Bihar, North-Eastern states
South Karnataka, Andhra Pradesh, Tamil Nadu, Kerala, Pondicherry
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7.4.3 Sample Sizes

Following is the sample size for some important analysis given in the report.
Total Number of Projects for which Financial

104 Projects
Information is captured and analysed
Interest Rates of loans analysed for 85 Projects
Reset Periods in Loans analysed for 53 Projects
Tenure of Loans analysed for 89 Projects
7.4.4 Approximation of Financial Closure Year from Secondary Sources

For following projects (Total Number 93) we have approximated year of financial closure
from secondary sources. These secondary sources include (indicative):
o Websites of promoters or SPVs
o Government websites and reports
o News clips and Press releases
o References in other Presentations/Reports/Studies
We have maintained critical view while considering this data for analysis.
# Project Name Sub-Sector Financial Closure Year
1. Gangavaram Port Ports 2005
2. Krishnapatnam Port Ports 2005
3. Multipurpose berths at Ports 2002
Visakhapatnam Port EQ8 &
EQ9 (2 MT)
4. Sheonath River, Industrial water Water Supply 1998
supply in Boarai
5. Multipurpose General Cargo Ports 2000
Berths 5A and 6A (5 MT),
Mormugao
6. Vadodara - Halol Road Roads & Bridges 1998
7. Bhuj-Nakhtrana Road Roads & Bridges 2002
8. Chhayapuri ROB Roads & Bridges 2003
9. Himmatnagar bypass Roads & Bridges 2002
10. Kim Mandvi Road Roads & Bridges 2003
11. Development of Bypass Roads Roads & Bridges 2006
for Sandur Town Bellary district
Under Direct Tolling System
12. Four laning of Bangalore Roads & Bridges 2004
Mysore Road (Bangalore
Maddur)
13. Widening and strengthening of Roads & Bridges 2004
Wadi Raichur Road
14. Sanitary Landfills in Bangalore Solid Waste Management 2004
15. Development of New Roads & Bridges 1999
Mattancherry Bridge Build –
Operate – Transfer project in
Cochin
16. Trivandrum City Road Roads & Bridges 2004
Improvement Project
17. Dewas-Ujjain-Badnagar- Roads & Bridges 2003
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Badnawar Road
18. Hoshangabad-Harda-Khandwa Roads & Bridges 2006
Road
19. Hoshangabad-Piparia- Roads & Bridges 2003
Pachmarhi Road
20. Indore-Sanawad-Burhanpur- Roads & Bridges 2002
Edlabaad Road
21. Jabalpur-Narsinghpur-Pipana Roads & Bridges 2003
Road
22. Raisen-Rahatgarh Road Roads & Bridges 2006
23. Rewa-Jaisinghnagar-shahdol- Roads & Bridges 2002
Amarkantak Road
24. Sagar-Damoh-Jabalpur Road Roads & Bridges 2004
25. Satna-Maihar-Tala-Umaria Roads & Bridges 2003
Road
26. Seoni-Balaghat-Gondia Road Roads & Bridges 2003
27. Ujjain-Agar-Susner-Jhalawad Roads & Bridges 2002
Road
28. Up gradation, Operation and Roads & Bridges 2006
Maintenance of Patiala -
Malerkotla Road on B.O.T.Basis
Maintenance of Balachaur
Dasuya Road on B.O.T.Basis
Maintenance of Hoshiarpur -
Tanda Road on B.O.T. Basis
Maintenance of Kiratpursahib -
Una Road on B.O.T. Basis
Maintenance of Patiala Patran
33. Construction of Additional two Roads & Bridges 1999
lane bridge and improvements
to the existing bridge across
river Korathalayar at Km.26/4 of
N.H.5
34. Karur Toll Bridge by Tamil Nadu Roads & Bridges 1999
Urban Infrastructure Financial
Services Ltd., (TNUIFSL)
35. Sewerage Treatment Plant for Waste Water 2000
underground drainage in
Alandur by Tamil Nadu Urban
Infrastructure Financial Services
Ltd. (TNUIFSL)
36. Tirupur Water Supply and Water Supply 1995
Sewerage Project
37. Solid Waste Management at Solid Waste Management 2004
Haldia
38. Bara to Orai/ km 449 to 422 on Roads & Bridges 2006
NH-2 & km 255 to km 220/ Uttar
Pradesh
39. Gwalior Bypass (NS-1/BOT/MP- Roads & Bridges 2002
1)/ Km 0 to Km 42.033/ Madhya
Pradesh
40. Tindivanam - Ulundurpet (Pkg - Roads & Bridges 2006
VI-A) km 121 - km 192.25/ Tamil
Nadu
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Draft Final Report
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41. Padalur - Trichy (Pkg - VI-C)/ Roads & Bridges 2006

km 285.00 - km 325.00/ Tamil
Nadu
42. CMWSSB-CWSAP-100MLD Water Supply 2006
Sea Water Desalination Plant
at Minjur, Chennai on DBOOT
basis in the State of Tamil
Nadu
43. Transmission system Power Transmission 2005
associated with Tala HEP, East-
North Interconnector and
Northern Region Transmission
system
44. Development of Container Ports 1998
terminal (3.6) Mt at Tuticorin
Port, Tamil Nadu
45. Development, Construction, Ports 2006
Operation and Management of
International Container
Transshipment Terminal at
Vallarpadam, Cochin
46. GC of Hassan-Mangalore metre Railways 2004
gauge section
47. Container Terminal at Chennai Ports 2001
Stage 1 - 600 m Berth (5.60
MT)
48. East Coast Road Roads & Bridges 2001
49. Bhiwandi Chinchoti , Repair of Roads & Bridges 1998
22 KM Strecth
50. Bhiwandi - Repair of 18.35 Km Roads & Bridges 1998
Stretch
51. Vadgaon Chakan - 30 Km Roads & Bridges 2002
Repair work
52. Malhar Peth Pandarpur - 36 Km Roads & Bridges 2002
Repair work
53. Pune - Ahmednagar 4 lanning Roads & Bridges 2003
54. Vellhe Shrikrapur Jijuri Nera Roads & Bridges 2002
Lonand 7.27 Km, 1 bridge, 1
ROB
55. Nagpur Vardha Yevatmal - Roads & Bridges 2001
Bridge on Krishna River
56. Seri Talayajval - Bridge on Roads & Bridges 2002
Krishna River
57. Ahmednagar Karmala Temuni Roads & Bridges 2002
Repair of 59 Km Stretch
58. Mohol Kurul Kamdhi Repair Roads & Bridges 2002
work for 24 Km Strech
59. Pandarpur Bypass Repair work Roads & Bridges 2002
- 10 Km Stretch
60. Pandarpur Mohol - Repair of Roads & Bridges 2002
11.12 Km
61. Pune - Pond repair of 31.8 Km Roads & Bridges 2002
Stretch
62. Ahmednagar Karmala (Sholapur Roads & Bridges 1999
Dist) Temuni 6.56 Km Stretch
with a Bridge
63. Sholapur Dist a) Mangalveda Roads & Bridges 2003
Vijapur repair b) Begampur
Mangalveda ( Total 31.85 Km)
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Draft Final Report
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64. Sholapur Dist - Kuduvadi Latur Roads & Bridges 2003

1 Railway ROB and 4.83 Km
Stretch
65. Surat Dhule Edlabad - 5.1 Km Roads & Bridges 1998
Stretch
66. Nashik to Sukedi Phata 15 Km Roads & Bridges 2002
Stretch and 1 ROB
67. Prakasha-Chadvel-Samoda- Roads & Bridges 2003
Vindur, 76 Km Stretch and 3
Bridges
68. Ahmednagar Karmala 70.60 Km Roads & Bridges 1999
Stretch Repair work
69. Ahmednagar - Dond 44.6 Km Roads & Bridges 2000
Stretch Repair work
70. Ahmednagar - Takli - kajhi - Roads & Bridges 2001
Bhum , Repair and
Maintainance of 41 Km stretch
and 2 Bridges
71. Nasik Vani - Repair of 44 Km Roads & Bridges 2003
Stretch
72. Jalgaon Neri Puhur repair work Roads & Bridges 2004
for 48.4 km Stretch
73. Muktanagar - Banhanpur repair Roads & Bridges 2004
work for 31.4 Km Stretch
74. Tuljapur Ugni - repairework for Roads & Bridges 1999
28.5 Km
75. District Nanded, Sirur Mukhed Roads & Bridges 1999
Narsi Bilol, Repair work for 32
Km Stretch
76. Nanded - Narsi Reapairwork for Roads & Bridges 2002
43 Km Stretch
77. Nanded - Ardhapur - Varnaga Roads & Bridges 2004
30 Km Stretch
78. Nagpur - APMC Market and Roads & Bridges 2002
Ring Road Connecting Road
Repairwork for 8.2 Km Strech
79. Devri - Sirpur reapirwork for Roads & Bridges 1999
13.4 Km Stretch
80. Varil Bandra 4.11 Km of Road Roads & Bridges 1999
Stretch and 1 Bridge on
Vanganga
81. Coimbatore Bypass & Roads & Bridges 1999
Athupalam bridge
82. Thane-Bhiwandi Bypass Roads & Bridges 1996
83. Construction of additional 2-lane Roads & Bridges 1998
with tunnel in Khambatki Ghat
on NH 4
84. Construction of Six Bridges Roads & Bridges 1997
85. Kosasthalyar Bridge Roads & Bridges 1997
86. Wainganga Bridge Roads & Bridges 1999
87. Mahi Bridge Roads & Bridges 1997
88. Bridge across river Watrak Roads & Bridges 1999
89. Narmada bridge Roads & Bridges 1999
90. Patalganga Bridge & ROB Roads & Bridges 1998
91. 4-laning of Pune-Sholapur road Roads & Bridges 1998
Km. 14/00 to 40/00 of NH 9
92. Construction of Bridge across Roads & Bridges 2003
Pinglai river in km 113/800 on
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Draft Final Report
September 2007
NH 6
93. Pune-Nasik( Khed) (km Roads & Bridges 2004
12.90 to 42.00)
94. Nardhana ROB Roads & Bridges 1999
95. Chalthan Road Over Bridge Roads & Bridges 1998
96. ROB at Derabassi Roads & Bridges 2000
97. Nasirabad ROB Roads & Bridges 1999
7.4.5 Approximation of TPC from Secondary Sources

For following projects (Total Number 54, Total Value USD 3.75 billion) we have
approximated Total project Cost (TPC) from secondary sources. These secondary sources
include (indicative):
o Websites of promoters or SPVs
o Government websites and reports
o News clips and Press releases
o References in other Presentations/Reports/Studies
We have maintained critical view while considering this data for analysis.
TPC Assumed TPC Assumed (USD
# Project Name State
(INR Crore) Million)
1. Multipurpose berths at Andhra Pradesh 240.00 53.33
Visakhapatnam Port EQ8
& EQ9 (2 MT)
2. Sheonath River, Industrial Chhattisgarh 9.00 2.00
water supply in Boarai
3. Multipurpose General Goa 224.00 49.78
Cargo Berths 5A and 6A
(5 MT), Mormugao
4. Vadodara - Halol Road Gujarat 161.00 35.78
5. Development of Bypass Karnataka 19.00 4.22
Roads for Sandur Town
Bellary district Under
Direct Tolling System
6. Four laning of Bangalore Karnataka 188.00 41.78
Mysore Road (Bangalore
Maddur)
7. Widening and Karnataka 58.00 12.89
strengthening of Wadi
Raichur Road
8. Sanitary Landfills in Karnataka 23.00 5.11
Bangalore
9. Development of New Kerala 30.00 6.67
Mattancherry Bridge Build
– Operate – Transfer
project in Cochin
10. Trivandrum City Road Kerala 221.39 49.20
Improvement Project
11. Dewas-Ujjain-Badnagar- Madhya Pradesh 49.30 10.96
Badnawar Road
12. Hoshangabad-Piparia- Madhya Pradesh 59.88 13.31
Pachmarhi Road
13. Indore-Sanawad- Madhya Pradesh 123.00 27.33
Burhanpur-Edlabaad
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Draft Final Report
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Road
14. Jabalpur-Narsinghpur- Madhya Pradesh 74.16 16.48
Pipana Road
15. Rewa-Jaisinghnagar- Madhya Pradesh 110.00 24.44
shahdol-Amarkantak
Road
16. Sagar-Damoh-Jabalpur Madhya Pradesh 89.70 19.93
Road
17. Satna-Maihar-Tala- Madhya Pradesh 54.22 12.05
Umaria Road
18. Seoni-Balaghat-Gondia Madhya Pradesh 59.80 13.29
Road
19. Ujjain-Agar-Susner- Madhya Pradesh 65.19 14.49
Jhalawad Road
20. Construction of Additional Tamil Nadu 25.00 5.56
two lane bridge and
improvements to the
existing bridge across
river Korathalayar at
Km.26/4 of N.H.5
21. Karur Toll Bridge by Tamil Tamil Nadu 15.45 3.43
Nadu Urban Infrastructure
Financial Services Ltd.,
(TNUIFSL)
22. Sewerage Treatment Tamil Nadu 40.00 8.89
Plant for underground
drainage in Alandur by
Tamil Nadu Urban
Infrastructure Financial
Services Ltd. (TNUIFSL)
23. Bhiwandi Chinchoti , Maharashtra 14.40 3.20
Repair of 22 KM Strecth
24. Bhiwandi - Repair of Maharashtra 9.45 2.10
18.35 Km Stretch
25. Vadgaon Chakan - 30 Km Maharashtra 10.28 2.28
Repair work
26. Malhar Peth Pandarpur - Maharashtra 12.50 2.78
36 Km Repair work
27. Pune - Ahmednagar 4 Maharashtra 108.00 24.00
lanning
28. Vellhe Shrikrapur Jijuri Maharashtra 10.70 2.38
Nera Lonand 7.27 Km, 1
bridge, 1 ROB
29. Nagpur Vardha Yevatmal Maharashtra 7.25 1.61
- Bridge on Krishna River
30. Seri Talayajval - Bridge Maharashtra 7.50 1.67
on Krishna River
31. Ahmednagar Karmala Maharashtra 32.40 7.20
Temuni Repair of 59 Km
Stretch
32. Mohol Kurul Kamdhi Maharashtra 15.30 3.40
Repair work for 24 Km
Strech
33. Pandarpur Bypass Repair Maharashtra 6.31 1.40
work - 10 Km Stretch
34. Pandarpur Mohol - Repair Maharashtra 9.76 2.17
of 11.12 Km
35. Pune - Pond repair of Maharashtra 28.75 6.39
31.8 Km Stretch
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Draft Final Report
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(Sholapur Dist) Temuni
6.56 Km Stretch with a
Bridge
37. Sholapur Dist a) Maharashtra 13.21 2.94
Mangalveda Vijapur repair
b) Begampur Mangalveda
( Total 31.85 Km)
38. Sholapur Dist - Kuduvadi Maharashtra 9.56 2.12
Latur 1 Railway ROB and
4.83 Km Stretch
39. Surat Dhule Edlabad - 5.1 Maharashtra 5.15 1.14
Km Stretch
40. Nashik to Sukedi Phata Maharashtra 19.62 4.36
15 Km Stretch and 1 ROB
41. Prakasha-Chadvel- Maharashtra 46.00 10.22
Samoda-Vindur, 76 Km
Stretch and 3 Bridges
70.60 Km Stretch Repair
work
43. Ahmednagar - Dond 44.6 Maharashtra 5.50 1.22
Km Stretch Repair work
44. Ahmednagar - Takli - kajhi Maharashtra 10.15 2.26
- Bhum , Repair and
Maintainance of 41 Km
stretch and 2 Bridges
45. Nasik Vani - Repair of 44 Maharashtra 24.60 5.47
Km Stretch
46. Jalgaon Neri Puhur repair Maharashtra 15.77 3.50
work for 48.4 km Stretch
47. Muktanagar - Banhanpur Maharashtra 12.00 2.67
repair work for 31.4 Km
Stretch
48. Tuljapur Ugni - Maharashtra 6.00 1.33
repairework for 28.5 Km
49. District Nanded, Sirur Maharashtra 9.61 2.14
Mukhed Narsi Bilol,
Repair work for 32 Km
Stretch
50. Nanded - Narsi Maharashtra 15.50 3.44
Reapairwork for 43 Km
Stretch
51. Nanded - Ardhapur - Maharashtra 18.51 4.11
Varnaga 30 Km Stretch
52. Nagpur - APMC Market Maharashtra 10.50 2.33
and Ring Road
Connecting Road
Repairwork for 8.2 Km
Strech
53. Devri - Sirpur reapirwork Maharashtra 7.85 1.74
for 13.4 Km Stretch
54. Varil Bandra 4.11 Km of Maharashtra 32.58 7.24
Road Stretch and 1
Bridge on Vanganga
55. Thane-Bhiwandi Bypass Maharashtra 103.00 22.89
56. Construction of additional Maharashtra 37.80 8.40
2-lane with tunnel in
Khambatki Ghat on NH 4
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Draft Final Report
September 2007
57. Construction of Six Andhra Pradesh 50.00 11.11

Bridges
58. Kosasthalyar Bridge Tamil Nadu 30.00 6.67
59. Wainganga Bridge Maharashtra 32.60 7.24
60. Mahi Bridge Gujarat 42.00 9.33
61. Bridge across river Gujarat 48.20 10.71
Watrak
62. Narmada bridge Gujarat 113.00 25.11
63. Patalganga Bridge & ROB Maharashtra 33.30 7.40
64. 4-laning of Pune-Sholapur Maharashtra 88.00 19.56
road Km. 14/00 to 40/00
of NH 9
65. Construction of Bridge Maharashtra 14.15 3.14
across Pinglai river in km
113/800 on NH 6
66. Pune-Nasik( Khed) Maharashtra 127.60 28.36
(km 12.90 to 42.00)
67. Nardhana ROB Maharashtra 34.21 7.60
68. Chalthan Road Over Gujarat 10.00 2.22
Bridge
69. ROB at Derabassi Punjab 31.48 7.00
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Draft Final Report
September 2007
8 Annexure 3: Survey Coverage

8.1.1 Projects by Region24
Of the 231 projects across the country, more than three fourths are in the Southern and
Western regions (for classifications of states by region please refer Assumptions Section
7.4.2 Regions).
Exhibit 29: Regional Distribution of Value of PPP projects by State
6%
6%
19%
17% 13%
13%
Western region followed by the Southern region dominates both in terms of number and
value of projects.
a. 43% of the PPP projects by number are located in the Western region followed by South
which has 32% of the projects by number.
b. In terms of value again the West dominates with 50% of the projects by value followed
by the South with 25% of the projects by value.
Exhibit 30: Regional Distribution of PPP Projects by Value and Number
Regional Distribution of PPP Projects
Value 7% 43% 18% 32%
Number 6% 50% 19% 25%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Percentage
East West North South
24
Regions defined in Section 7.4.2
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Draft Final Report
September 2007
The larger number of projects in the Western region, however, can be attributed to about
100 Roads & Bridges projects awarded by the State Governments in the region. High values
in the West come from the Port projects.
Exhibit 31: Sectoral Distribution of Projects in the Four Regions
PPP Projects Across Region by Value PPP Projects Across Region by Number
(Total Value USD15.8 billion) (Total number 231)
3,500.00
120
3,000.00
100
2,500.00
USD Million
80
2,000.00
Number
60
1,500.00
1,000.00 40
500.00 20
- 0
North West East South North West East South
Roads & Bridges Ports Airports Roads & Bridges Ports Airports
Railways Power Distribution Power Transmission Railways Power Distribution Power Transmission
Solid Waste Management Waste Water Water Supply Solid Waste Management Waste Water Water Supply
Clearly the State projects in the West are making the difference in the total number and
value of Projects in the West.
Exhibit 32: Regional Distribution of Projects by Awarding Authority
Regional Distribution of Centre and State Projects by Regional Distribution of Centre and State Projects by
Value (Total Value USD15.8 billion) Number (Total number 231)
8,000 140
7,000 120
6,000
100
USD million
5,000
Number
80
4,000
60
3,000
2,000 40
1,000 20
- -
North West East South North West East South
Centre State Centre State
Exhibit 33: Sector Wise distribution of State and Centre Projects by Number and Value
Centre Projects by Region and Value Centre Projects by Region and Number
3,000 35
2,500 30
Number of Projects
2,000 25
USD million
20
1,500
15
1,000
10
500
5
-
0
North West East South
Roads & Bridges Ports Airports Railways Roads & Bridges Ports Railways Airports Power Transmission
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Draft Final Report
September 2007
State Projects by Region and Value State Projects by Region and Number
1,800 75
1,600 65
Number of Projects
1,400 55
USD million
1,200
45
1,000
800 35
600 25
400 15
200
5
-
North West East South -5
Roads & Bridges Ports Roads & Bridges Ports
Solid Waste Management Waste Water Power Distribution Solid Waste Management
Water Supply Waste Water Water Supply
Though it is the road projects that are more in number and value for Centre projects in all
regions, it is the port projects awarded by the States in the West that are more in value and
are also contributing significantly to the value of projects for the West. In South too the port
projects awarded by State are high in value.
8.1.2 Projects Categorised by Size

For analyzing projects by size, the sample of PPP projects (total number 231) was classified
into three categories of their Total Project Cost (TPC):
• more than USD100 million,
• between USD50-100 million, and
• less than USD50 million.
Exhibit 34: Size Wise Grouping of PPP Projects by Value and Number
Size Wise Grouping of PPP Projects by Value and Number

(Value USD15.8 billion, Number 231)
by Value 11% 20% 69%
by Number 61% 18% 21%
0% 20% 40% 60% 80% 100%

As seen in Exhibit 34 above, 61% of the total projects by number have a TPC of less than
USD50 million. However, when seen in terms of value this constitutes only 11% of total PPP
projects analysed. Even though the projects with values more than USD100 million are only
21% by number, these constitute 69% of the projects by total value.
Sectoral composition of projects with project cost more than USD100 million shows that it is
the high value Port and Airport projects which though small in number add significantly to the
total value.
Some of the Road, Port and Airport projects contributing the value include:-
• Road & Bridge projects- such as Western Expressway (USD425 million) Vadodara to
Bharuch (USD322 million), Bharuch to Surat (USD313 million)
• Port projects- such as Hazira LNG Terminal (USD667 million), Dahej LNG (USD622
million), Mundra Port (USD467 million) and
• Airport projects- (Mumbai) MIAL (USD1,294 million), (Delhi) DIAL(USD622 million),
(Bangalore) BIAL(USD413 million) and (Hyderabad) HIAL(USD391 million)
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Draft Final Report
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Exhibit 35: Projects by Size Classification and Sector
Sectoral Composition of Projects of by Size and Number Sectoral Composition of Projects of Size and Value
(Total Number 231) (Total Value USD15.8 billion)
>USD 100 Million >USD 100 Million
USD 50-100 Million USD 50-100 Million
<USD 50 Million <USD 50 Million
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
Exhibit 36 shows the average size of PPP projects by sector (The position of the sphere with
respect to the y-axis indicates the average size of projects in the sector whereas the size of
the sphere indicates the volume of projects). This shows that though small in numbers the
average size of Airport projects (USD680 million) is larger than the average size of Power
Transmission project (one project of size USD358 million) which is larger than the average
size of Port projects which is much larger as compared to the other sectors.
Exhibit 36: Average Size of Projects
Value and Average Size of Projects Average Size of Projects (All Sectors)
900.00
140.00
800.00 Airports
120.00
700.00
Average Size USD Million
600.00 100.00
USD Million
500.00 80.00
Power Transmission
400.00 60.00
300.00 Ports 40.00
Roads & Bridges
200.00
Railways
Water Supply 20.00
100.00
Solid Waste -
Power Distribution
- Management
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
0 2 4 6 8 10
(100.00) Year of Financial Close
Sector
Average size of PPP projects across sectors (Exhibit 36) shows an increasing trend in the
last five years.
Even though this increase in average size of PPP projects can be attributed mainly to the
Airport projects which achieved financial closure in 2006, an analysis of the Roads & Bridges
sector sizes also shows an increasing trend (USD18.8 million to USD95.2 million).
Exhibit 37: Trends in Average size of all Roads & Bridges and NHAI projects
Average Size of Road Projects Average Size of Central Road Projects
110.00
140.00
100.00
90.00 120.00
80.00
100.00
USD million
70.00
USD million
60.00 80.00
50.00
40.00 60.00
30.00
40.00
20.00
10.00 20.00
-
-
95
96
97
98
99
00
01
02
03
04
05
06
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
19
19
19
19
19
20
20
20
20
20
20
20
Year Year of Financial Closure
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Draft Final Report
September 2007
8.1.3 Projects by Type of Awarding Authority

The analysis of 231 projects by the type of awarding authority (i.e. Centre or State), reveal
that though States dominate in terms of the number of PPP projects awarded (55%), they
trail the Centre in terms of the total value of the projects (Centre is 72%).
Exhibit 38: Centre and State by Number and Value
PPP Project Composition by Awarding Authority
by Value Centre State
by Number Centre State
0% 20% 40% 60% 80% 100%

Percentage
This is because most State projects sizes are less than USD50 million and Central project
sizes and in particular Airport sector projects (Delhi Airport, Mumbai Airport, Bangalore
Airport, Hyderabad Airport) are large (more than USD100 million).
Exhibit 39: Sectoral Distribution of Centre/State Projects by Number and Value
Sectoral Composition of Projects Awarded by Centre/State Sectoral Composition of Projects Awarded by Centre/State
by Number (Total number 231) by Value (Total Value USD15.8 billion)
State State
Centre Centre
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
Following points emerge from the Exhibit 39:

1. By number, Roads and Bridges sector form the largest proportion in projects awarded
both by States and by Centre.
2. By value, Airport projects form a large proportion of the projects awarded by the Centre.
The Port projects are almost the same with respect to number of projects awarded by State
and Centre. However, the State Port projects are mainly Greenfield projects of larger size.
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Draft Final Report
September 2007
9 Annexure 4 - Other Key Trends in PPP Infrastructure

Financing
This section of the report discusses some of the evidence and experience based observation
from both the project surveys and interviews which have been used to arrive at the issues
detailed out further in the next section of the report. Analysis in this section pertains to
the observations derived from our sample of 104 projects for which we have detailed
financing information as well as the views expressed by key stakeholders in more than 80
interviews held during the course of this study. [Make this clear in summary]
9.1 Composition of the Sample of 104 projects

Out of the 231 projects studied by us, more detailed financing information was available
for 104 projects. These 104 projects having a total project cost of USD11.48 billion form
73% of 231 projects by value (as mentioned earlier, not all stakeholders and sources were
willing to share details of financing and financial information for various confidentiality and
commercial reasons). Sector composition of the sample of 104 PPP projects by number and
value is representative of the entire lot of 231 projects.
Exhibit 40: Sectoral Composition by Value and Number
Sectoral Composition of Sample by Value Sectoral Composition of Sample by Number

Solid Waste Water Supply Airports
Management 3.1% Solid WasteWater Supply
Airports 2.9% 2.9%
0.2% Management
18.3% Ports Power
1.9%
10.6% Transmission
1.0%
Railways
3.8%
Ports
15.6%
Power Roads &
Roads & Bridges Transmission Bridges
57.1% 3.1% 76.9%
Railways
2.5%
The number and value captured with respect to size and regional distribution of the projects
is as shown in the charts below.
Exhibit 41: Size wise Distribution and Regional Distribution
PPP Projects Captured in the Sample Reagional Distribution of the Sample

(Number-104, Value-USD11.48 billion) (Number-104, Value-USD11.48 million)
by Value 16% 39% 9% 36%

by Value 6% 22% 72%
by Number 33% 32% 35% by Number 23% 32% 11% 34%
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
<USD 50 Million USD 50-100 Million >USD 100 Million North West East South
9.2 Trends in Financing Structure

Our analysis of financing structure of the 104 PPP projects taken together reveal that the
PPP projects in India have been historically financed by (on an average) 68% debt, 26%
equity, 2% sub-debt [from equity investors or third parties?] and 4% Government grant.
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Draft Final Report
September 2007
The 4% grant mentioned above has been mainly in the form of monitory support given by
both the State and the Central Government to make the projects viable. Going forward VGF
may play an important role in easy availability of finance for otherwise non-viable projects.
Exhibit 42: Issue of Negative Grant in Road Projects
Negative grants (or the premium that a developer offers to pay to take the concession) is treated as part of the project cost for
financing purpose, specially when bidder is required to pay the entire money up-front/during construction period (for example,
in case of Road projects such as Ahmedabad -Barauch, Delhi Gurgaon, etc).
When bidder quotes negative grant to be paid over some years, the money to be paid before construction is completed is
generally capitalised as project cost while post-construction it is expected to be funded from accruals from the project
operations. This pattern is the case with almost all the projects. However, many of such projects are yet to commence
operations and as such how the negative grant would be funded during the operations in reality is yet to be tested.
In the Model Concession Agreement (MCA) finalised recently , the concept of negative grant is substituted by bidding for
Premium (as a percentage of revenue to the concessionaire) which has to be specified by NHAI (and which increases by 1%
point every year) and the bidder can quote the year from which they start paying the premium. This concept is yet to be tested
and projects are yet to be awarded.
9.2.1 Role of Grants in PPP Infrastructure Financing

In the survey of Indian infrastructure PPPs, our analysis showed that about 5% of the total
project costs of all the projects were funded out of Grants received from the Government.
This is significant considering that not all projects receive grant. It was therefore, decided to
analyse the impact of grants on project structure in greater detail. In order to analyse the
grant, we have divided the PPP projects (104 projects on which we have detailed financing
information) into three categories –
1. Positive grant projects
2. Negative grant projects
3. Non grant projects
Grant, also referred to as positive grant in India, and is commonly known to be the amount
which project awarding authority provides to the project sponsor to support the financial
viability of a project. Projects, which are not commercially viable on their own, often require a
fund support from the Government. In India, often the bidding criteria in the projects that
require grant support is the amount of grant a sponsor requires for the project. The project
sponsor who requires minimum grant support from the authority wins the project.
Some PPP projects are highly commercially viable and therefore, the awarding authorities
prefer to award the project to the bidder who offers to pay a premium to the Government.
This amount is often referred to as Negative grant in India. Negative grant is the amount
which project sponsors offer to pay to the project awarding authority in lieu of being awarded
the project. In such projects, the amount of premium a project sponsor is willing to pay to the
Government is the final bidding criteria. The project is awarded to the sponsor who pays the
maximum negative grant.
Positive grant in a project is often deducted from the Total Project Cost by the Bankers to
calculate the debt equity ratio or any other parameter of the project. While negative grant is
added to the project cost after which the financing is arranged. Therefore, our analysis, in
this section on positive and negative grant, relates to only those PPP projects where grant
(either positive/ negative) exists during construction phase.
Sector wise analysis of 104 PPP projects shows the projects under each of above categories
as follows-
Exhibit 43: Sector Wise Non Grant, Positive Grant and Negative Grant Projects
Non grant Positive Grant Negative Grant
Sub-sectors Total
projects Projects Projects
Airports 1 2 3
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Ports 10 1 11
Power Transmission 1 1
Railways 4 4
Roads & Bridges 42 31 7 80
Solid Waste Management 1 1 2
Water Supply 2 1 3
Grand Total 61 35 8 104
We can see that there is no grant (positive or negative) under in Railways and Power
Transmission sectors. While Solid Waste Management and Water Supply each has one
positive grant project, two positive grant projects are in Airports and one negative grant
project in Ports sector. Maximum number (80 projects) of grant projects is under Roads &
Bridges sector. All sectors other than Roads & Bridges have very few positive or negative
grant projects which is too small to be analysed to get any inference. Therefore, we have
confined the grant analysis to Roads & Bridges sector only.
Grant in Road & Bridges Projects

The year wise occurrence of positive and negative grant projects under Roads & Bridges
sector is presented below-
Exhibit 44: Positive and Negative Grant Projects – Numbers and Amount
Positive Grant Negative Grant
Year Amount Amount
Count Count
(USD Million) (USD Million)
1995 - - - -
1996 - - - -
1997 - - - -
1998 1 6.0 - -
1999 - - - -
2000 - - - -
2001 2 3.9 - -
2002 - - - -
2003 2 47.8 - -
2004 1 26.7 - -
2005 3 12.3 - -
2006 20 213.6 7 337.5
2007 2 46.3 - -
Total 31 356.5 7 337.5
The table above shows that during the period from 1995 to 200725, around USD 356.5
million has been given as grant by awarding authorities in Roads & Bridges and around USD
337.5 million were negative grant during the same period. It is also important to mention that
as there were large numbers of projects awarded during the years 2005/2006 and many
projects achieved financial close during these years maximum number instances of positive
and negative grant projects are also witnessed in the year 2006.
In India, both the State and Centre Governments have awarded PPP projects. The positive
and negative grants under the Roads & Bridges sectors by Centre and State awarding
authorities are indicated below. It is interesting to note that Negative grants are seen only in
respect of projects awarded by Centre.
25
Our data base includes PPP projects achieved financial closure till March 2007 only.
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Exhibit 45: Count and Amount of Positive and Negative Grant in Road & Bridges sector
Positive Grant Negative Grant
Awarded by (USD Million) (USD Million)
Count Amount Count Amount
Centre 22 306.0 7 337.5
State 9 50.5 - -
Grand Total 31 356.5 7 337.5
It can also been noted that the average positive grant (USD 14 million) per project for
projects awarded by the Centre is much more than average positive grant (USD 5.5 million)
per project for projects awarded by the State. This is due to small size of the projects
awarded by the State.
Impact of Grant on Debt and Equity

In order to analyse the impact of grant on project structure we have calculated the debt,
equity26 and grant as percentage of total project cost27 under Roads & Bridges sector and
carried out the analysis for two different categories of projects viz. - Non-grant and Positive
grant projects.
Exhibit 46: Financing Structure for Positive and Non-Grant Projects and Annuity and Negative
Grant Projects
Roads & Bridges Roads & Bridges
Positive Grant Annuity Projects 73% 25% 2%

64% 21% 15%
projects
Negative Grant
74% 22% 4%
Non-Grant Projects 69% 31% Projects
0% 20% 40% 60% 80% 100%

0% 20% 40% 60% 80% 100%
Debt Equity Grant Debt Equity Sub Debt
Above chart shows that equity reduces from 31% (non-grant projects) to 21% (in positive
grant projects) and debt reduces from 69% (non-grant projects) to 64% (in positive grant
projects) correspondingly. It is clear, therefore, that grant is largely replacing equity
contribution, though a small portion of the grant is responsible for reducing the debt also.
Correspondingly, the chart above also depicts the differences in the structure for annuity and
negative grant projects and there doesn’t seem to be any significant difference in the
structure.
9.2.2 Financing Structure by Awarding Authority, Sector and Size of Project

The financing structure does not vary significantly by awarding authorities. However, by
sector, Port projects have witnessed a higher level of equity with practically no grant.
26
Subordinate debt has been taken as part of equity.
27
In the case of negative grant projects, project cost has been taken excluding negative grant.
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Draft Final Report
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Exhibit 47: Financing Structure by Awarding Authority and Sector
Financial Structure of Projects across Awarding Agencies Financing Structure of Projects Across Sectors
Roads & Bridges 68% 22% 5% 5%
Ports 63% 36% 1%

State 66% 27% 4 3
Airports 71% 24% 5%
Power Transmission 70% 30%
Railways 48% 41% 11%
Centre 68% 25% 3 4

Water Supply 66% 29% 5%
Solid Waste Management 46% 34% 11% 9%
0% 20% 40% 60% 80% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100
%
Debt Equity Sub-Debt Grant Debt Equity Sub-Debt Grant
Projects of size less than USD100 million, show higher incidence and value of sub-debt.
Also interestingly grant seems to be replacing equity rather than debt except for small
projects (less than USD50 million), where grant also replaces debt as shown in Exhibit 48.
Exhibit 48: Financing Structure by Size
Financial Structure of Projects across Project Sizes
>USD 100 Million 68% 26% 24
USD 50-100 Million 66% 23% 6 4
<USD 50 Million 58% 26% 9% 7%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100
%
Debt Equity Sub-Debt Grant
9.3 Trends in PPP Financing on Debt Side

We have analysed debt financing from the point of view of Sources, Tenor, Debt to Equity
Ratio28, Interest Rates, and Reset Periods. The trends presented in this section have been
analysed on the basis of detailed debt financing information received for the 104 projects as
well as our interaction with the key financial institutions and developers. The value of total
senior debt, for the 104 projects, aggregate to USD7.72 billion. Also when asked, most
developers were of the view that banks not only meet current financing needs adequately,
but also keenly compete to lend to infrastructure projects.
Exhibit 49: Sources of Debt by Year and Size
Year Wise Sources of Debt Sources of Debt by Sector
100% Water Supply

90%
Solid Waste Management
80%
70% Roads & Bridges
60%
50% Railways
40% Power Transmission
30%
20% Ports
10% Airports
0%
2001 2002 2003 2004 2005 2006 2007 0% 20% 40% 60% 80% 100%
Commercial Banks Institutions Others Commercial Banks Institutions Others
28
Debt to Equity Ratio (DER) we have considered as senior debt to pure equity
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Further break-up of sources of debt by year provided in Exhibit 49 show increasing

contribution by institutions lenders. Analysis of commercial banks lending to PPP projects, in
our database reveals that, Public Sector banks dominates with a share of 82%, while share
of Private Sector banks and foreign banks is only 13% and 5% respectively29. If we look at
the trends and composition over the years the lending from private sector banks is
increasing while there is no trend in debt from financial institutions and foreign banks.
Exhibit 50: Trend in Debt from Commercial Banks
Share of Commercial Banks by Type Share of Commercial Banks by Type

(Value USD5.6 billion) (Value USD5.6 billion)
100% 18000
90%
16000
80%
14000
70%
12000
60%
50% 10000
40% 8000
30% 6000
20% 4000
10% 2000
0% 0
1995 1998 1999 2000 2001 2002 2003 2004 2005 2006 1995 1998 1999 2000 2001 2002 2003 2004 2005 2006
Foreign Bank Private Sector Bank Public Sector Bank Financial Instituions Foreign Bank Private Sector Bank Public Sector Bank Financial Instituions
9.3.1 Tenure of Loans

Trends on tenure of loans from our sample of projects30 show that tenure varies between
12 to 17 years for most projects. We found that banks in India lend to infrastructure projects
with tenure of up to 17 years – albeit with resets.
Exhibit 51: Average Tenure of Debt and Concession Period
Average Tenure and Concession Period

Airports 16
30
13
Ports 28
Power Transmission 12
25
Railways 10
28
14
Roads & Bridges 23
5
Solid Waste 16
15
Water Supply 28
- 5 10 15 20 25 30 35
Number of Years
Average Concession Period Average Tenure of Debt
Average tenure when compared with the concession periods is generally less than 50% of
the average concession period in that sector except for roads and bridges sector where
average tenure is slightly more than 50% of the average concession period.
It emerges from our interviews that Bank’s capacity (and willingness) to lend to infrastructure
projects where the tenure of loans required are generally more than 15-20 years is rather
limited. Most developers however, have not expressed any concern regarding the non
availability of more than 20 year tenures.
29
Lenders break-up into banks or institutional investors is only available for debt amounting to USD4.18 Billion
30
Our analysis on tenure is based on a sample size of 89 Projects only, because authentic information was available only for
this sample size
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Restructuring of loans with respect to interest rate, tenure of loan etc. has taken place in
some projects which have suffered financially after the initial loan agreement. However, no
instances of roll over have been witnessed so far.
9.3.2 Debt to Equity Ratio (DER)31

Senior Debt to Pure Equity Ratio (DER) over the years has increased from 2.1 in the year
2002 to 4.3 in the year 2006. However, the ratios vary significantly with sectors.
Exhibit 52: Senior Debt to Pure Equity Ratio by Sector
Sub-Sector 2002 2003 2004 2005 2006
Airports - - - - 3.5
Ports 1.7 1.9 - 2.1 2.2
Power Transmission - - - 2.3 -
Railways 2.3 0.8 1.5 -
Roads & Bridges 2.2 2.0 2.5 3.2 4.6
Solid Waste Management - - 3.3 - -
Water Supply - - - 2.3 3.4
Simple Average 2.1 2.0 2.3 2.6 4.3
Exhibit 53: Increased Gearing
Debt to Equity Ratio by Sector

5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-
2002 2003 2004 2005 2006
Airports Ports Year Power Transmission

Railways Roads & Bridges Water Supply
DER by sector shows that the gearing in Roads and Bridges sector has increased from year
2002 to year 2006. DER in ports sector however, has been almost constant at 2 and is much
lower than the gearing in Roads and Brides, Water Supply and Airports sector. Airport
projects which have happened only in the last year show a higher DER of 3.6.
On average, State awarded projects show higher leveraging than the Central projects.
However, Debt to TPC does not vary. This apparent contradiction is because of higher
levels of grant provided in State projects, rather than any increase in the debt
provided (once again hinting that grant is viewed as replacing equity).
Smaller project have generally shown lower levels of DER over the years.
31
Debt Equity Ratio has been calculated as ratio of Senior Debt with Pure Equity. Sub-Debt and Grant portions are not
considered on either for this calculation. DER for projects like the Rajasthan RIDCOR’s road projects where financing structure
significantly different have been ignored for analysis of DER. RIDCOR is an SPV set-up together by the Governemnt fo
Rajashtan and IL&FS. RIDCOR intern has sisghed a concession agreement with the Government of Rajasthan for 7 road
projects in the State. IL&FS and government has an equal stake in RIDCOR. The financing structure also includes an interest
free loan from the government and a sub-debt from IL&FS with moratorium of 15 years. Hence, when we take up DER (pure
Debt to pure equity) in this project it is 23, while in other road PPP projects it ranges between 0.63 and 12.
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32
Exhibit 54: DER by Awarding Authority and Size
Debt to Equity Ratio by Awarding Authority Debt to Equity Ratio by Project Sizes
(Senior Debt to Pure Equity) (Senior Debt to Pure Equity)
6.0
5.0
5.0
4.5
4.0 4.0
3.5
3.0 3.0
2.5
2.0 2.0
1.5
1.0 1.0
0.5
- -
2002 2003 2004 2005 2006 2002 2003 2004 2005 2006
Year Year
Centre State <USD 50 Million USD 50-100 Million >USD 100 Million
When seen from both size and sector, DER of Roads & Bridges and Water projects increase
with sizes.
Exhibit 55: DER by Sector and Size
Size and Sector Wise Average DER
6.0
5.0
4.0
DER
3.0
2.0
1.0
-
Roads & Bridges Ports Railways Water Supply
However, this is reverse in Port Projects. The reverse trend in Ports sector does not show
any relation with the awarding authority. Higher DER for the Port projects of less than
USD50-100 million is due to the high DER achieved by Tuticorin Port project (Development
of Container terminal 3.6Mt at Tuticorin Port, Tamil Nadu) in 1998. [Either exclude the
project and recalculate OR explain why this project achieved a high DER]
9.3.3 Interest Rates33

Comparison of interest rates spreads (interest rates over the base rates of the 10 year
Government Securities), shows a decreasing trend over the years. Average spreads in the
year 2003 was 3.66 which increased to 4.5 in the year 2004 and reduces to 1.64 in the
year 2006. Reason for the increased spread in 2004 is the decreasing G-Sec yield in that
year. [It is not normal market behaviour that a fall in the underlying rate leads to an increase
in spreads. Further clarification required]
32
Sample for mid size projects (USD50-100 million) consist of Tuticorin Port Connectivity Projects of NHAI in the year 2003 and
Paradip Port connectivity project of NHAI & RVNL’s Hassan-Mangalore gauge conversion project in the year 2004.
33
Sample size for analysis on interest rate is 85 Projects.
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Draft Final Report
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Exhibit 56: Average Interest Rate Spread over 10-Yr G-Sec Yield
Average Interest Rates Interest Rate Spreads over 10 Year G-Sec over the Years
12.0 10.9 6.0
9.4 9.4 4.9

10.0 9.2 9.2 5.0
8.0 3.8
4.0
7.2 7.6
6.0 7.0
5.6 5.9 3.0
4.0 2.2 2.3
2.0 1.6
2.0
1.0
-
2002 2003 2004 2005 2006
0.0
Average Interest Rate 10 year G-Sec Yield
2002 2003 2004 2005 2006
Standard Deviation of Interest Rate Spread Average Interest Rates

(Year 2005-2006)
2.5
9.1 9.3 10.5
2.2 10.0
2.0 7.6 7.5
8.0
1.5 1.5
6.0 7.5 7.5 7.5 7.5 7.5
1.0
0.9
0.7 4.0
0.6
0.5
2.0
-
-
2002 2003 2004 2005 2006 Airports Ports Railways Roads & Bridges Water Supply
Average Interest Rate 10 year G-Sec Yield
The standard deviation of the spreads (across projects during a given year) has also
been reducing indicating a convergence in lending rates between institutions and
across projects. Standard deviation of spreads has reduced from 2.2 in the year 2002 to
0.9 in the year 2006.
Average Spread (year 2005 & 2006)34 for Roads and Bridges sector is 1.9 with ports closer
to roads at 1.73. However, spreads for Airports sector has been low at 0.11. Water supply
and sanitation projects on the other hand have received debt at much higher spread clearly
indicating higher risk perception for the sector (again admittedly for low sample base).
In the last two years (2005 & 2006), we find that the larger projects have attracted relatively
lower interest rate. This is largely because of the lower interest rates obtained by the large
Airport projects and reflects the increasing comfort of lenders with large PPP projects. Even
in the relatively advanced NHAI projects we find that the trend of larger projects attracting
lower rates of interest continues.
Exhibit 57: Interest Rate Spreads Awarding Authority
Average Interest for Centre Projects

(year 2005 & 2006)
12.0 11.4
10.5 9.4
9.0
7.5
6.0 10 year Average
G Sec
4.5
3.0
1.5
-
Centre State
34
Average 10 year G-Sec yield for the year 2005 & 2006 is taken as 7.5%
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In last two years (2005-2006), Central Government projects in all sectors attracted relatively
lower interest rates than State Government projects, reflecting the lower risk perception of
lenders with Central agencies. While, State sponsored projects get an average spread of 3.9
percentage points above 10year G-sec yield, Central Government projects get an average
spread of 2 percentage points above the 10year G-sec yield.
9.3.4 Interest Rate Resets

While the spread has decreased, interest rate reset periods35 (Exhibit 58) have
reduced particularly in Roads sector. Clearly the banks though lending for longer term,
have reset clauses to hedge against the volatile interest rates in India. Average reset periods
across sectors have reduced from 2.6 years in 2003 to 2.0 years in 2006.
36
Exhibit 58: Reducing Resets
Average Reset Periods Average Reset Periods (Road Sector)

3.5
3.5 3.0 3.0
3.0 3.0 3.0
3.0 2.7 2.6
2.6
2.5
2.5
2.0 2.0
2.0 2.0
1.5 1.5
1.0 1.0
0.5 0.5
-
- -
2002 2003 2004 2005 2006 2002 2003 2004 2005 2006
Year Year
As seen in Exhibit 59 average reset periods for Central Government projects is lower than
the State Government awarded projects across sectors. Also smaller projects (USD50-100
million) have been seen to have smaller reset periods. When seen by sector, the Ports and
Roads & Bridges sector has smaller reset periods (an average of 2 years) as opposed to
Airport and Railway projects that have average reset periods of about 3 years.
Exhibit 59: Average Reset Period
Average of Reset (2005- Standard Deviation of Reset
2006) Period
By Awarding Authority
Centre 2.1 1.0
State 2.7 0.5
By Size Category
Less than USD50 million 2.8 0.6
Between USD50-100 million 2.7 0.8
More than USD100 million 1.9 0.8
By Sector
Airports* 3.0 -
Ports 2.1 1.3
Power Transmission* 3.0 -
Railways 3.0 -
Roads & Bridges 2.2 1.1
Water Supply* 2.5 0.7
35
Sample size for analysis on reset is 53 projects
36
Data on reset was not available for any road projects in the year 2004
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Draft Final Report
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* Small Sample Size

Note: This analysis is based on the information received form the loan documents at the time of financial closure.
It may be true that the terms and conditions negotiated at the time of reset in the lifecycle of a project in more
mature projects may be different, however, this information is confidential we have not been able to access this.
9.4 Trends in PPP Financing on Equity Side

It can be seen above that total equity funded in PPP infrastructure projects is USD2.93
billion till the Year 2006.
Exhibit 60: Sources of Equity
Source of Equity by Year Source of Equity by Sector

3%
2006 77% 12% 11% Railways 40% 36% 21%
2005 56% 24% 20%
2004 61% 11% 29% Airports 65% 15% 20%

Year
2003 73% 27%

3% 2%
2002 86% 3% 11% Ports 90% 5%
2001 84% 15% 1% 2%
Roads & Bridges 76% 5% 17%

2000 92% 8%
0% 20% 40% 60% 80% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Developer Own Equity Other Source of Equity Sub-Debt Developers Financial Institution Government Strategic Inverstors Sub-Debt
Exhibit 60 depicts that there has been substantial reduction in equity from developer’s own
source for three years after the year 2002, that is primarily due to more number of such
projects (like –Railways, Airports) being implemented after the year 2002 where either
strategic investor or Government or both have also funded equity. Exhibit 60 shows sector
wise equity (including sub-debt) funding. The Exhibit shows that equity funding by
developers has been low in Airports & Railways projects as compared to Ports and Roads &
Bridges projects. Since the airport and railways projects were awarded after the year 2002,
the overall developer’s equity has come down after that year.
Sub-debt has also played important role in reducing the developer’s own equity after the
year 2003. We believe that such trend would continue in the future as well, given the huge
requirement of equity expected.
9.4.1 Strategic Investors and their Investment in the Projects

As per information provided by the stakeholders, strategic investor in infrastructure sector
has been found in only 9 PPP projects. Strategic investor in different sectors and amount
invested by them is presented below-
Exhibit 61 : Strategic Investment by Sector
No of project with Equity Infused (USD
Sectors
strategic investor Million)
Ports 4 29.89
Airports 3 102.15
Water Supply 1 30.00
Railways 1 4.89
Total 9 166.93
It can be observed above that total USD166.93 million has come as strategic investment in
the PPP infrastructure projects and this investment is mainly in Ports & Airports sector.
Beside, in order to attract Foreign Direct Investment (FDI) in infrastructure, GoI opened that
sector for FDI and allowed 100% FDI (under automatic route) as presented below-
Why tabulate?
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Draft Final Report
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Exhibit 62 : FDI Allowed by Sector

Sector Limit
Roads, Highways & Bridges 100%
Ports & Harbour 100%
Airport 100%*
Power 100%
Mass Rapid Metro Transit System 100%
Water 100%
* Beyond 74%, Government Approval is required for existing airports. 100% is allowed for Greenfield airports
under automatic route.
Though, FDI limit in infrastructure is 100% in almost all the sectors above, FDI in
infrastructure PPP projects has been very low (11%). Maximum FDI has been seen in Ports
followed by Airports and Roads and Bridges Sector (refer as per Exhibit 63).
Exhibit 63: FDI in PPP Infrastructure
FDI in PPP Infrastructure Sector wise FDI ( USD 322 Million)
(Total equity USD2.93 billion)
Solid Waste
FDI Management,
Roads &
11% 5.56
Bridges,
50.95
Ports, 163.42
Domestic Airports,
Equity 102.15
89%
Though FDI in PPP infrastructure projects is very low, it may be noted that ports sector has
been high in attracting FDI (in terms of value) followed by Airports, Road & Bridges and Solid
Waste Management. It may also be noted that FDI cases are more in those sectors like
Ports & Airports where operational expertise doesn’t exist with Indian developers and FDI
has come from Strategic Foreign Investors.
It is very important to note that FDI in Road & Bridge is very low at USD50.95 million despite
that sector being very active in terms of PPP initiative. The low penetration of FDI in Roads
& Bridges is probably because the projects being implemented are small and local
developer/contractors are capable of implementing it and that the overseas investors/
developers have yet to get confidence in this segment.
9.4.2 Returns and Expectations of the Investors from the equity invested
Considering the huge requirement of equity for PPP infrastructure projects, it was imperative
to find out the return expectation of investors. We have therefore, asked the developers
about the equity returns expectations they have from the PPP projects. Developers stated
their expected equity returns only in 22 cases. The equity returns expectation (these are not
calculated returns but only expectations as stated by the developers) as furnished by the
developers is presented below:-
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37
Exhibit 64: Equity Returns Expectations by Investors
Equity Returns in PPP

18%
41%
9%
32%
Between 8% & 12% Between 12% & 16%

Between 16% & 20% More than 20%
It can be seen above that equity returns are more than 16% in approximately 73% of the 22
PPP projects. Hence it can be inferred that the developers expectation of equity returns from
infrastructure PPP projects are high and this might be due to high gestation periods for
infrastructure projects.
At the same time it is worth to mention that most of the infrastructure developers (especially
in roads & bridges) have their own construction division which gets the construction contract
for the PPP projects they have won. These developers then, earn a margin on the
construction contracts which increases their overall returns. The equity return expectation,
as stated by the developers is exclusive of the margin earned by them on corresponding
construction contracts and hence the actual returns expectations would be much higher for
the developer who is also the construction contractor for the project.
37
Sample size is 22 projects
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10 Annexure 5 - Future Lending to PPP Infrastructure Projects

from Commercial Banks in India
10.1 Introduction
The banking financial institutions in India are categorised into three types - commercial
banks, co-operative banks and regional rural banks. The commercial banking sector again
comprises of public sector banks, private banks and foreign banks. The commercial banks in
India are regulated by the Reserve Bank of India (RBI) and there are no differences in
regulations for public sector of private sector banks. Public sector banks like the State Bank
of India and its associates are owned by the Government of India. These banks in India
account for almost three fourth of the banking sector and a similar pattern exist in the
Infrastructure debt market too.
Apart from commercial banks there are other lending institutions categorised as financial
institutions in India. India has a two-tier structure of financial institutions - all India financial
institutions and institutions at the State level. All India financial institutions comprise term-
lending institutions, specialized institutions and investment institutions. State level institutions
comprise of State Financial Institutions and State Industrial Development Corporations
providing project finance, equipment leasing, corporate loans, short-term loans and bill
discounting facilities to corporate. These Institutions are non-Banking institutions i.e. they do
not accept deposits from the public. In India, in the infrastructure sector Government holds
majority shares in many of these financial institutions e.g. IRFC, PFC, and HUDCO etc.
There are other financial institutions which were started as specialised institutions by the
Government, but later Government stakes were significantly diluted or sold to other investors
e.g. IDFC and IL&FS. There are other specialised financial institutions like ICICI and IDBI
which have been converted into commercial banks and were earlier prominent lenders in the
infrastructure sector.
Tax free bonds were one of the major sources of fund for these financial institutions.
However, most of the tax sops on such bonds by the Government financial institutions have
now been withdrawn by the Government.
Some of the prominent financial institutions currently operating in the infrastructure debt
market are IIFCL, IDFC, PFC and IRFC. The composition of lending from commercial banks
and financial institutions is presented in the main report.
Our survey of historical data on PPP financing in India reveals that commercial banks have
been dominant players in PPP financing. Therefore, it is imperative to analyse the capacity
of commercial banks to lend towards infrastructure sector in the backdrop of huge
investment projection made by the Government.
In this Annexure we have therefore, tried to assess the lending capacities of commercial
banks and financial institutions like IDFC, IRFC etc in India. There can be other sources of
debt funding like foreign banks, multilaterals, mutual funds, insurance & pension funds etc.
which have not been analysed in this Annexure.
It is important to mention that commercial banks don’t differentiate PPP infrastructure
financing with other infrastructure financing for the purpose of reporting the data. Therefore,
all lending towards infrastructure either PPP or non-PPP has been reported under only one
sector head “Infrastructure”. However, within Infrastructure sector there are sub-sectors such
as Power, Telecommunications, Roads & Ports & Others. Due to non-availability of data on
commercial banks outstanding towards PPP infrastructure financing, we have based the
estimation on our survey data as the base for PPP financing in India, with some minor
adjustments.
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Even though our survey data provided some insights into the volume of financing by the
Banking sector for PPP projects surveyed, we find that there is a wide variation from one
Bank to another in the volumes of lending to PPP as a proportion of their infrastructure
lending or as a proportion of their total lending. Hence, it is not really possible to assess the
capacity of banks to PPP lending separately. Also, there are no separate regulations or
reporting requirements for PPP lending. Therefore, we have endeavoured to work out only
some broad estimation.
10.2 Lending Capacity of Commercial Banks

Over last seven years, there has been substantial upsurge in lending towards infrastructure
sector by the banks as presented below-
Exhibit 65: Credit Outstanding of Commercial Banks (USD Billion)
Financial Year*
1998 1999 2000 2001 2002 2003 2004 2005 2006
Sector
Infrastructure Total 0.70 1.32 1.61 2.52 3.29 7.71 9.86 17.56 24.17
(USD Billion)
Telecommunication 0.45 0.51 0.44 0.81 0.88 1.76 2.27 3.51 3.94
(USD Billion)
Power 0.15 0.47 0.73 1.17 1.64 4.73 5.55 8.61 12.86
(USD Billion)
Roads, Ports & 0.10 0.35 0.44 0.54 0.77 1.22 2.04 5.44 7.37
Others
(USD Billion)
Note: For the purpose of this note table and this note we have taken 1USD =45 INR
*Financial Year in India is from April to March i.e. FY 1999 is April 1998 to March 1999
Source- RBI
As per the table above, total credit outstanding by commercial banks to infrastructure sector
was to the tune of USD 24 billion as on 31st March 2006 and the same has grown from a
mere USD 0.7 billion as on 31st March 1998. The sudden jump in FY2005 was due to merger
of IDBI bank with IDBI during that year (IDBI earlier was not a Bank but FI). It may be noted
that the growth in infrastructure credit during the FY2006 was around 37.7% which was way
above the growth in industrial lending (28.6%) during the same year.
Credit outstanding of commercial banks to Infrastructure as on 31st March 2007 is not
available. We have projected it to be USD31.2 billion, on the basis of “RBI Annual Policy
Statement for 2007-08”. As per RBI Annual Policy Statement for 2007-08, infrastructure
lending has increased by 21.7% by December 2006. The same growth percentage has been
applied to each sector’s outstanding to arrive at the figure as on 31st March 2007.
10.2.1 Methodology for Assessing Infrastructure Lending Capacity of Banks

Banks’ lending towards any particular sector depends on a number of macroeconomic and
other factors. We have adopted a very simple methodology of holding discussions with
experienced Bankers active in the market, rather than attempting to establish complex
relationships between these factors and the lending volumes. We have tried to keep an even
mix of public and private sector banks in the interview to understand the complexities of their
lending to infrastructure.
Therefore, we have projected the total credit outstanding to infrastructure from commercial
banks at the growth rates based on our discussions with the banks. The generally agreed
views of these banks suggest that future growth towards infrastructure lending could be
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anywhere between 20-25%. However, it is important to mention that we have considered

sectors such as- Power, Roads, Ports and others (credit outstanding of which is depicted
above) for the purpose of our analysis excluding “telecommunication” which is highly
privatised sector. Therefore, infrastructure outstanding from here onwards would means
outstanding of sectors considered for the analysis.
There are several reasons that we have observed for such a view on the growth in
infrastructure lending.
• The data on credit & deposit growth of banks for the last couple of years reveals that
credit growth has outpaced the deposit growth and RBI had to intervene to slow down
the credit growth.
• Simultaneously, in the past 4-5 years, tremendous growth in credit has led many banks
to liquidate their extra investment in Government of India securities and deploy them in
credit.
Therefore, banks are of the view that any further increase in growth-rate in credit from banks
can be sustained only if there are other resources available to banks, example capital relief
by use of credit derivatives etc. These options have been discussed later in this annexure.
Based on our understanding in the sector and the discussions with the banks, we have
therefore, taken three scenarios viz, 20%, 25% and 30% for the growth-rate of outstanding
credit of infrastructure by banks, with the upper limit for our projection at 30%.
Infrastructure Outstanding Projection

We have taken the total outstanding of commercial banks to infrastructure sector as on 31st
March 200738 as the base figure for our projection. Thereafter we have applied the growth
rate as estimated above to the base lending figure and projected that for next 5 years. The
projection under different growth rate has been presented below-
Scenario – I (20% growth in infrastructure outstanding)
Year 2008 2009 2010 2011 2012
Power Sector- Infrastructure outstanding in 20 24 29 34 41
USD Billion
Road, Ports & Others Sector- Infrastructure 11 14 16 20 24

outstanding in USD Billion
Scenario – II (25% growth in infrastructure outstanding)

Year 2008 2009 2010 2011 2012
Power Sector- Infrastructure outstanding in 21 26 32 40 51
USD Billion
Road, Ports & Others Sector- Infrastructure 12 15 19 23 29

38
Estimated from growth rate fo 21.7% which was also assumed to continue from 31st December 2006 till 31st March 2007
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Scenario – III (30% growth in Infrastructure outstanding)

Year 2008 2009 2010 2011 2012
Power Sector- Infrastructure Outstanding in
22 28 36 47 62
USD Billion
Road, Ports & Others Sector- Infrastructure
12 16 21 27 35
Ratio of PPP Lending to Infrastructure Lending by Banks

Bank lending to the infrastructure sector has grown rapidly over the last few years. However,
the growth in lending to infrastructure is not unique. In fact it is concomitant with a sharp rise
in non food credit provided by banks, with strong growth in credit off take being observed in
both the corporate and retail segments. However, PPP infrastructure as a subset of total
infrastructure has show a sharper increase in the last few years. In the last two years more
and more small and large projects are coming up on PPP, rather than going for development
from budgetary sources. Hence, the PPP lending by commercial banks has also shown a
significant growth rate over the last few years.
To compute the PPP lending capacity of banks we have relied extensively on our data base
of PPP financing in India. We have computed the ratio of Infrastructure lending to PPP
lending following the steps as below –
a. Step 1 – Computation of PPP debt finance by banks till the Year 1997
b. Step 2 – Computation of PPP debt finance by banks till the Year 2006
c. Step 3 – Computation of Net Increase in PPP Debt and Total Infrastructure lending till
the Year 2006
d. Step 4 – Computation of PPP lending to infrastructure lending Ratio
The above steps have been used for computation of ratio in the sector “Roads, Ports &
Others” for which we have substantial data base. Since in our survey we didn’t consider
Power sector, therefore, we don’t have substantial data base on Power sector financing and
therefore, Power sector projection has been made separately using a separate methodology.
a. Step 1- Computation of PPP debt finance by banks till the Year 1997
Data on infrastructure outstanding by banks was available only for the financial years, while
the database accounted for calendar year data. Therefore, for the purpose of computing a
comparable data on PPP debt we have taken the PPP debt financing (from the database) till
the calendar year 1997 (i.e. December 1997) as corresponding to FY 1997-1998. We have
taken Calendar year 1997 as beginning year for PPP debt financing because FY 1997-1998
(ending on 31st March 1998) covers major part of calendar year 1997 and the PPP lending
by banks till the Year 1997 was only around USD 0.1 billion.
It may also be mentioned that complete financing data on some projects is not available and
therefore, we have made suitable assumptions on bank finance of those projects on the
basis of information available on other comparable projects.
b. Step 2- Computation of PPP debt finance by banks till the Year 2006
Under step 2, we calculated the total PPP debt finance by banks till the Year 2006. In order
to compute the PPP debt figure till the Year 2006, we have made some adjustments in the
debt financed during the Year 2005 and 2006. these adjustments have been made to
account for the fact that database only reports the total amount sanctioned by the banks in
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the calendar year, while the entire debt is not drawn from the bank in the same year, but is
drawn over a longer period. To make adjustments for this difference between the database
and the RBI data we have assumed that the debts sanctioned in a last two years, i.e. the
Years 2005 and 2006, would be released in equal amount over a period of three years.
These amounts are generally released over the construction period which is on an average 3
years for these infrastructure projects. Therefore, we have assumed that only 1/3rd of the
amount sanctioned in 2006 would have been disbursed by the end of FY2006 and 2/3rd of
the amount sanctioned in 2005 would have been disbursed by the end of FY2006.
The analysis of our data after making the above adjustments show that total PPP debt
financed by banks till the year 2006 was around USD 3.3 billion.
c. Step 3 - Computation of Net Increase in PPP Debt and Total Infrastructure lending
in the period from the year 1997 to the year 2006
Under Step 3, we computed the net increase in PPP Debt and total infrastructure lending by
banks. As per our analysis, net increase in PPP lending during 1997-2006 was around USD
3.2 billion and net increase in total infrastructure lending to “Road, Ports & Others” was
around USD 9.4 billion during the same period.
d. Step 4 – Computation of Ratio

The ratio of net increase in PPP lending to net increase in infrastructure credit to roads, ports
& others by banks was calculated. The ratio, works out to 33% (USD 3.2 billion/ USD 9.40
billion). This means banks in India have lent broadly around 33% of their total Road, Ports &
Others infrastructure lending towards PPP in those sectors.
The analysis of our data also shows that there has been significant upward move in PPP
lending by banks in the last three years and particularly in the year 2006. Therefore, we have
also worked out the PPP lending to total infrastructure lending ratio for the period 2004-2006
and for the year 2006 as well. The increase has been calculated in the same way as the
increase for the period 1997-2006. The result for the three periods is presented in the table
below:
Exhibit 66: Roads, Ports & Others PPP lending/ Infrastructure lending ratio by Banks in India
to these sectors
Period Ratio
Year 1997-2006 33%
Year 2004-2006 3639%
Year 2006 62%
As we can see the ratio of 62% for the year 2006 is much higher than the ratio of 36% for the
period 2004-06 and 33% for the period 1997-2006. The higher ratio in the year 2006 is
primarily due to large number of PPP projects receiving disbursement during that year.
Therefore, we believe that if the projected infrastructure investment is achieved the PPP
lending to total infrastructure lending ratio in these sectors could be anywhere between 33%
and 62% in the future, and more likely to be over 50%
We believe that going forward, if the growth rate envisaged for infrastructure investment
actually happens, the number of PPP projects would increase considerably and as a result
the ratio of PPP lending to total infrastructure lending would also increase. We have
39
Suitable adjustment has been made in the bank infrastructure credit outstanding figure as on 31st March 2004 because of
conversion of IDBI Ltd into Bank after FY 2003-04.
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therefore, assumed a medium growth scenario where the ratio of PPP to

infrastructure lending is 50% in the above sectors such as Roads, Ports & Others.
10.2.2 PPP Lending Capacity of Commercial Banks to Roads, Ports & Other sector
PPPs
We have also projected infrastructure credit outstanding of banks under three scenarios and
for the ratio of 50% (PPP to Infrastructure credit by banks in roads, ports & other sectors),
the projections of PPP infrastructure lending capacity of banks are as presented below-
Scenario – I (20% growth in infrastructure outstanding to roads, ports & other sectors)
2008 2009 2010 2011 2012
YoY PPP lending capacity of banks–(USD Billion) 1.0 1.1 1.4 1.6 2.0
Scenario – II (25% growth in Infrastructure outstanding to roads, ports & other

sectors)
2008 2009 2010 2011 2012
Scenario – III (30% growth in Infrastructure outstanding to roads, ports & other
sectors)
2008 2009 2010 2011 2012
On the basis of the above computation, total PPP lending capacity of commercial banks
towards Roads, Ports & Others over the next 5 years under different scenarios has been
shown in the table below-
Roads, Ports & Others PPP Financing Capacity of Banks in next 5 years (USD billion)
at PPP Lending to Infrastructure lending ratios of 20% Medium Growth
Roads, Ports & Others Infrastructure PPP Financing Capacity of Banks in next 5
Outstanding Growth of Banks years
30% - High Growth 12.9
25% - Medium Growth 9.8
20% - Low Growth 7.1
The data on disbursement by banks and repayment period is not available and therefore,
repayment during the next 5 years has not been considered. If we consider repayment also,
the above figure would be higher but not substantially higher.
Thus, as per our analysis and projection, the maximum capacity of commercial banks to lend
towards Roads, Ports & Others PPP would be around USD 12.9 billion in next five years.
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10.2.3 PPP Lending Capacity of Commercial Banks to Power PPP

As stated before, in our survey we excluded the Power sector and therefore, we don’t have
detailed financing information of private sector power Generation projects (the IPPs). As a
result we cannot follow the same steps as done for Roads, Ports & Other infrastructure
sector to compute Power PPP lending to total power sector lending ratio.
In order to derive the ratio of private sector power projects lending to overall lending to
power projects by banks we have taken our assumption on the basis of two reports - “Report
of the Committee on Financing of Power Sector During the 10th and the 11th Plan” (also
called the Kohli Committee report) and “Report of Working Group on Power for 11th Plan” -
which states the private sector lending out of total banks lending to power projects as below-
Exhibit 67: Private sector lending out of total Banks lending to power projects in USD Billion
State Power Central Power Private Power

Lenders Total
Projects Projects Projects
Banks & AIFI 8.3 13.0 2.4 23.6
As per the reports, banks & AIFIs are expected to lend USD 2.4 billion (10% of their total
lending) to power projects for private sectors. However, we have assumed the credit from
commercial banks to private sector to be around 15% due to faster conceptualisation and
implementation of projects by them compared to State and Central projects.
For the ratio of 15%, the projections of PPP infrastructure lending capacity of banks to power
sector are as presented below-
Scenario – I (20% growth in Power sector infrastructure outstanding)
2008 2009 2010 2011 2012
Scenario – II (25% growth in Power sector Infrastructure outstanding)

2008 2009 2010 2011 2012
YoY PPP lending capacity of banks–(USD Billion 0.6 0.8 1.0 1.2 1.5
Scenario – III (30% growth in Power sector Infrastructure outstanding)

2008 2009 2010 2011 2012
YoY PPP lending capacity of banks–(USD Billion 0.7 1.0 1.3 1.6 2.1
On the basis of the above computation, total PPP lending capacity of commercial banks
towards Power sector over the next 5 years under different scenarios has been shown in the
table below-
Exhibit 68: PPP Power Financing Capacity of Banks in next 5 years (USD billion) at Private to
Infrastructure lending ratios of 15% Medium Growth
Power Sector Outstanding PPP Financing Capacity

Growth of Banks of Banks in next 5 years
30% - High Growth 6.7
25% - Medium Growth 5.1
20% - Low Growth 3.7
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As per our analysis, the maximum capacity of commercial banks to lend towards Power PPP
would be around USD 6.7 billion in next five years.
10.2.4 Further requirement of debt financing from other sources

Considering the investment requirement for PPP infrastructure at around USD64 billion over
this period, commercial banks will not be able to meet the debt funding requirement.
Exhibit 69: Calculation of Debt Financing Gap
Amount (USD Billion)
Infrastructure investment requirement 64.0
Estimated Government Grant – 5% 3.2
Investment requirement without grant 60.8
Debt Requirement - 80%* (DER 4:1) 48.6
Banks maximum lending capacity (12.9+6.7) 19.6 (40.4%)
Further requirement of debt financing from other 29.0

sources
* 80% is just one scenario, but is a very likely one.
If the projected investment requirement for PPP infrastructure in India (USD 64 billion) in the
next five years actually happens the contribution of commercial banks to PPP debt funding,
which is currently around 80%, is likely to reduce drastically to a more likely figure of 40%
(the maximum capacity deduced above is 19.6 billion which is 40.4% of USD 64 billion).
On one hand issues of asset liability mismatch generated by long term lending to
infrastructure projects as also to other retail sectors is leading RBI to advocate increased
caution in lending to infrastructure projects. On the other hand group exposure norms,
unless changed, are likely to make banks unable to lend to the large developers. The
impending implementation of the Basel II norms will mean that the banks will have to
significantly increase their risk weighting capital for lending long term. Within the ambit of
current RBI policies and implementation of Basel II norms commercial banks’ lending to PPP
infrastructure is unlikely to increase beyond the limit (~USD 19.6billion) deduced above.
Financial institutions that are a major source of finance for PPP infrastructure also may not
be able to meet the gap. We have therefore, tried to look at their potential to lend to PPP
infrastructure and arrive at a gap that will have to be financed by other sources like bonds,
foreign banks etc.
10.3 PPP Debt Financing Through Other Financial Institutions

The requirement of debt financing from other sources is to the tune of USD 29 billion. These
other sources may include financial institutions like IIFCL, IDFC, PFC and IRFC. We have
therefore, on the basis of some assumptions, estimated the approximate amount of debt
funding that may be available from these four institutions as some of these financial
institutions will be able to meet the USD 29 billion requirement.
10.3.1 Debt Funding From IIFCL

In the past, apart from commercial banks, other financial institutions such as IDFC and IIFCL
were also debt financiers, though their share was not high. Going forward, Government of
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India’s policy is to make large amount of funds available to IIFCL and enable it to raise even
more fund more from the international market. Therefore, IIFCL is likely to play a more
significant role in PPP infrastructure lending.
However, IIFCL’s exposure is currently limited to 20% of the total debt financing requirement
in a project. Assuming the same contribution for the future PPP project, and assuming that
IIFCL is able to raise the amount as well as able to deploy the entire amount into credit
IIFCL’s portion can go upto about USD 10 billion over the next 5 years ( 20% of debt
requirement for PPP computed at 80% of project costs after reducing 5% grants).
Incidentally, this is not very different from about USD 2.2 billion per year that GOI may
guarantee for IIFCL to raise resources.
10.3.2 PPP Lending Capacity of IDFC

Infrastructure Development Finance Company Ltd (IDFC) is a specialized financial institution
focused towards infrastructure lending. Over the 5 years, it has financed a number of
infrastructure projects and achieved remarkable growth in its lending to infrastructure sector
as presented below-
Exhibit 70: Infrastructure loan outstanding of IDFC
Sectors FY2003 FY2004 FY2005 FY2006 FY2007 CAGR
Energy (in USD Million) 215 392 536 829 1206 53.8%
Transportation (in USD 187 254 406 627 835 45.3%
Million)
Telecommunication(in USD 177 271 422 403 526 31.3%
Million)
Commercial , Industrial & 12 65 204 381 526 158.2%
Others (in USD Million)
Total Infrastructure loan 591 983 1568 2240 3092 51.2%
outstanding (in USD Million)
Source- Company Annual Reports & prospectus
CAGR of total outstanding to infrastructure sectors, over the last 5 years (FY2003-2007) has
been whopping 51.2%. Sector wise credit outstanding data of IDFC is not available and
therefore, we have taken sectoral exposure40 percentage to calculate that. Simultaneously,
the data on PPP lending is not available and therefore, we have relied on our data base to
arrive at IDFC share in total PPP debt finance.
PPP Transport Lending Capacity of IDFC

Our analysis of data base shows that IDFC share in total Transport PPP debt finance is
mere 5% or USD 428 million at the end of calendar year 2006. PPP lending of IDFC over the
last 5 years has been presented below-
Exhibit 71: IDFC’s transport PPP lending as on 31st December in USD Million
Sectors 2002 2003 2004 2005 2006

Transport sector PPP 166 194 207 225 428
lending (in USD
Million)
Transport PPP lending to total transport infrastructure lending was 40% over the last three
years (2004-2006). However, given the ambitious plans being drawn-up by IDFC
40
Exposure means approvals, less cancellations less repayments plus defaults of interest, penal interest and liquidated
damages, and includes funded and non-funded debt and equity.
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management, the focus of IDFC in private sector infrastructure projects and huge investment
expectation by Government in this sector the ratio is expected to increase. Therefore, we
have assumed that ratio to be 50% over the next five years and ascertained the YoY PPP
lending capacity of IDFC. We have also assumed the growth rate of 40% on total transport
infrastructure outstanding of IDFC.
Projected lending to PPP transport infrastructure by IDFC in USD Million
Sectors FY2008 FY2009 FY2010 FY2011 FY2012
Total transport Infrastructure 1169 1636 2291 3207 4490
outstanding (USD Million)
Total PPP lending (USD Million) 584 818 1146 1604 2245
YoY PPP Lending Capacity of 156 234 327 458 641

IDFC (USD Million)
On the basis of above calculation, total transport PPP lending capacity of IDFC work
out to be USD 1.8 billion over the next five years.
Even if we assume the transport PPP lending of IDFC to increase more sharply to reach
60% of its total transport infrastructure outstanding over the next 5 years, its total transport
PPP lending capacity would increase only to USD 2.3 billion.
PPP Power Lending capacity of IDFC

In order to assess PPP power sector lending capacity of IDFC, we have adopted same
methodology as in the case of banks capacity to Power sector. On the basis of “Report of
Working Group on Power for 11th Plan”, we have assumed the IDFC lending to private power
projects to be around 15%. Considering the CAGR of 40% in power sector credit outstanding
and 15% for private sector power projects, IDFC capacity to lend towards PPP power
projects works out to be 0.8 billion.
Even if we assume the PPP Power projects lending of IDFC to increase more sharply to
20% of its total power sector outstanding over the next 5 years, its total Power PPP lending
capacity would increase only to USD 1.1 billion.
10.3.3 Lending from PFC

As per our data base, institutions like PFC and IRFC have been very small players in PPP
infrastructure financing and the main reason is the less number of PPP in Power and
Railways sectors. However, that would not be the case in future because of big increase
expected in PPP in these two sectors.
PFC has been a pioneer in financing power sector projects in India. It is the leading power
sector public financial institution providing fund and non-fund based support to power sector
projects. As of 31st March 2007, the total credit outstanding by PFC was USD 9.8 billion
registering a CAGR of 21.8% since FY 2002. As on 31st March 2006, out of USD 7.91 billion,
around USD 5.12 billion is towards generation which accounts for 60% of total outstanding.
However, of the total loan assets outstanding as on September 30, 2006 only 3.70% of the
loan assets were extended to joint sector utilities and 8.10% of the loan assets were
extended to private power utilities
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“Report of Working Group on Power for 11th Plan” states the private sector lending out of
total PFC lending to power projects as below-
Exhibit 72: PFC lending to power projects in USD Billion
State Power Central Power Private Power

Lenders Total
Projects Projects Projects
PFC 14.4 1.8 1.8 18.0
As per the above table, total lending by PFC to private sector appear to be only USD 1.8
billion which is not substantial to bridge the gap of USD 29 billion.
10.3.4 Lending from IRFC

Indian Railway Finance Corporation Ltd. (IRFC) is a dedicated financing arm of the Ministry
of Railways (MoR) to finance the railways projects. IRFC is wholly owned by and has a close
working relationship with the MoR. The MoR approves IRFC's annual borrowing limits and
proposed borrowings. The MoR notifies the company of its funding requirements after the
railway budget is approved by Parliament.
At the end of the financial year, IRFC enters into a standard lease agreement with the MoR,
wherein the assets financed by it are earmarked and lease rentals are fixed at a mark-up
over the average borrowing costs for the year. The ministry pays lease rentals to the
company every half year.
During the year 2005-06, IRFC funded acquisition of 228 Locomotives, 2125 Passenger
Coaches and 3884 Freight Cars valued at USD 0.73 billion. As on 31st March 2006,
cumulative moving infrastructure assets financed by IRFC was valued at USD 7.9 billion. For
the year 2006-07, financial requirement target of USD 927 million has been given by MoR. In
addition target of around USD 11.11 million has been given for financing the projects being
implemented by Railway Vikas Nigam Limited (RVNL). It may be mentioned that RVNL is an
arm of MoR to implement the projects with private participation.
IRFC has been the major financer for MoR and would continue to play a major role in
railways financing. However, as IRFC’s total funding to private sector was only around USD
0.73 billion during the FY2005-06 it is not very clear as to how much IRFC would be able to
finance the investment requirement in Railways to private sector. If we assume the year on
year funding to increase by 30%, total funding capacity of IRFC works out to be USD 10.9
billion in next five years. If we assume 10% of total funding of IRFC to go towards PPP in
railways, its capacity amounts to USD 1.10 billion only in next five years.
10.3.5 Financing Requirement from Sources Other than Commercial Banks and
Financial Institutions
If we consider the lending capacity of institutions as discussed above, the final gap works out
to be USD 12.7 billion as presented below-
Exhibit 73: Financing Requirement from Sources Other than Commercial Banks and Financial
Institutions (USD billion)
Lenders Capacity to lend towards PPP
Gap after banks lending capacity 29.0
IDFC 3.4
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IIFCL 10.0
PFC 1.8
IRFC 1.1
Final Gap in PPP financing 12.7
It can be seen above that the final gap in PPP financing, after considering all major lenders,
amounts to nearly USD 12.7 billion which would be required to be financed by other possible
sources like- Foreign banks, Bond market borrowings, ECBs, Insurance Companies,
Pension Fund etc., Although, some steps have been taken by Government to initiate reform
in the bonds market and Pension Fund, major funding from these sources cannot not be
expected in the near future.
10.4 Possibility of Banks Lending more to Infrastructure Sector

It can be concluded from above that commercial banks as well as financial institutions
cannot meet the entire debt financing requirement of USD 48.6 billion, unless major financial
sector changes take place which can significantly change the exposure of banks to PPP
sector.
During our survey, it was repeatedly mentioned by many of the Bankers that they will have to
be more concerned in the future on the Asset-Liability mismatch issue when infrastructure
sector lending volumes increase substantially. As we have indicated earlier in the main
report, banks do not really have long term liabilities to match long term assets they will have
to live with in the infrastructure sector loans.
Lending to infrastructure projects not only locks the banks’ fund for longer period but also
expose the banks to risks such as - Maturity, Credit and Interest risk. Therefore, it is
essential that they are able to manage their maturity risk by use of securitisation, credit risk
by use of credit derivatives and interest rate risk by use of interest rate derivatives. Better
management of infrastructure loan portfolio will help banks to release their locked up capital
and redeploy the money into infrastructure credit.
Therefore, it is important to understand the current situation and issues faced by banks in
securitisation, credit derivatives and also interest rate derivatives in India.
10.4.1 Securitisation
Securitisation as a financial instrument has been in practice in India since the early 1990s –
essentially as a device of bilateral acquisitions of portfolios of finance companies. Some of
the early securitisation deals involved actual sale of loans or quasi-securitisations where
creation of any form of security was rare and the portfolios simply moved from balance sheet
of one originator over to that of another. As there were no rules for regulatory capital
requirements, most of the so called securitisation investors were actually taking exposure on
the balance sheet of the originator. However, the securitisation transaction structures in India
have evolved over time. From unstratified pass-throughs, the market has several types of
multi-tranche paper now, including prepayment protecting, and prepayment-protected
classes.
The National Housing Bank (Amendment) Act, 2000 came into force from June 12, 2000,
which, provides for creating Special Purpose Vehicle (SPV) Trust by NHB for taking up
securitisation transactions and issuing MBS in various forms. Securitisation through
Mortgage baked securities actually started in a big way after the amendment to National
Housing Bank Act. NHB through this amendment could facilitate securitisation transactions
involving assignment of retail housing loans from the Housing Finance Corporations to NHB.
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The loans, repayable in equated monthly instalments (EMIs), were packaged and offered to
investors as Pass Through Certificates (PTCs) by NHB, acting as Issuer and Trustee. The
housing loans, which constitute the receivables to be securitised, are held by a Special
Purpose Vehicle (SPV) in the nature of a trust, declared by NHB. The PTCs are in the nature
of trust certificates and represent proportionate undivided beneficial interest in the pool of
housing loans.
“The Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Ordinance, 2002” (The Act) was also enacted in 2002 to promote the setting up of
asset reconstruction/securitisation companies to take over the Non Performing Assets (NPA)
accumulated with the banks and public financial institutions.
Securitisation volumes in India have been scaling new peaks every year since these acts
have been passed. The securitisation market in India reached new highs till about 2005.
Standard and Poor’s reported the Asian securitisation data for 2003, and India was no. 2 in
ex-Japan Asia in terms of volumes, next only after Korea. Though the gap between India
and Korea was huge, the Indian market continued to grow at cumulative growth rate of
nearly 100% through 2004.
However, in early 2006, the RBI came out with guidelines on regulatory capital treatment for
securitisation. ICRA’s report on “Update on Indian Structured Finance products-June 2007”
reports a slow down in the growth rate of securitisation activity and reduction in size of
transactions in the year 2005-2006 and 2006-2007. Apart from the issuance of securitisation
guidelines by the RBI, tight liquidity conditions and rise in interest rates too led to the slow-
down in securitisation in the year 2006.
In the year 2007, the securitisation market in India has picked up again and shown an
increase of 44% over previous year, according to ICRA’s June 2007 report.
During the financial year 2007, around 65% of the securitised assets were originated by
banks and the balance by NBFCs. Interestingly; according to the report, many of these
transactions were in LSO category where single corporate loans were securitised by banks.
A common structure used has been a longer tenure loan with annual put and call option,
wherein under the securitisation transaction it is mandatory for the SPV to exercise the loan
recall option at the end of one year, thereby effectively ensuring one year tenure for the
investor. There has been no multi-credit CDO in the Indian market till now.
In Infrastructure there has been securitisation of two annuity projects by GMR and a BOT
project by L&T. These securitisations have been simple transactions where based on the
future cash flows of annuity to the project company from NHAI, the project company has
raised more loan from banks. GMR has refinanced its initial loans (at around 10%) for two
annuity projects at 7.5% plus raised extra debt to invest in other projects. While L&T too has
refinanced its loan for Coimbatore bypass project and raised extra debt to invest in other
projects. These are not the conventional securitisations through issue of PTCs to investors.
Few of the issues in the Indian securitisation market are:
• Current regulations in India had slowed the rapid growth of securitisation market.
However, the market is now moving towards international standards and Basel II norms.
The market is picking up again and has come out of the initial shock of stricter capital
requirements. Following RBI guidelines analysts believe originators will more actively
look to place mezzanine (second loss) piece with investors to reduce the capital impact.
• Limited investor base, comprising mutual funds and a few private sector banks;
• Banks play a dominating role in the secondary markets in India, while mutual funds
are emerging as another major player as investors in the securitisation market. Other
players that are very active in the international market like Insurance and pension
funds are not active in India. In India, pension funds are unable to access the
securitisation market, while insurance funds have limited presence in the market.
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Reports are that mutual fund, which are the major investors in the market are actively
diverting investments into other markets like equity for higher returns. While, in
countries like Peru and Columbia institutional investors have been the key
participants leading to development and increase in depth of the securitisation
market. Investor base in India can therefore, be widened only by bringing in
insurance and pension funds into the market. This however, may only be possible, if
the investment regulation for these funds is relaxed from AA to BBB or atleast A.
• Simultaneously, securitisation market in other emerging economies is being
increasingly accessed directly by private infrastructure companies to finance PPP
projects. However, in India the dominance of banks in the sector and illiquidity in the
markets for such instruments, has led to stifling of issuance of securitisation products
by Corporates.
• Compared to India, other emerging market economies like Brazil, and Mexico have many
types of asset classes being securitised. While in India only three asset classes were
securitised in the year 2007. The reason being, no participation from public sector banks
which have huge loan portfolios and hence huge potential of securitising their loans.
Another reason is that the current regulatory guidelines have reduced the capital relief to
banks through securitisation and only certain asset classes where relief is higher are
being securitised.
• Most investments in securitised paper in India are made on a “hold to maturity” basis and
Pass-though certificates (“PTCs”) are still not classified as securities and hence are not
tradable on the stock exchange. The secondary market for securitised paper is therefore,
virtually non-existent with little trading and all issuance being privately placed. In one of
the major move by the Government of India recently, PTCs have been classified as
securities by including it within the definition of tradable securities. We believe that with
the inclusion of PTCs under securities, liquidity will increase which would lead to further
growth in securitisation.
10.4.2 Credit Derivatives

World over, credit derivatives are the major instrument today for banks to manage their risks
and are a very important component of the market today. Products like Credit default swaps,
credit linked notes, and indexed trades are showing tremendous increase in the global
market. Credit derivatives also increase liquidity in the secondary market with banks issuing
papers to transfer their credit risk by sometimes packaging several project debts together, to
buyers with different risk appetite. Typically the buyers of these products would include other
banks, pension funds, insurance companies, other institutional investors etc. Since, the
market is very liquid for such products internationally, banks or the buyers of such products
do not have issue of asset-liability mismatches. The timing of such sell downs also range
from immediate to few years depending on the risk profile of projects.
Credit Derivatives Globally
Credit Derivatives is one of the fastest growing markets in the banking industry. The growth of the global credit derivatives market
has outperformed all expectations from the year 2004 and continues to do so. Credit default swaps and full indexed trades are the
most traded instruments in the global credit derivatives market today.
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There are many factors that have contributed to the rapid growth in credit derivatives market in the world today, including: greater
focus by banks and other financial institutions on risk management; a more rigorous approach to risk/return judgments by lenders
and investors and an increasing tendency on the part of banks to look at their credit risk exposures on a portfolio-wide basis; efforts
by market intermediaries to generate fee income; a generally low interest rate environment, which has encouraged firms to search for
yield pickup through broadening the range of instruments they are prepared to hold; and arbitrage opportunities arising from different
regulatory capital requirements applied to different kinds of financial firm. However, there are still some issues in the international
market that are being debated constantly such as need for market participants to improve risk management capabilities and for
supervisors and regulators to continue improving their understanding of the associated issues.
Source: BBA Credit Derivatives Report 2006
However, credit derivatives market in India today is virtually non existent. Apart from some
single loan securitisation which we can call CDOs, other instruments are non-existent in
India.
RBI in March 2003 had issued "Draft guidelines for introduction of Credit Derivatives in India"
for comments. The draft guidelines talked about enabling the banks and the financial
institutions, in India, to manage their credit risk by permitting them the use of credit risk
hedging techniques like the credit derivatives. The instruments included were the Credit
Default Swap (CDS), Credit Default Option, Credit Linked Note (CLN), Credit Linked
Deposits/ Credit Linked Certificates of Deposit, Repackaged Notes, Collateralised Debt
Obligations (CDOs), and Total Return Swaps. However, these guidelines were not finalised.
Subsequent to RBI’s Annual Policy Statement 2007-08 wherein, it was considered
appropriate to introduce credit derivatives in a calibrated manner at this juncture, and to
begin with permit commercial banks and Primary Dealers to transact in single-entity credit
default swaps, RBI in May 2007 had issued Draft guidelines for only one credit derivative –
the Credit Default Swaps for comments.
Institutional investors are the major investors in the credit derivatives market. The primary
reason for this is that credit derivatives provide access to otherwise inaccessible retail loan
market to these institutional investors. Insurance funds, pension funds and mutual funds can
access the retail loan market without going to the market, by buying into the products
structured by banks, on the basis of the underlying retail loans. However, currently in India
the banks, especially the public sector banks are unable to issue credit derivatives and
hence there is no market for such products.
Apart from the regulatory guidelines not being in place there are other bottlenecks faced by
banks currently in India. These bottlenecks include the non-availability of skilled manpower
in the Public Sector banks (PSU banks) and the lack of sophisticated IT infrastructure in the
PSU banks to handle monitoring of such complex structures and trading. The public sector
banks interviewed by us voiced these concerns specifically.
10.4.3 Interest Rate Derivatives

In India interest rate derivatives came into existence in 1999 when OTC trading of interest
rate derivatives for balance sheet management and market making purpose was allowed by
the RBI.
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The Reserve Bank of India, had issued guidelines for Scheduled commercial banks
(excluding Regional Rural banks), primary dealers and all-India financial institutions in 1999
to undertake Forward Rate Agreements and Interest Rate Swaps (FRAs/IRS) as a product.
The guidelines not only allowed the mentioned institutions to trade in FRAs/IRS for their own
balance sheet management but also for market making purposes. Corporates were also
allowed to use IRS and FRA to hedge their exposures.
Further, in June 2003, the Reserve Bank of India had issued guidelines to banks/primary
dealers/FIs for transacting in exchange traded interest rate futures only in three Government
securities viz notional 10-year Government security, a 3-month Treasury Bill rate and a 10-
year Government zero coupons.
Since then, the interest rate derivatives market in India has been grown drastically, however,
dominated by OTC trading. The volumes in interest rate derivatives market in India have
reached USD 150billion in the year 200441 while as of December 2006, the notional amount
outstanding combined in the OTC/exchange derivatives markets for interest rate derivatives
accounted for USD325 billion.
In the Indian Market:
• Although the interest rate derivatives are available for tenure of upto 10 years, there is
still lack of depth in the market in terms of the type of products available. Contracts like
Interest rate caps, floors, swaptions etc. are not available in India.
• The Indian Market is dominated by the OTC trading, with exchange trading in futures
only in Government securities. Even in these securities the volumes are not very large.
• In infrastructure the players in the interest rate derivatives market include Corporates like
L&T and Reliance which have strong treasuries to manage and monitor their risks and
PSUs like NHB, REC, PFC, IRFC, etc. Other smaller Corporates have not been
accessing the market to hedge their interest rate risks.
RBI is taking some steps to further develop the interest rate derivatives market in India, such
as:
• to have a mechanism for transparent capture and dissemination of trade information as
well as an efficient post-trade processing infrastructure in the OTC market. CCIL is being
advised to start a trade reporting platform for Rupee Interest Rate Swaps (IRS);
a Working Group is being set up to go into all the relevant issues and to suggest measures
to facilitate the development of the interest rate futures market.
41
Source: Rakesh Mohan. 2004. Debt Markets in India – Issues and Prospects as reported in RBI Bulletin December 2004
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11 Annexure 6 - Project Risk Profile and Relationship to

Lending Terms
11.1 Background to the Analysis
The preliminary analysis of the financing of PPP projects as also the meetings and
discussions with various stakeholders of the PPP projects gave a distinct impression that
pricing of risks is not being done appropriately while setting the terms of the debts by the
bankers. To test this hypothesis further, within the limitation of data available, it was decided
to analyse the lending terms of one set of projects all belonging to one sector but with
differing risk profiles.
11.2 Methodology
We selected two sets of data from the Roads sector -projects that achieved financial closure
in 2002 and in 2006- for risk profiling and evaluation (Data list provided in Annex 1). Since
the India G-Sec rates changed substantially during the study period, it was decided to
consider projects that achieved financial closure in the same year only and hence two sets of
results were obtained (one for 2002 and the other for 2006).
Within the limitations on the data availability, we then listed a few independent parameters
that will define the risk profile of a project. While typically banks use parameters like the
Construction risk, O&M risk, Regulatory risk, Demand risk etc and evaluate lending to
infrastructure project on the basis of set measures (refer box below), which are captured in a
loan term sheet. However, our data on the financial closure terms do not capture these
information and therefore, we have tried to develop the risk profiles of the projects based on
the risk variable on which the data is available.
A typical project risk evaluation is done in the following manner:

• Banks agree on financing the project if they feel they have a basic comfort with the promoter, the sector and
the project concept.
• If acceptable financial analysis is carried out by banks. The primary factor looked at is the Debt Service
Coverage Ratio and sometimes also the Loan Life Coverage Ratio.
• The pricing of the loan is done on the basis of discussion with promoters, comparison with pricing got for
similar projects from other banks as well as the pricing on a similarly project financed earlier. This
comparison probably results in similarities in the interest rate of the loan.
• Several risks like Construction risk, O&M risk, Regulatory risk, Demand risk etc. are rated on the basis of
judgement of the bank’s deal team and in all the high risk areas specific mitigation measures are demanded.
Some typical risk mitigation measures are:
o Construction risk- Cost and time overrun support to be brought in form of equity
o Promoter risk- Corporate guarantee, sponsor support
o Technology risk- Liquidated damages to be given by technology provider
o Demand risk- Creation of a Debt service reserve account
• In addition banks also earn from projects beyond the debt that they give out. Other income which can earn
fee based income for banks comes from providing financial advisory to the project, providing guarantees and
carrying out the loan syndication for the project. These are also often taken into account while pricing the
loan.
As seen above risk mitigation measures are the additional costs which are to be borne by riskier projects.
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Our interviews had also given us a fair Idea on weightage that the bankers would assign to
these parameters. We assigned scores (0 to 3) against the magnitude of risk (no risk, low to
high risk) and arrived at the risk marking table to be used (see below).
Parameters for risk profiling and the method of marking
Risk
HIGH AVERAGE LOW Weightage
Parameters
Developer (Net Worth) in USD
< 100 100-1000 > 1000
Million 20.0%
Score 3 2 1
Developer (Revenue) in USD
< 200 200-500 > 500
Million 15.0%
Score 3 2 1
Independence of the Not Fully
Partially
construction contractor independent independent 0.0%
Score 3 2 1
Awarded by State Centre
10.0%
Score 2 1
Region Centre/East North/South/West
2.5%
Score 2 1
Project type Annuity/BOT BOT Annuity
15.0%
Score 3 1
Project Size 100-500
<100 Crore >500 Crore
Crore 5.0%
Score 3 2 1
Project IRR <12% 12%-15% >15%
15.0%
Score 3 2 1
Contract period <15 yrs 15-20 yrs >20 yrs
2.5%
Score 3 2 1
Grant from the Government No Yes
10.0%
Score 1 0
Negative Grant Yes No
5.0%
Score 2 0
Against each project of our sample, we then applied the above marking and calculated the
final risk score for each project. A composite score was calculated for each project. Lower
score for a project would mean lower the overall risk profile of the project. The projects were
then arranged in a descending order and grouped into High /Medium /Low risk on the basis
of cut-off scores as in table below:
Overall risk categorisation
Composite Score >2.2 1.5-2.2 <1.5
Categorised Score 3 2 1
( overall risk category) (high) (medium) (low)
The composite risk profile and the categorised score of the projects are listed in Annex 2.
We then looked at the information pertaining to the lending terms of these projects and
attempted to see if there is any clear relationship between the risk profile (as obtained from
the above method) and the actual lending by the bankers. For this purpose, we first
considered the actual interest rate charged.
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11.3 Relationship between the Risk Profile and the Lending Terms
Based on the risk profile generated for the selected project we did not find significant
relationship between the project risk and the interest rate. Even higher risk weighted projects
have also been able to achieve low interest rates. As seen from the table below average
interest rate for the projects in the three risk categories does not show any relationship with
the risk category in either 2002 projects or 2006 projects.
Exhibit 74: Risk and Interest Charged
Financial Closure Year Risk Category Average Interest Rate
2002 1 12.00
2002 2 13.00
2002 3 10.00
2006 1 9.09
2006 2 9.39
2006 3 9.79
Project Type Risk Category Average Interest Rate

Annuity 1 12.00
Annuity 2 9.50
BOT 1 9.09
BOT 2 9.54
BOT 3 9.82
Note: Outlier Projects showing extremely high or low interest rate have been removed from the
analysis.
This could either mean that pricing of interest rates is not linked to risk profile or it could also
mean that other factors (other than interest rates) are being used by bankers to price higher
risks. Some further discussions with bankers have revealed that the risk evaluation
framework used by many banks invariable allocate maximum risk to PPP infrastructure
projects. Therefore, banks ask for other comfort factors (such as balance sheet support from
sponsors, corporate and sometimes personal guarantees from promoters, creation of debt
service reserves, etc.) which can not be captured in the evaluation the relationship between
the project risk and lending terms. Therefore, based on the comfort factors developers finally
provide, the banks tweak the interest rates a bit. Therefore, it is difficult to conclude that risks
are not being priced properly.
During our discussions, it was also revealed that most banks have their own risk evaluation
frameworks, while some other banks do not appraise the projects themselves but rely
heavily on the lead bank for the analysis and appraisal. However, these frameworks capture
most of the typical project risks that PPP infrastructure projects have, even though it is not
very clear as to how exactly the results of the risk analysis by banks get converted into a
pricing decision. If the project risks are not priced into the interest rates there could be other
factors where it could be priced like the debt repayment terms.
Therefore, to further examine the relationship between the risk profiles and the lending
terms, we considered another theoretical parameter called the ‘Debt Annuity per Kilometre’
used by some rating agencies to compare toll road and railway projects. Debt Annuity per
Kilometre here is defined as the annualised debt at a fixed rate of interest (we took 10%) for
a tenure that leaves 1 year tail from the concession period, divided by the length (in Km) of
the road project. For example, if a road project with project cost of USD 100 million and
concession period of 30 year for certain road length (say 100 km) has a debt of USD 70
million, the annualised payment of USD 70 million at 10% rate of interest and repayment
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over 29 years is called the Debt annuity per kilometre. Typically, a project perceived as a
higher risk project should have a lower debt annuity per Km to give the bankers a higher
level of comfort.
We have looked at the average debt annuity per km for project under the three risk
categories by year and by project type (i.e. annuity or BOT) and for two years (i.e. 2002 &
2006). Interestingly, we find that there is a clear relationship between debt annuity per Km
and the project risk as far as high risk and other projects are concerned. However, between
medium risk and low risk projects, there is not much of a difference in debt annuity per Km.
Exhibit 75: Debt annuity per Km and risk category
Debt Annuity per Km.
Financial Closure Year Risk Category
(USD million)
2002 1 0.15
2002 2 0.10
2002 3
2006 1 0.14
2006 2 0.15
2006 3 0.10
Debt Annuity per Km.

Project Type Risk Category
(USD million)
Annuity 1 0.15
Annuity 2 0.13
BOT 1 0.14
BOT 2 0.14
BOT 3 0.10
Note: Outlier Projects showing extremely high or low debt annuity per km have been removed from
the analysis.
11.4 Conclusion
Based on the limited analysis carried out here, it is difficult to conclude definitively that
bankers are not pricing their risks appropriately (or for that matter that they are). Due to the
smallness of sample with similar fixed parameters (year, sector, etc.) and due to the
complexity of pricing parameters (interest rates, DSCR, guarantees, etc.) it would not be
possible to come to anything other than subjective conclusions.
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11.5 Data List

Financial
Proj Primary Length Awarded Region Concession TPC (USD Project
Project Name Annuity Closure
Code Developers (Km.) by Code Code Period (Yrs) Million) IRR
Year
A1 Ankapalli – Tuni/ km 359.2 - km 300/ GMR 58.95 Annuity 1 4 2002 17.5 68.20 NA
Andhra Pradesh
A2 Gwalior Bypass (NS-1/BOT/MP-1) Ramky 42.00 Annuity 1 1 2002 20.0 66.67 13.00
km 0 to km 42.033 / Madhya Pradesh Infrastructure Ltd.
A3 Palsit – Dankuni/ km 581 - km 646/ Gamuda Malaysia 65.00 Annuity 1 3 2002 20.0 90.02 NA
West Bengal
A4 Panagarh – Palsit/ km 517 - km 581/ Gamuda Malaysia 64.46 Annuity 1 3 2002 20.0 126.99 NA
West Bengal
A5 Tambaram - Tindivanam km 28 - km GMR 93.00 Annuity 1 4 2002 17.5 88.08 NA
121/ Tamil Nadu
RS1 Bhuj Nakthrana Road M.S. Khurana 45.00 BOT 2 2 2002 13.0 7.78 NA
Engineering
RS2 Himmatnagar Bypass MSK Projects(I) Ltd. 8.00 BOT 2 2 2002 15.0 1.56 NA
RC1 Haldia Port NH-41 (from Kolaghat on NHAI 53.00 BOT 1 3 2002 30.0 60.67 NA
NH-6 to Haldia) West Bengal
RC2 Jawaharlal Nehru Port Phase-I/ NHAI 30.00 BOT 1 2 2002 30.0 39.56 14.60
Maharashtra
RC3 Jawaharlal Nehru Port Phase-II/ SH- NHAI 14.35 BOT 1 2 2002 30.0 39.13 NA
54 + Amramarg + Panvel Creek
Bridge/ Maharashtra
RC4 New Mangalore Port NH-17 NHAI 37.00 BOT 1 4 2002 30.0 40.56 11.28
(Suratkal-Nantur Section), NH-48
(Padil Bantwal Section)/ Karnataka
A6 Bara to Orai/ km 449 to 422 on NH-2 Nagarjuna 62.80 Annuity 1 1 2006 20.0 129.96 NA
& km 255 to km 220/ Uttar Pradesh Construction
Company Ltd.
RS3 Hoshangabad-Harda-Khandwa Road MSK Projects(I) Ltd. 185.60 BOT 2 1 2006 15.0 21.33 NA
RS4 Punjab Road Sector Project: Phase II Rohan Builders 104.96 BOT 2 1 2006 17.0 28.78 21.08
– Upgradation, Operation and India Pvt. Ltd.
Maintenance of Balachaur – Dasuya
Road on B.O.T Basis
RS5 Raisen-Rahatgarh Road MSK Projects(I) Ltd. 100.00 BOT 2 1 2006 15.0 14.67 NA
RS5 Upgradation, Operation and IDEB Projects Pvt 55.70 BOT 2 1 2006 16.5 16.43 8.69
Maintenance of Patiala - Malerkotla Ltd.
RC5 Agra – Bharatpur/ Oriental Structural 45.00 BOT 1 1 2006 20.0 49.80 NA
Rajasthan[20]/Uttar Pradesh[25] Engineers Pvt. Ltd.
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RC6 Ambala – Zirakpur/ Km. 5/735 to Km. GMR 36.00 BOT 1 1 2006 20.0 86.92 NA
39/961 of NH-22 and Km. 0/0 to Km.
0/871 of NH-21 Haryana[6]/
Punjab[30]
RC7 Aurang - Raipur Km 232 to Km. 281 DS Construction 45.00 BOT 1 3 2006 25.0 63.56 17.22
Chattisgarh Ltd.
RC8 Bharatpur-Mahua/ km. 63 to Km. Madhucon Projects 57.00 BOT 1 2 2006 25.0 66.21 NA
120/ Rajasthan Ltd.
RC9 Bharuch-Surat package BOT-II / 4 Ideal Road Builders 65.00 BOT 1 2 2006 20.0 313.13 NA
laning / Gujarat Pvt. Ltd.
RC10 Chennai - Ennore Express Way NHAI 21.10 BOT 1 4 2006 30.0 68.67 12.60
RC11 Farukhanagar to Kotakatta (NS-2/AP- L&T 55.74 BOT 1 4 2006 20.0 82.74 NA
4)/ Km 80.050 to km 135.469/ Andhra
Pradesh
RC12 Farukhanagar to Kottakata (NS-2/AP- GMR 46.16 BOT 1 4 2006 20.0 104.74 13.38
3)/ Km. 34.140 to km 80.050/ Andhra
Pradesh
RC13 Four laning from km 0.0 to km 53.0 of IVRCL Infrastructure 53.53 BOT 1 4 2006 20.0 111.56 14.79
Salem – Kumarapalayam on NH-47 Projects Ltd.
on BOT basis.(Contract Package No.
NS-2/BOT/TN-6)
RC14 Four laning from km 407.100 to km IVRCL Infrastructure 49.00 BOT 1 1 2006 20.0 52.83 11.60
456.100 of NH-1 (Jalandhar – Projects Ltd.
Amritsar Section) in the State of
Punjab on BOT basis
RC15 Four laning from km 53.0 to km 100.0 IVRCL Infrastructure 48.51 BOT 1 4 2006 20.0 93.68 16.26
of Kumarapalayam-Chengapalli Projects Ltd.
section of NH-47 on BOT
basis.(Contract Package No. NS-
2/BOT/TN-7)
RC16 Gonde-Vadape (Thane)/ Km. Gammon India 100.00 BOT 1 2 2006 20.0 167.33 NA
440/000 to Km. 539/500 Maharashtra
RC17 Guna Bypass/ Km. 319/700 to Km. IVRCL Infrastructure 14.00 BOT 1 1 2006 15.0 14.67 NA
332/100 / Madhya Pradesh Projects Ltd.
RC18 Indore-Khalghat/ Madhya Pradesh Oriental Structural 80.00 BOT 1 1 2006 20.0 144.44 NA
Engineers Pvt. Ltd.
RC19 Karur to Madurai (TN-4) Km 305.6 to Madhucon Projects 68.13 BOT 1 4 2006 20.0 82.96 NA
Km 373.275 Tamil Nadu (Karur to Ltd.
Dindigul)
RC20 Karur to Madurai (TN-5) Km 373.275 Reliance Energy 53.03 BOT 1 4 2006 20.0 92.22 NA
to km 426.6Tamil Nadu Ltd.
RC21 Kondhali – Telegaon/ Km 50 to Km Oriental Structural 50.00 BOT 1 2 2006 20.0 70.63 NA
100/ Maharashtra Engineers Pvt. Ltd.
RC22 Krishnagiri to Thopurghat (NS-2/TN1) L&T 62.50 BOT 1 4 2006 20.0 116.67 NA
Km. 94.000 to 156 Tamil Nadu
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RC23 Mahua-Jaipur/ Km. 120 to Km 228/ IJM 108.00 BOT 1 2 2006 25.0 117.64 NA
Rajasthan
RC24 Meerut-Muzaffarnagar/ Km 52.250 to Gayatri Projects Ltd. 79.00 BOT 1 1 2006 20.0 118.89 NA
Km.131.00/ Uttar Pradesh
RC25 Nagpur – Kondhali/ Km 9.2 to Km 50/ Atlanta Construction 40.00 BOT 1 2 2006 20.0 50.28 NA
Maharashtra Co.
RC26 Padalur-Trichy Package VI-6 / km Navayuga 40.00 BOT 1 4 2006 25.0 91.33 NA
285.00 to km 325.00 / Tamil Nadu
RC27 Palanpur to Swaroopganj (Rajasthan L&T 76.00 BOT 1 2 2006 20.0 123.42 8.89
-42 km & Gujarat-34 km )/ km 264 to
km 340 (Rajasthan 42 km & Gujarat -
34 km)/ Gujarat[34]/Rajasthan[42]
RC28 Panipat Elevated Highway/ Km 96.00 L&T 10.00 BOT 1 1 2006 20.0 93.67
to 86.00/ Haryana
RC29 Salem to Karur (NS-2/TN-2) Km. MVR 41.55 BOT 1 4 2006 20.0 57.16 19.99
207.050 to Km 248.625 Tamil Nadu
RC30 Salem to Karur (NS-2/TN-3) Km Reliance Energy 33.48 BOT 1 4 2006 20.0 76.62 11.97
258.645 to Km 292.6 Tamil Nadu Ltd.
RC31 Sitapur – Lucknow/ Km 488.27 to km DS Construction 75.00 BOT 1 1 2006 20.0 100.09 NA
413.20/ Uttar Pradesh Ltd.
RC32 Tindivanam - Ulunderpet package VI- GMR 71.25 BOT 1 4 2006 20.0 176.67 NA
a / km 121 to km 192.25 / Tamil Nadu
RC33 Ulundurpet - Padalur (Pkg- VI-B) km IJM 92.75 BOT 1 4 2006 20.0 166.22 14.65
192.25 - km 285.00 Tamil Nadu
RC33 Vadodara to Bharuch Package BOT- L&T 83.30 BOT 1 2 2006 15.0 322.22 13.25
1/ 6 lanning/ Gujarat
RC33 Western Expressway DS Construction 135.60 BOT 1 1 2006 30.0 425.56 11.97
Ltd.
Awarded by: Code 1 = Centre Projects; Code 2 = State Projects
Region: Code 1 = Centre; Code 2 = Western; Code 3 = Eastern; Code 4 = Southern,
NA = Data Not available
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Sub Debt Debt

Debt Debt as Negative Debt Reset Moratorium Interest Corporate
Proj Primary as Grant Equity Tenure
Project Name (USD percentage Grant Equity Period Period (in Rate / Personal
Code Developers percentage (Y/N) Ratio (Yrs)
Million of TPC (Y/N Ratio* (Yrs) Years) (%) Guarantee
of TPC **
A1 Ankapalli – Tuni/ km GMR 50.69 74% 0% 2.9 2.9 15.0 5.00 0.0 7.50 NA
359.2 - km 300/ Andhra N N
Pradesh
A2 Gwalior Bypass (NS- Ramky 44.44 67% 0% 2.0 2.0 NA
1/BOT/MP-1) km 0 to km Infrastructure N N NA NA NA NA
42.033 / Madhya Ltd.
Pradesh
A3 Palsit – Dankuni/ km 581 Gamuda 74.26 75% 7% 3.0 3.0 15.0 1.00 3.0 12.00 NA
- km 646/ West Bengal Malaysia N N
A4 Panagarh – Palsit/ km Gamuda 93.11 73% 0% 2.7 2.7 15.0 1.00 3.0 12.00
517 - km 581/ West Malaysia N N NA
Bengal
A5 Tambaram - Tindivanam GMR 64.30 73% 0% 2.7 2.7 15.0 5.00 0.0 7.50
km 28 - km 121/ Tamil N N NA
Nadu
RS1 Bhuj Nakthrana Road M.S. Khurana 5.45 70% 0% 2.3 2.3 10.5 NA 1.5 10.00 1
Engineering N N
RS2 Himmatnagar Bypass MSK 1.09 70% 0% 2.3 2.3 NA NA 1.5 NA
Projects(I) Ltd. N N NA
RC1 Haldia Port NH-41 (from NHAI 45.29 38% 37% 0.6 0.6 12.0 1.00 2.0 13.00
Kolaghat on NH-6 to N N NA
Haldia) West Bengal
RC2 Jawaharlal Nehru Port NHAI 22.89 41% 17% 0.7 0.7
Phase-I/ Maharashtra N N NA NA NA NA NA
RC3 Jawaharlal Nehru Port NHAI 23.36 37% 22% 0.6 0.6
Phase-II/ SH-54 + N N NA NA NA NA NA
Amramarg + Panvel
Creek Bridge/
Maharashtra
RC4 New Mangalore Port NH- NHAI 20.28 50% 0% 1.0 1.0
17 (Suratkal-Nantur N N NA NA NA NA NA
Section), NH-48 (Padil
Bantwal Section)/
Karnataka
A6 Bara to Orai/ km 449 to Nagarjuna 97.47 75% 0% 3.0 3.0 13.5 1.00 3.0 9.50
422 on NH-2 & km 255 to Construction N N NA
km 220/ Uttar Pradesh Company Ltd.
RS3 Hoshangabad-Harda- MSK 5.22 24% 0% Y 0.3 1.1 8.0 11.00
Khandwa Road Projects(I) Ltd. N NA NA NA
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RS4 Punjab Road Sector Rohan 14.80 51% 0% Y 1.1 4.9 7.0 NA 2.0 10.25
Project: Phase II – Builders India N NA
Upgradation, Operation Pvt. Ltd.
and Maintenance of
Balachaur – Dasuya
Road on B.O.T Basis
RS5 Raisen-Rahatgarh Road MSK 4.00 27% 0% Y 0.4 1.2 9.0 8.50
Projects(I) Ltd. N NA NA NA
RS5 Upgradation, Operation IDEB Projects 9.56 58% 0% Y 1.4 7.8 10.0 NA 3.0 10.00
and Maintenance of Pvt Ltd. N NA
Patiala - Malerkotla Road
on B.O.T.Basis
RC5 Agra – Bharatpur/ Oriental 37.33 75% 0% 3.0 3.0 15.0 1.00 4.5 9.75
Rajasthan[20]/Uttar Structural N N NA
Pradesh[25] Engineers Pvt.
Ltd.
RC6 Ambala – Zirakpur/ Km. GMR 66.22 72% 4% Y 1.7 2.6 15.0 3.00 4.3 8.50
5/735 to Km. 39/961 of N NA
NH-22 and Km. 0/0 to
Km. 0/871 of NH-21
RC7 Aurang - Raipur Km 232 DS 44.44 70% 0% Y 2.3 2.4 13.7 2.00 2.0 10.00
to Km. 281 Chattisgarh Construction N NA
Ltd.
RC8 Bharatpur-Mahua/ km. 63 Madhucon 44.10 67% 0% Y 2.0 3.2 12.0 NA 3.0 8.50
to Km. 120/ Rajasthan Projects Ltd. N NA
RC9 Bharuch-Surat package Ideal Road 269.10 86% 0% Y 1.7 6.1 11.0 3.00 1.0 9.25 1
BOT-II / 4 laning / Gujarat Builders Pvt. N
Ltd.
RC10 Chennai - Ennore NHAI 26.67 39% 0% 0.6 0.6 15.0 NA 3.0 8.00
Express Way N N NA
RC11 Farukhanagar to L&T 60.30 64% 9% Y 1.8 2.7 15.3 3.00 3.0 9.19
Kotakatta (NS-2/AP-4)/ N NA
Km 80.050 to km
RC12 Farukhanagar to GMR 78.57 75% 0% N 3.0 3.0 16.0 3.00 2.0 9.25 1
Kottakata (NS-2/AP-3)/ N
Km. 34.140 to km
RC13 Four laning from km 0.0 IVRCL 65.11 44% 14% Y 0.8 1.5 15.0 3.00 3.0 9.25
to km 53.0 of Salem – Infrastructure N NA
Kumarapalayam on NH- Projects Ltd.
47 on BOT
basis.(Contract Package
No. NS-2/BOT/TN-6)
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RC14 Four laning from km IVRCL 34.89 66% 0% Y 1.9 3.8 8.0 NA 3.3 8.25
407.100 to km 456.100 of Infrastructure N NA
NH-1 (Jalandhar – Projects Ltd.
Amritsar Section) in the
State of Punjab on BOT
basis
RC15 Four laning from km 53.0 IVRCL 75.33 76% 5% Y 3.1 3.8 15.0 3.00 3.0 9.25
to km 100.0 of Infrastructure N NA
Kumarapalayam- Projects Ltd.
Chengapalli section of
NH-47 on BOT
No. NS-2/BOT/TN-7)
RC16 Gonde-Vadape (Thane)/ Gammon India 144.44 86% 0% Y N 6.3 12.5 15.0 3.00 4.0 9.00 1
Km. 440/000 to Km.
539/500 Maharashtra
RC17 Guna Bypass/ Km. IVRCL 9.33 64% 0% Y 1.6 1.8 11.0 3.00 2.0 9.00
319/700 to Km. 332/100 / Infrastructure N NA
Madhya Pradesh Projects Ltd.
RC18 Indore-Khalghat/ Madhya Oriental 115.56 80% 0% N 4.0 4.0 15.0 1.00 4.0 10.00
Pradesh Structural N NA
Engineers Pvt.
Ltd.
RC19 Karur to Madurai (TN-4) Madhucon 49.78 60% 0% Y 1.5 3.0 16.0 NA 3.5 8.50
Km 305.6 to Km 373.275 Projects Ltd. N NA
Tamil Nadu (Karur to
Dindigul)
RC20 Karur to Madurai (TN-5) Reliance 84.18 80% 11% N 4.0 4.0 16.0 1.00 1.0 9.25
Km 373.275 to km Energy Ltd. N NA
426.6Tamil Nadu
RC21 Kondhali – Telegaon/ Km Oriental 54.44 77% 0% Y N 3.4 3.9 15.0 3.00 3.8 9.50
50 to Km 100/ Structural NA
Maharashtra Engineers Pvt.
Ltd.
RC22 Krishnagiri to Thopurghat L&T 99.11 75% 10% N Y 0.8 3.0 14.1 3.00 4.3 8.25
(NS-2/TN1) Km. 94.000 NA
to 156 Tamil Nadu
RC23 Mahua-Jaipur/ Km. 120 IJM 76.44 65% 0% Y 1.9 2.4 12.5 3.00 3.3 8.25
to Km 228/ Rajasthan N NA
RC24 Meerut-Muzaffarnagar/ Gayatri 85.56 66% 6% Y 2.0 2.9 14.6 3.00 4.0 10.20
Km 52.250 to Km.131.00/ Projects Ltd. N NA
Uttar Pradesh
RC25 Nagpur – Kondhali/ Km Atlanta 24.44 49% 0% Y 0.9 1.9 13.0 0.08 3.0 9.50 1
9.2 to Km 50/ Construction N
Maharashtra Co.
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RC26 Padalur-Trichy Package Navayuga 59.11 65% 0% Y 1.8 3.1 14.0 2.00 3.5 9.50
VI-6 / km 285.00 to km N NA
325.00 / Tamil Nadu
RC27 Palanpur to Swaroopganj L&T 111.11 90% 0% 9.0 9.0 16.5 0.50 3.0 NA
(Rajasthan -42 km & N N NA
Gujarat-34 km )/ km 264
to km 340 (Rajasthan 42
km & Gujarat -34 km)/
RC28 Panipat Elevated L&T 74.93 70% 10% N Y 0.6 2.3 13.2 NA 4.0 10.21
Highway/ Km 96.00 to NA
86.00/ Haryana
RC29 Salem to Karur (NS- MVR 46.00 75% 5% N Y 1.0 3.0 15.0 3.00 3.0 10.77 1
2/TN-2) Km. 207.050 to
Km 248.625 Tamil Nadu
RC30 Salem to Karur (NS- Reliance 61.33 80% 0% Y N 4.0 6.2 14.8 1.00 1.0 9.25
2/TN-3) Km 258.645 to Energy Ltd. NA
Km 292.6 Tamil Nadu
RC31 Sitapur – Lucknow/ Km DS 47.56 48% 0% Y N 0.9 1.8 15.0 2.00 4.0 10.00
488.27 to km 413.20/ Construction NA
Uttar Pradesh Ltd.
RC32 Tindivanam - Ulunderpet GMR 132.50 75% 0% N Y 1.9 3.0 15.0 3.00 3.5 9.25
package VI-a / km 121 to NA
km 192.25 / Tamil Nadu
RC33 Ulundurpet - Padalur IJM 120.22 65% 7% Y N 1.9 2.2 14.5 NA 1.2 9.73
(Pkg- VI-B) km 192.25 - NA
km 285.00 Tamil Nadu
RC33 Vadodara to Bharuch L&T 312.56 80% 17% 4.0 4.0 13.6 2.00 4.0 10.15
Package BOT-1/ 6 N N NA
lanning/ Gujarat
RC33 Western Expressway DS 255.33 60% 0% 1.5 1.5 13.8 1.00 3.0 10.50
Construction N N NA
Ltd.
* Senior Debt to Pure Equity
** Sub-Debt has been included on the equity side
11.6 Composite Risk Profile and the Categorised Score of the Projects
Weightage 20% 15% 0% 10% 3% 15% 5% 15% 3% 10% 5%
Independence Composite
Developer Grant from
Proj Developer of the Awarded Project type Project Project Contract Negative Risk Risk
Project Name (Net Region the
Code (Revenue) construction by Annuity/BOT Size IRR period Grant Profile Category
Worth) Government
contractor Score
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Weightage 20% 15% 0% 10% 3% 15% 5% 15% 3% 10% 5%

Worth) Government
contractor Score
A1 Ankapalli – Tuni/ km 2 3 2 1 1 1 2 2 2 1 1 1.73 2
359.2 - km 300/ Andhra
Pradesh
A2 Gwalior Bypass (NS- 1 2 1 1 1 1 2 2 2 1 1 1.38 1
1/BOT/MP-1) km 0 to km
42.033 / Madhya
Pradesh
A3 Palsit – Dankuni/ km 581 1 1 1 1 2 1 2 2 2 1 1 1.25 1
- km 646/ West Bengal
A4 Panagarh – Palsit/ km 1 1 1 1 2 1 1 2 2 1 1 1.20 1
517 - km 581/ West
Bengal
A5 Tambaram - Tindivanam 2 3 2 1 1 1 2 2 2 1 1 1.73 2
km 28 - km 121/ Tamil
Nadu
BS1 Bhuj Nakthrana Road 3 3 3 2 2 3 3 2 3 2 2 2.58 3
BS2 Himmatnagar Bypass 2 3 3 2 2 3 3 2 3 2 2 2.38 3
BC1 Haldia Port NH-41 (from 1 1 1 1 2 3 2 2 1 1 1 1.53 2
Kolaghat on NH-6 to
Haldia) West Bengal
BC2 Jawaharlal Nehru Port 1 1 1 1 2 3 3 2 1 1 1 1.58 2
Phase-I/ Maharashtra
BC3 Jawaharlal Nehru Port 1 1 1 1 2 3 3 2 1 1 1 1.58 2
Phase-II/ SH-54 +
Amramarg + Panvel
Creek Bridge/
Maharashtra
BC4 New Mangalore Port NH- 1 1 1 1 1 3 3 3 1 1 1 1.70 2
17 (Suratkal-Nantur
Section), NH-48 (Padil
Bantwal Section)/
Karnataka
A6 Bara to Orai/ km 449 to 2 2 3 1 1 1 1 2 2 1 1 1.53 2
422 on NH-2 & km 255 to
km 220/ Uttar Pradesh
BS3 Hoshangabad-Harda- 2 3 3 2 1 3 3 2 3 1 2 2.25 3
Khandwa Road
BS4 Punjab Road Sector 3 3 3 2 1 3 3 1 2 1 2 2.28 3
Project: Phase II –
Upgradation, Operation
and Maintenance of
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Weightage 20% 15% 0% 10% 3% 15% 5% 15% 3% 10% 5%

Worth) Government
contractor Score
Balachaur – Dasuya
Road on B.O.T Basis
BS5 Raisen-Rahatgarh Road 2 3 3 2 1 3 3 2 3 1 2 2.25 3

BS5 Upgradation, Operation 3 3 3 2 1 3 3 3 2 1 2 2.58 3
and Maintenance of
Patiala - Malerkotla Road
on B.O.T.Basis
BC5 Agra – Bharatpur/ 3 3 3 1 1 3 2 2 2 1 1 2.23 3
Rajasthan[20]/Uttar
Pradesh[25]
BC6 Ambala – Zirakpur/ Km. 2 3 2 1 1 3 2 2 2 1 2 2.08 2
5/735 to Km. 39/961 of
NH-22 and Km. 0/0 to
Km. 0/871 of NH-21
BC7 Aurang - Raipur Km 232 2 3 3 1 2 3 2 1 1 0 1 1.78 2
to Km. 281 Chattisgarh
BC8 Bharatpur-Mahua/ km. 63 3 3 3 1 2 3 2 2 1 0 1 2.13 2
to Km. 120/ Rajasthan
BC9 Bharuch-Surat package 3 3 3 1 2 3 1 2 2 1 2 2.25 3
BOT-II / 4 laning / Gujarat
BC10 Chennai - Ennore 1 1 1 1 1 3 2 2 1 1 1 1.50 1
Express Way
BC11 Farukhanagar to 1 1 3 1 1 3 2 2 2 0 0 1.38 1
Kotakatta (NS-2/AP-4)/
Km 80.050 to km
BC12 Farukhanagar to 2 3 2 1 1 3 2 2 2 1 0 1.98 2
Kotakatta (NS-2/AP-3)/
Km. 34.140 to km
BC13 Four laning from km 0.0 2 2 3 1 1 3 1 2 2 0 0 1.68 2
to km 53.0 of Salem –
Kumarapalayam on NH-
47 on BOT
No. NS-2/BOT/TN-6)
BC14 Four laning from km 2 2 3 1 1 3 2 3 2 0 0 1.88 2
407.100 to km 456.100 of
NH-1 (Jalandhar –
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Weightage 20% 15% 0% 10% 3% 15% 5% 15% 3% 10% 5%

Worth) Government
contractor Score
Amritsar Section) in the
State of Punjab on BOT
basis
BC15 Four laning from km 53.0 2 2 3 1 1 3 2 1 2 0 0 1.58 2
to km 100.0 of
Kumarapalayam-
Chengapalli section of
NH-47 on BOT
No. NS-2/BOT/TN-7)
BC16 Gonde-Vadape (Thane)/ 2 2 1 1 2 3 1 2 2 0 0 1.70 2
Km. 440/000 to Km.
539/500 Maharashtra
BC17 Guna Bypass/ Km. 2 2 3 1 1 3 3 2 3 1 2 2.00 2
319/700 to Km. 332/100 /
Madhya Pradesh
BC18 Indore-Khalghat/ Madhya 3 3 3 1 1 3 1 2 2 1 0 2.13 2
Pradesh
BC19 Karur to Madurai (TN-4) 3 3 3 1 1 3 2 2 2 0 0 2.08 2
Km 305.6 to Km 373.275
Tamil Nadu (Karur to
Dindigul)
BC20 Karur to Madurai (TN-5) 1 1 1 1 1 3 2 2 2 1 0 1.48 1
Km 373.275 to km
426.6Tamil Nadu
BC21 Kondhali – Telegaon/ Km 3 3 3 1 2 3 2 2 2 0 0 2.10 2
50 to Km 100/
Maharashtra
BC22 Krishnagiri to Thopurghat 1 1 3 1 1 3 1 2 2 1 2 1.53 2
(NS-2/TN1) Km. 94.000
to 156 Tamil Nadu
BC23 Mahua-Jaipur/ Km. 120 1 1 1 1 2 3 1 2 1 0 0 1.33 1
to Km 228/ Rajasthan
BC24 Meerut-Muzaffarnagar/ 3 3 3 1 1 3 1 2 2 0 0 2.03 2
Km 52.250 to Km.131.00/
Uttar Pradesh
BC25 Nagpur – Kondhali/ Km 3 3 3 1 2 3 2 2 2 0 0 2.10 2
9.2 to Km 50/
Maharashtra
BC26 Padalur-Trichy Package 3 2 3 1 1 3 2 2 1 0 0 1.90 2
VI-6 / km 285.00 to km
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Weightage 20% 15% 0% 10% 3% 15% 5% 15% 3% 10% 5%

Worth) Government
contractor Score
325.00 / Tamil Nadu
BC27 Palanpur to Swaroopganj 1 1 3 1 2 3 1 3 2 1 0 1.60 2

(Rajasthan -42 km &
Gujarat-34 km )/ km 264
to km 340 (Rajasthan 42
km & Gujarat -34 km)/
BC28 Panipat Elevated 1 1 3 1 1 3 2 2 2 1 2 1.58 2
Highway/ Km 96.00 to
86.00/ Haryana
BC29 Salem to Karur (NS- 3 3 3 1 1 3 2 1 2 1 2 2.13 2
2/TN-2) Km. 207.050 to
Km 248.625 Tamil Nadu
BC30 Salem to Karur (NS- 1 1 1 1 1 3 2 3 2 0 0 1.53 2
2/TN-3) Km 258.645 to
Km 292.6 Tamil Nadu
BC31 Sitapur – Lucknow/ Km 2 3 3 1 1 3 2 2 2 0 0 1.88 2
488.27 to km 413.20/
Uttar Pradesh
BC32 Tindivanam - Ulunderpet 2 3 2 1 1 3 1 2 2 1 2 2.03 2
package VI-a / km 121 to
km 192.25 / Tamil Nadu
BC33 Ulundurpet - Padalur 1 1 1 1 1 3 1 2 2 0 0 1.33 1
(Pkg- VI-B) km 192.25 -
km 285.00 Tamil Nadu
BC33 Vadodara to Bharuch 1 1 3 1 2 3 1 2 3 1 0 1.48 1
Package BOT-1/ 6
laning/ Gujarat
BC33 Western Expressway 2 3 3 1 1 3 1 3 1 1 0 2.05 2
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11.7 Value of the Evaluating Parameters

Debt Tenure to
Interest Minimum Corporate/ Personal
Proj Code Project Name Annuity per Debt/KM DER Tail Concession period
Rate DSCR Guarantee
Km. ratio
A1 Ankapalli – Tuni/ km 359.2 - km 300/ 0.11 0.86 Outlier 2.9 2.50 85.71% NA NA
Andhra Pradesh
A2 Gwalior Bypass (NS-1/BOT/MP-1) km 0 to 0.13 1.06 NA 2.0 NA 0.00% NA NA
km 42.033 / Madhya Pradesh
A3 Palsit – Dankuni/ km 581 - km 646/ West 0.14 1.14 12.00 3.0 5.00 75.00% NA NA
Bengal
A4 Panagarh – Palsit/ km 517 - km 581/ West 0.17 1.44 12.00 2.7 5.00 75.00% NA NA
Bengal
A5 Tambaram - Tindivanam km 28 - km 121/ 0.09 0.69 Outlier 2.7 2.50 85.71% NA NA
Tamil Nadu
RS1 Bhuj Nakthrana Road Outlier Outlier 10.00 2.3 2.50 80.77% NA 1
RS2 Himmatnagar Bypass Outlier Outlier 2.3 NA 0.00% NA NA
RC1 Haldia Port NH-41 (from Kolaghat on NH-6 0.09 0.85 13.00 0.6 18.00 40.00% NA NA
to Haldia) West Bengal
RC2 Jawaharlal Nehru Port Phase-I/ 0.08 0.76 NA 0.7 NA 0.00% NA NA
Maharashtra
RC3 Jawaharlal Nehru Port Phase-II/ SH-54 + 0.17 1.63 NA 0.6 NA 0.00% NA NA
Amramarg + Panvel Creek Bridge/
Maharashtra
RC4 New Mangalore Port NH-17 (Suratkal- 0.06 0.55 NA 1.0 NA 0.00% NA NA
Nantur Section), NH-48 (Padil Bantwal
Section)/ Karnataka
A6 Bara to Orai/ km 449 to 422 on NH-2 & km 0.19 1.55 9.50 3.0 6.50 67.50% NA NA
255 to km 220/ Uttar Pradesh
RS3 Hoshangabad-Harda-Khandwa Road Outlier Outlier 11.00 1.1 7.00 53.33% NA NA

RS4 Punjab Road Sector Project: Phase II – Outlier Outlier 10.25 4.9 10.00 41.18% NA NA
Upgradation, Operation and Maintenance
of Balachaur – Dasuya Road on B.O.T
Basis
RS5 Raisen-Rahatgarh Road Outlier Outlier 8.50 1.2 6.00 60.00% NA NA
RS5 Upgradation, Operation and Maintenance Outlier Outlier 10.00 7.8 6.50 60.61% NA NA
of Patiala - Malerkotla Road on
B.O.T.Basis
RC5 Agra – Bharatpur/ Rajasthan[20]/Uttar 0.10 0.83 9.75 3.0 5.00 75.00% NA NA
Pradesh[25]
RC6 Ambala – Zirakpur/ Km. 5/735 to Km. 0.22 Outlier 8.50 2.6 5.00 75.00% NA NA
39/961 of NH-22 and Km. 0/0 to Km. 0/871
of NH-21 Haryana[6]/ Punjab[30]
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RC7 Aurang - Raipur Km 232 to Km. 281 0.11 0.99 10.00 2.4 11.30 54.80% NA NA
Chattisgarh
RC8 Bharatpur-Mahua/ km. 63 to Km. 120/ 0.09 0.77 8.50 3.2 13.00 48.00% NA NA
Rajasthan
RC9 Bharuch-Surat package BOT-II / 4 laning / Outlier Outlier 9.25 6.1 9.00 55.00% NA 1
Gujarat
RC10 Chennai - Ennore Express Way 0.13 1.26 8.00 0.6 15.00 50.00% NA NA
RC11 Farukhanagar to Kotakatta (NS-2/AP-4)/ 0.13 1.08 9.19 2.7 4.75 76.25% NA NA
Km 80.050 to km 135.469/ Andhra Pradesh
RC12 Farukhanagar to Kottakata (NS-2/AP-3)/ 0.20 1.70 9.25 3.0 4.00 80.00% NA 1
Km. 34.140 to km 80.050/ Andhra Pradesh
RC13 Four laning from km 0.0 to km 53.0 of 0.15 1.22 9.25 1.5 5.00 75.00% NA NA
Salem – Kumarapalayam on NH-47 on
BOT basis.(Contract Package No. NS-
2/BOT/TN-6)
RC14 Four laning from km 407.100 to km 0.09 0.71 8.25 3.8 12.00 40.00% NA NA
456.100 of NH-1 (Jalandhar –Amritsar
Section) in the State of Punjab on BOT
basis
RC15 Four laning from km 53.0 to km 100.0 of 0.19 1.55 9.25 3.8 5.00 75.00% NA NA
Kumarapalayam-Chengapalli section of
NH-47 on BOT basis.(Contract Package
No. NS-2/BOT/TN-7)
RC16 Gonde-Vadape (Thane)/ Km. 440/000 to 0.17 1.44 9.00 12.5 5.00 75.00% NA 1
Km. 539/500 Maharashtra
RC17 Guna Bypass/ Km. 319/700 to Km. 0.09 0.67 9.00 1.8 4.00 73.33% NA NA
332/100 / Madhya Pradesh
RC18 Indore-Khalghat/ Madhya Pradesh 0.17 1.44 10.00 4.0 5.00 75.00% NA NA
RC19 Karur to Madurai (TN-4) Km 305.6 to Km 0.09 0.73 8.50 3.0 4.00 80.00% 1.41 NA
373.275 Tamil Nadu (Karur to Dindigul)
RC20 Karur to Madurai (TN-5) Km 373.275 to km 0.19 1.59 9.25 4.0 4.00 80.00% NA NA
426.6Tamil Nadu
RC21 Kondhali – Telegaon/ Km 50 to Km 100/ 0.13 1.09 9.50 3.9 5.00 75.00% NA NA
Maharashtra
RC22 Krishnagiri to Thopurghat (NS-2/TN1) Km. 0.19 1.59 8.25 3.0 5.86 70.70% 1.93 NA
94.000 to 156 Tamil Nadu
RC23 Mahua-Jaipur/ Km. 120 to Km 228/ 0.08 0.71 8.25 2.4 12.50 50.00% NA NA
Rajasthan
RC24 Meerut-Muzaffarnagar/ Km 52.250 to 0.13 1.08 10.20 2.9 5.45 72.75% NA NA
Km.131.00/ Uttar Pradesh
RC25 Nagpur – Kondhali/ Km 9.2 to Km 50/ 0.07 0.61 9.50 1.9 7.00 65.00% NA 1
Maharashtra
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RC26 Padalur-Trichy Package VI-6 / km 285.00 0.16 1.48 9.50 3.1 11.00 56.00% NA NA
to km 325.00 / Tamil Nadu
RC27 Palanpur to Swaroopganj (Rajasthan -42 0.17 1.46 NA 9.0 3.50 82.50% 1.1 NA
km & Gujarat-34 km )/ km 264 to km 340
(Rajasthan 42 km & Gujarat -34 km)/
RC28 Panipat Elevated Highway/ Km 96.00 to Outlier Outlier 10.21 2.3 6.83 65.83% 1.53 NA
86.00/ Haryana
RC29 Salem to Karur (NS-2/TN-2) Km. 207.050 0.13 1.11 10.77 3.0 5.00 75.00% 2.22 1
to Km 248.625 Tamil Nadu
RC30 Salem to Karur (NS-2/TN-3) Km 258.645 to 0.22 9.25 6.2 5.25 73.75% NA NA
Km 292.6 Tamil Nadu
RC31 Sitapur – Lucknow/ Km 488.27 to km 0.08 0.63 10.00 1.8 5.00 75.00% NA NA
413.20/ Uttar Pradesh
RC32 Tindivanam - Ulunderpet package VI-a / 0.22 9.25 3.0 5.00 75.00% NA NA
km 121 to km 192.25 / Tamil Nadu
RC33 Ulundurpet - Padalur (Pkg- VI-B) km 0.15 1.30 9.73 2.2 5.52 72.40% NA NA
192.25 - km 285.00 Tamil Nadu
RC33 Vadodara to Bharuch Package BOT-1/ 6 Outlier Outlier 10.15 4.0 1.37 90.89% NA NA
lanning/ Gujarat
RC33 Western Expressway 0.20 1.88 10.50 1.5 16.25 45.83% NA NA
Outlier – Data deleted due to an exceptional value
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12 Annexure 7 - Differences in Equity Infusion

The risk profile mentioned in Annexure 6 above was compared with the amount of equity
infusion in the projects. However, there was no relationship that could be derived from the
analysis. We therefore, carried out an analysis that looked at the following:
1. First, we have looked at equity differences in projects under two categories of projects–
a. Project that has atleast one strong developer
b. Project that does not have a strong developer
This helps us understand how presence of a strong developer affects the infusion of
equity in a PPP project.
2. Second, we have tried to understand how covenants in concession and loan agreements
restrict equity dilution in India.
We have analysed the data for only the Road sector because firstly, it is the only sector in
India, where PPP format is in advanced stages of development and secondly, the sample
size is significant only in the road sector to carry out any meaningful analysis
12.1 Equity Differences in Projects

We have divided the sample of road projects into two basic categories:
Categories
1 – One or more strong developer
2 – One or more small developer
Note: Strength of the developer is a judgemental definition based on the market size, reputation, and
number of projects undertaken.
The list of the projects, their categories and the data on them is provided in Exhibit 76. The
sample size and equity brought in each category is as follows:
Exhibit 76: Project Category and Data
Project Category 1 2
Sample Size 31 30
Average Project TPC (USD Million) 114.70 68.28
Average Equity per Project (USD Million) 24.35 13.15
Average Equity as percentage of TPC 22% 21%
Average Sub-Debt per Project (USD Million) 12.07 4.76
Average Sub Debt as percentage of TPC 4% 2%
Average Grant per Project (USD Million) 13.87 10.04
Average Grant as percentage of TPC 6% 13%
Average Debt Equity Ratio (including Sub-debt) 3.24 3.12
It can be seen clearly from above that large developers are taking up bigger projects and
small developers are taking up smaller projects in road sector in India. Hence the average
amount of equity per project is also proportional. There is not much variation in terms of the
proportion of equity.
However, there are some differences in terms of the percentage of sub-debt and grant in the
projects. Smaller developers are investing in smaller projects which have higher amount of
grant support from the Government while larger developers are investing in large projects
which have smaller grant component. There is slight variation in the sub-debt too.
Percentage of sub-debt on an average in projects taken up by large developers is more than
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the percentage of sub-debt on an average in projects taken up by small developers. The

difference in DER by category is not significant to reach any meaningful conclusion.
12.2 Covenants in the Concession Agreements and Loan Agreements

Restricting Dilution of Equity
There are some restrictions that are placed on the continuation of holding of equity (i.e.
Lock-in) by the developers in the Concession agreement and also in loan documentation.
These conditions restrict equity dilution below a certain percentage, as presented in the table
below:
Agreement
# Type of Covenant Actual conditions imposed Restriction Implications
Type
1 Concession Conditions are The equity share holding of The covenants in Equity dilution
Agreement imposed on the the Lead Developer (with its the agreement do below 26% by
(often percentage of associates) in the issued and not impose limit on the lead
referred to equity to be paid up equity share capital the total equity developer is not
as Old maintained by a of the SPV shall not be less (either in amount or possible.
Concession developer during than (a) 51% (fifty one in percentage) to
Agreement various stages of percent) during the be brought by any
in Roads) the project life Construction Period and for consortium of
cycle 3 (three) years following developers.
COD, and (b) 26% (twenty However, it
six per cent) during the imposes restriction
balance remaining only on the
Operations Period. composition of that
equity by
Other member of the
mandating the lead
Consortium shall hold not
developer to
less than 10% (ten per cent)
maintain a
of SPV’s equity at all times
minimum
during the Concession
percentage of the
Period
total equity of the
SPV.
2 Concession Conditions are Equity of the existing Even in the new Equity dilution
Agreement imposed on the promoters/ Consortium concession below 26% by
(often percentage of Members, together with their agreement for the lead
referred to equity to be Associates in the total Equity roads, covenants in developer is not
as New maintained by a of the SPV, not to decline the agreement do possible.
Concession developer during below not impose limit on
Agreement various stages of the total equity
1. 51% (fifty one per cent)
in Roads) the project life (either in amount or
during Construction
cycle in percentage) to
Period,
be brought by any
2. 33% (thirty three per consortium of
cent) thereof during a developers.
period of 3 (three) years However, it
following Project imposes restriction
Completion Date, and only on the
composition of that
3. 26% (twenty six per cent)
equity by
thereof, or such lower
mandating the lead
proportion as may be developer to
permitted by the maintain a
Authority during the
minimum
remaining Concession
percentage of the
Period
total equity of the
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SPV.
3 Loan The SPV has to pledge of all the shares Often more than The shares
Agreement* pledge a (equity and preference) of 51% of the SPV’s pledged with the
percentage of its the SPV representing 51% of shares are pledged banks’ can not
shares in lieu of the the paid up share capital of with the banks and be sold or
loan the SPV, till the life of the hence can not be transferred.
loan diluted over the life
of the loan.
Lenders also have
a nominee on the
board of the
borrower /SPV and
there are certain
conditions where
consent is
mandatory from the
lenders.
* conditions indicated here are only samples. All loan documentation may or may not have such conditions.
Internationally, like in Latin American countries the project finance is many times on a limited
recourse basis. In some cases, lenders request additional involvement from the sponsors
after construction period. For example lenders may request sponsors to increase equity
when maintenance and operation costs are larger than expected in the initial financial plan.
In other cases, lenders request additional equity from sponsors if actual traffic is lower than
forecasted42.
42
Source: Paulina Beato. (2000). Road Concessions: Lessons Learned from the Experience of Four Countries, Best Practice
Study. Financial Markets Division of the Sustainable Development Department. Inter-American Development Bank.
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13 Annexure 8 - Refinancing of PPP Projects

Refinancing of debt is a common feature in PPP infrastructure financing. Refinancing of
debt, to reduce the cost in PPP projects is generally associated with the reduction in
construction risk after the initial construction phase is over. Also, a maturing PPP market
means early PPP projects can now access better financing terms than those available when
the contracts were let.
13.1 Refinancing of PPP Projects in India – some Case Studies

In India, we find that many PPP projects have been refinanced due to a variety of reasons
such as:
• Lowering of risks after the initial construction is over and revenues have started
stabilising;
• Significant drop in interest rates in the market;
• Projects distressed due to shortfalls in projected revenues and hence inability to service
agreed level of debt;
We have presented, the case study, under each of the above refinancing reasons to better
understand the relationship of risk and refinancing.
For example Narmada Bridge Project (refer Case 1) of L&T has been refinanced at a rate
lower than initial terms leading to significant reduction (300 Basis points) in the debt funding
cost. This project has been refinanced on account of two reasons – reduction in the initial
construction risk and the decrease in the market interest rates. Refinancing here has been
through banks different from those at the initial financial closure stage.
Case 1 – Narmada Bridge Projects
Project Narmada Bridge Project
Developer L&T
SPV Narmada Infrastructure & Construction Enterprise Ltd
Year of Financial Close 1999
Total Cost USD 25 million (INR113 crore)
Construction Period 3 years
Background:
NICE is an SPV formed by L&T for design, construction, maintenance and operation of the second Narmada
bridge at Zadeshwar on NH-8 in Gujarat. This project was undertaken on BOT basis. The scope of the project
included the construction of a 1.4km-long bridge adjacent to the first bridge, along with 4.6km of approach roads.
Commercial service began in November 2000. The concession was awarded for a period of 15 years, including
the construction period.
Funding Details :
The project was financed in the Debt Equity Ratio of 2:1 and total debt was funded by 4 (four) bankers. The debt
was financed @13% p.a. during the construction phase and reset was fixed after three years which means after
construction phase.
Refinancing :
Since the term loan was available for reset after construction phase, L&T was searching for the best rate available
in the market. L&T had considered that it was possible to get the rate lower than original rate (13%) because the
construction risk was over in the project.
The refinancing was done through a mix of FCNR and term loans. L&T converted the loan by one bank into Yen
denominated FCNR loan and replaced the loan of other three banks with new bank which offered best rate. By
this refinancing, L&T was able to reduce the interest cost of its debt by over 300 basis points.
In two other projects – the Kalyani group’s Hubli-Dharwad and NTBCL’s Noida Toll Bridge
(refer Case 2 & 3) - the refinancing was done primarily because project revenues were lower
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than the projected revenues, leading to inability of the project to service the debt. Also, in
both cases the financial closure was achieved at a time when market lending rates were very
high and subsequently the market lending rates had dropped drastically. Hence the debt in
both cases was refinanced at significantly lower rates. Part of the Noida Bridge was also
financed through the first ever public issue of project bond by any project company in India,
and the bond issue was also refinanced.
Case 2 – Hubli-Dharwad Refinancing

Project Hubli-Dharwad Bypass
Developer Kalyani group
SPV Nandi Highway Developers Limited (NHDL),
Total Cost USD 19.95 million (INR 89.8 Crore)
Background:
Nandi Highway Developers Limited (NHDL), an assisted company promoted by Bharat Forge Limited of the
Kalyani Group, has undertaken the Hubli-Dharwad Bypass Project in Karnataka on NH 24 on BOT basis. The
company has been granted the concession for a period of 26 years.
Funding Details :
The average cost of debt for the project was 16.1% being financed through a combination of Senior and
subordinated debt from ICICI and IDBI infrastructure Bond. NCDs from ICICI have interest rate of 2.75% over
ILTPR (ICICI long Term Prime Lending Rate) which was around 14%# and the repayment schedule has 36
instalments commencing from April 15, 2003 and ending on January 15, 2012. Subordinated loans have interest
rate of 2.65% over ILTPR. Repayment for USD2.56 million (INR11.5 Crore) involves 12 quarterly instalments and
balance USD0.56 million (INR 2.5 Lakh) is to be repaid in 36 quarterly instalments.
Subsequently, ICICI had sold down NCDs amounting to USD9.42 million (INR 42.4 Crore) to Debentures
Securitisation Trusts (DST) in March 2001. Investors subscribed to Pass Through Certificates at 12.75% interest
rate.
Refinancing :
Refinancing of the project was done because the project was not able to service the high cost debt, as there was
much lower traffic on the road than what was projected. Also, the market interest rates have dropped significantly.
The loan was refinanced from the same banks at significantly lower rates. The developers agreed to pay the
prepayment penalties for both the term loans and the PTCs (loan securitised further by the ICICI bank).
Refinancing was through NCDs from ICICI with interest rate of 1.05% over ILTPR which was around 12.5%* and
the repayment schedule of 34 unequal instalments commencing from June 15, 2009 and ending on September
15, 2017. part of the loan was also in the form of Subordinated Cumulative Non Convertible Debentures
(SCNCDs) with interest rate of 4.5% over ILTPR.
nd th
# as per newspaper report on 2 March 1999; * as per ICICI on 14 March 2001
Case 3 – Noida Toll Bridge

Project Noida Toll Bridge
Developer IL&FS
SPV Noida Toll Bridge Company Limited
Total Cost USD 86.66 million (INR 390 Crore)
Construction Period 2 Years
Background:
Noida Toll Bridge Company Limited (NTBCL) has been set up to develop, establish, construct, operate and
maintain the Delhi to Noida Bridge under the “Build-Own-Operate-Transfer” (BOOT) basis. An 8 lane, 10.3 km
link across the river Yamuna, the Noida Toll Bridge project comprises of - a 552 meter long main bridge, 3 minor
bridges, 8 lane approach roads on embankments and a 27 lane 150 meter long toll plaza.
Funding Details :
The debt for the project was raised in two parts. First through term loan form banks and second through issues of
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Deep Discount Bonds (DDBs) the DDB issued on 3rd November 1999 had an option of takeout, making it the first
Public Offer with take out financing arrangement. Nominal Value and Issue Amount were at par. Takeout Lenders
were IDFC and IL&FS.
Issue Price Redemption Redemption Annualized Total Size

No. of DDB’s
(USD) period (years) price (USD) Return (USD million)
100,000 115.05 16 1035.43 14.67% 11.505
Refinancing :
The Group however, had to rationalize its debt structure primarily because of the following reasons:
1. During the initial years of commencing operations, actual cash inflows were significantly lower than
anticipated as toll traffic/ revenue did not meet the levels anticipated in the projections affecting the
repayment schedule for debt obligations.
2. The interest rates had fallen substantially as compared to the rates at which the initial borrowing had been
carried out.
Refinancing of the term Loan:
Term loan from banks were refinanced through different consortium of banks including IDFC and IL&FS.
As per the restructuring of term loans, fifty percent of the outstanding loan of the Financial Institutions and others
aggregating USD 21,635,790 was bifurcated equally into Part A and Part B.
Part A - For fifty percent, the lenders were issued Zero Coupon Bond - “Series A” amounting to USD 10,817,895
with the following repayment terms:
• Bonds will bear Zero interest
• Bonds will be paid in two equal instalments
- First instalment – 31 March 2005 of USD 5,408,947
Second instalment – 31 March 2006 of USD 5,408,947
Part B – The balance 50% of USD 10,817,895 has been retained as term loan carrying interest of 12.5% per
annum and the same is repayable by 2010 - 2014. The effective rate of interest, considering the payment
schedule, is 8.5% per annum.
Infrastructure Development Finance Company Limited (IDFC) has converted USD 12,701,026 being the value of
DDBs purchased by them under the scheme of restructuring of DDBs into the term loan. The term loan is
repayable during 2010-14. The loan carries interest at the rate of 8.5% per annum payable quarterly on 31
March, 30 June, 30 September and 31 December every year.
NTBCL had taken term loans from a consortium of eight banks at interest ranging from 13.50% to 14.50% per
annum. Post restructuring, the term loans from banks, amounting to USD 28,000,000 carry interest at a rate of
8.5%. The term loans from banks are payable during 2004-13.
Refinancing of the DDBs:

In the initial DDB issue NTBCL had the put/call option guaranteed by the IDFC and IL&FS. DDB holders had the
option to tender the DDBs for takeout which would be purchased by Takeout Lenders – IDFC and IL&FS on the
th rd th rd
anniversary date falling on the 5 (3 November 2004) and 9 (3 November 2008) anniversary from the
allotment of DDB. The maximum limits for IDFC and IL&FS are 60% and 40% respectively of the number of
DDBs issued. The effective yields at the end of 5 years from date of allotment was to 13.70% and at the end
of 9 years from date of allotment was to be 14.19%
Of restructuring of the DDB the DDB holders were given two options to be exercised on 7th February, 2006:
Key Features
Option 1 • Yield of 13.7% p.a. till March 2002 & Yield of 8.50% p.a. thereafter
(Continuation) • Bonds to mature on 3rd Nov, 2015 at a Redemption value of USD476.65
• NTBCL would have call purchase option on DDB after 24th Nov, 2005 with above yield
rates
Option 2 • ILFS & IDFC to takeout DDB on 3rd Nov, 2004

(Encashment) • Price of redemption USD218.59 per DDB giving an effective yield of 13.7% as per the
yield guaranteed for end of 5 years from date of allotment
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• For any delay interest rate of 8.5% p.a. to be available to holders
Only around 17% of the initial number of bonds were continued under Option 1, rest of the bonds were taken-out
by IL&FS and IDFC under Option 2
Another example of refinancing is the Coimbatore Bypass. Refinancing in the Coimbatore

Bypass was done, not only to reduce the cost of borrowing after the stabilisation of traffic but
also to securitize the future revenues of the project. The developer of the Coimbatore
Bypass (Case 4) has raised debt on the project which is significantly more that the initial
amount of debt.
Case 4 – Coimbatore Bypass
Project Coimbatore Bypass Road Projects
Developer L&T
SPV L&T Transport Infrastructure Ltd (LTIL)
Total Cost USD 28.9 million (INR 103 crore)
Background:
This SPV was formed to design and construct a Bypass road at Coimbatore. This project is the first private road
project executed on BOT basis in Tamil Nadu. The scope of this project included construction of a 28km bypass
road along with an additional two-lane bridge across river Noyyal at Athupalam. The concession period, including
construction time has been 32 years for the bypass and 21 years for the Athupalam bridge.
Funding Details :
The project was financed with the Debt Equity Ratio of 1.5:1 and total debt was funded by 3 (three) bankers. The
debt was financed at average interest rate of 14.05% p.a. and reset was reportedly fixed after three years.
Refinancing :
During the financial year 2002-03 LTIL replaced one bank with a new bank which offered lesser interest rate and
then the other two banks also brought down their interest rate on the reset date. LTIL was able to bring down
interest rate by 70 basis points.
During the financial year 2006-07, LTIL raised additional loan to the extent of USD 20 million (INR90 crore) by
discounting the future toll revenues. The additional loan of USD 20 million has in turn been given as loan to the
promoter to use the same for investment in other projects. The idea of raising additional loan was to get upfront
the major portion of future cash flows to equity shareholders.
13.1.1 Significance of Lending to Projects through NCDs

The Hubli-Dharwad project was financed through the issue of Non Convertible Debentures
(NCD) to ICICI. ICICI had lent to the Hubli-Dharwad project through its borrowing from an
ADB facility (line of Credit) called ‘Private Sector Infrastructure Facility’. Other financial
institutions like IFCI were also given this line of credit for onward lending to Infrastructure
Projects. One of the criteria for utilisation of the fund from the ADB facility was that the
onward lending has to be through NCDs. The facility had put in this condition to improve the
liquidity in the Corporate Debt market in India. However, ADBs ‘Project Performance
Evaluation Report’ states that the NCDs issued under various loans under the facility had
virtually no liquidity, and thus the loan’s contribution to the corporate market development
was marginal.
Our survey database on 104 projects too shows that banks lending to PPP projects through
NCDs was at a very small level (around USD 70 million) and that too only till the year 2004.
• Our discussion with banks reveals that banks were lending to PPP projects through
NCDs prior to 2004 because income from banks’ investment in infrastructure was tax
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free and NCDs were counted as investments for banks, while term loans are not. These
tax rebates were however, withdrawn after March 2004.
• Simultaneously, in November 2003, RBI issued guidelines on investments by banks in
non-SLR (Statutory Liquidity Ratio) securities issued by companies, banks, financial
institutions, Central and State Government sponsored institutions and special purpose
vehicles. These guidelines apply to primary market subscriptions and secondary market
purchases. Pursuant to these guidelines, banks are prohibited from investing in non-SLR
securities with an original maturity of less than one year, other than commercial paper
and certificates of deposits. Banks are also prohibited from investing in unrated
securities. A bank’s investment in unlisted non-SLR securities may not exceed 10% of its
total investment in non-SLR securities as at the end of the preceding fiscal year with a
sub-ceiling of 5% for investments in bonds of public sector undertakings. Hence banks
could not lend to unrated NCDs while Borrowers (developers of infrastructure projects)
were not very keen to get the projects rated.
13.1.2 Significance of Interest Rate Reset in Refinancing of Loans

Instead of lending fixed rate or completely floating rate the banks in India lend to
infrastructure projects with reset clause. Reset means that the interest rate is reset at a
predetermined formula at periodic interval (e.g. every 2 years or 3 years) during the loan
tenure. Often the interest rates in India are pegged with the lending bank’s Prime Lending
Rate (PLR) or an external benchmark, for example G-Sec or LIBOR43.
Interest rate reset clause also has a provision for prepayment of loan without premium on
the reset date. We had discussion with some of the banks on the reset clause and they were
of the view that this clause leads to prepayment risk from their borrowers, especially when
interest rates are declining i.e. if the market interest rate is lower than the reset rate, then at
the reset date, developers try to refinance or renegotiate the loan.
This was the scenario in India during the falling interest rate regime during the years 2001-
2004 (10 year G-Sec during the years 1998-1999 was around 12% and had dropped to 5%
in the year 2004). Market rates during this period had dropped drastically and developers
were able to get loan at rates which were much lower than the reset rates. Therefore, during
this period, developers had often negotiated with the financiers to reset the interest rate at a
value lower than the one calculated through the predetermined formula. This actually meant
that either the same banks refinanced the project loan at lower rates or other banks, that
were ready to offer lower rates, refinanced the old loan. Therefore, during our interviews
banks also stated that, after these experiences, they more often than not lend without the
“prepayment without penalty at reset date” clause.
13.2 Refinancing of PPP Projects in Emerging Market Economies –

some Case Studies
Reasons for refinancing of projects in other emerging markets follow a pattern quite similar
to what is in India. For example, in Chile some of the concession companies that have
originally issued bonds at high interest rates earlier were locking in lower rates during the
lower interest rate regime of 2004-2005. During this period concessions which took on fixed
rate debt at 8% or 9% in the late 1990s were being refinanced at just over 3%.
One such refinancing of a road concession in Chile was the Maipo toll road (Refer case 5).
Apart from the falling interest rate regime revenue shortfall was also a major reason for
refinancing. The Maipo toll road in Chile was exposed to some indirect traffic risk despite
43
Indexing of interest rates with either inflation or currency changes is not common in India. Our data
base has no case of inflation or currency linked interest rate in any project.
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minimum revenue guarantees. Therefore, project revenues were not enough to ensure
payment of the bonds on time, in an under-performing Chilean economy.
Case 5 – Maipo toll road-Chile
Project Autopista del Maipo toll road-Chile
Developer Cintra
Year of Financial Close 2001 refinancing in 2004
Total Debt USD 421 million
Construction Period 1 year
Background:
Autopista del Maipo is a 266 Km toll road initially financed in the year 2001 and refinanced in 2004.
Primary reason of refinancing being the shortfall in revenues to service the debt, even when the concession by
the Chilean Government guaranteed minimum revenue. The project was sponsored by a company called Cintra
Funding Details :
The Autopista del Maipo toll road project was originally financed in 2001 in a USD 421 million bond issue in the
US 144A market. However, despite minimum revenue guarantees from the Chilean Government, the revenue
from the road was not enough to ensure payment of the notes on time. Consequently, Cintra the project sponsor
began negotiations in 2002 with the Chilean Ministerio de Obras Publicas (MOP) to opt into the new MDI regime.
Refinancing :
The refinancing takes the form of a USD 450 million shelf registration in the local market – the first use of such a
structure in the Chilean project market – and a USD 60 million standby facility from ABN Amro.
44
Of the USD450 million, around USD175 million (UF 6 million) were placed by BBVA (A multinational financial
service provider) immediately. The 19-year bonds have a bullet repayment profile, although principal is payable
in three instalments in the three years following maturity. The Bond issue came in at an all time low for the
Chilean infrastructure market and was able to achieve 29bp over the Chilean long bond (BTU) yield. Despite the
initial unfamiliarity of investors (and regulators) both with the MDI and the concept of the shelf, the deal was 12
times oversubscribed – the initial face value of the issue is USD 169 (UF5.8 million).
Bonds can be drawn down at any time during the 30-year life of the shelf and terms of each tranche negotiated at
time of issuance. MBIA is committed to insure all bonds throughout the life of the concession.
The primary reason for the shelf registration is that the full USD450 million shelf will not, under the base case, be
required. These bonds will only be required if, under extremely poor traffic conditions, the project company
cannot meet interest and principal payments on the existing debt.
The minimum size of any future issue is around USD 43.75 (UF1.5 million). Therefore, to make payments in the
period it takes for the potential bond issue to reach the ideal size, or to tide the borrower over a choppy period in
the bond markets, the deal also features a standby liquidity facility.
This facility, provided by bookrunner ABN Amro, has an initial seven-year tenor, and will be automatically
renewed provided the credit ratings of both MBIA and ABN Amro stay at AA.
Autopista del Maipo is not a refinancing in the traditional sense. The original 144A bonds remain in place, with
MBIA taking the role of agent, but the new bonds rank alongside the old issue, requiring the lender's counsel to
carefully work over the inter-creditor issues.
Critical to this process was the fact that MBIA had also wrapped the original deal. The terms of the original 144A
notes did not permit any change to the concession agreement, collateral or support obligations from Cintra.
However, the terms of the MBIA wrap gave the insurer the right to consent to all such amendments on behalf of
US investors and hence the flexibility to get the second deal done.
44
The Chilean UF (Unidad de Fomento) is a reference currency updated daily in relation to inflation, internal consumer prices,
and currency fluctuations. Most long term contracts, mortgages, insurance premiums, house prices etc. are quoted in UF while
the actual payments are made in Chilean pesos at the rate of the day.
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Another example of refinancing of a project distressed due to shortfalls revenues is the toll
road concession in Mexico - Autopista Mexico-Toluca toll road
Case 6 – Mextol- Mexico
Project Autopista Mexico-Toluca toll road - Mexico
Developer PACSA
Year of Financial Close Originally financed in 1989 and refinanced thrice thereafter. this case is the third
refinancing which happened in 2006
Total Debt Refinancing of USD400 million (UDI1.2 billion)
Construction Period Not known
Background:
Autopista Mexico-Toluca toll road (Mextol) is a 21km limited access highway between Mexico City and Toluca, in
the State of Mexico. Originally tendered in 1989 and refinanced in 1992 in the 144A market, the project suffered
in the 1990s when a wave of bankruptcies hit Mexico's toll roads. Amendments were made to the concession
agreement with many rights transferred to the Government trust that issued the 2003 debt. Part of that
refinancing involved the Government converting part of what it was owed by Mextol into subordinated debt.
Operational for 15 years the toll road had become one of the most expensive routes in Mexico on a per kilometre
basis. Part of Mextol's problem stemmed from lower than expected traffic levels. Over two thirds of road users
choose to avoid it, preferring instead the lower quality – but free – Route 15 that runs parallel. Cutting the tariffs
was expected to boost volumes and reverse this problem.
The 2006 Mextol refinancing therefore, had the objective to obtain a longer tenor on the debt and cut toll tariffs by
an average of 40% due to lower debt service.
Refinancing :
The USD400 million (UDI1.2 billion) refinancing of Mextol was completed through project bond structured in the
local market wrapped by MBIA though its PADEIM programme called ‘Programa AAA de Infraestructura Mexico’.
The refinancing achieved a benchmark 22-year tenor from the monoline MBIA.
The refinancing also included USD 147 million (MXN1.47 billion) of unwrapped subordinated debt, due in 2030,
when the concession expires.
There are some examples in other countries where projects were refinanced for reasons like
increasing leverage and achieving a longer tenure on debt. For example the Taweelah A2
project in UAE where the 17-year original loan of USD575 million which was raised in the
year 1999 was refinanced in 2004 from a syndicated loan of USD552 million for tenure
ranging between 16.25-year.
13.3 Sharing of Refinancing Gains

13.3.1 Sharing of Refinancing Gains in India
India still has a long way to go before any sharing of refinancing gain is possible. Sharing of
refinancing gain in the Indian context will be quite different from mature markets such as UK
because of the fundamental difference in the risk allocation in PPP projects. Most of the
projects currently being bid out in India are the BOT projects where developers carry the
entire revenue risk. Even in the Annuity based BOT toll concession, where revenue is
guaranteed by the authority, refinancing gain has not been shared with the authority
because the toll concession provisions in India do not freeze the overall return to
concessionaire. In India, refinancing of term loan is very closely related to interest reset
which is mutually agreed between borrower and the banker. However, any gain arising due
to refinancing of loan is not shared by the borrower with the authority because of entire risk
being borne by the concessionaire.
As we can see from the case studies mentioned, even though there are significant
refinancing gains achieved by the projects, there has been no case of sharing of refinancing
gain. Though this was thought of in earlier IPPs (Independent Power Producers) where
Government had guaranteed returns to the developers, it is not being considered in the new
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PPPs in India, as most of the projects are on BOT basis, where developers bear the entire
revenue risk.
13.3.2 Sharing of Refinancing Gains in UK

Sharing of debt refinancing gains is an accepted practice now (50:50 sharing) in UK. In the
more matured PPP/ PFI infrastructure market in the world like UK sharing of refinancing gain
is a factor of the characteristics of PPP/ PFI projects. In UK, unlike India, PPP/ PFI projects
are based on availability based payment. Traffic risk in toll projects is borne by Government
authority.
What is being debated is the gain sharing of secondary equity sale. It is a normal feature of
long term projects in UK that there may be refinancing in the form of changes to the debt or
equity finance during the life of the project. This is because there is a greater risk at the
construction phase which, once completed, enables better financing terms to be obtained.
Also, a maturing PPP market means early PPP projects can now access better financing
terms than those available when the contracts were let.
Some of these early refinancing which had taken place in UK had generated very high rates
of return to the private sector investors due to additional risks to the public sector in the form
of higher termination liabilities and extended contract periods. Therefore, in 2002, the UK
Government introduced arrangements for the private sector to share PFI debt refinancing
gains with the public sector (50:50 formula). In 2003, the Government expected the public
sector to receive USD350-400 million (BP175–200 million45) from the sharing arrangements
on early PFI deals. But, up to December 2006 the Government had secured the right to
gains of only USD 186million (BP93 million), with hospital projects contributing USD 156
million (BP78 million).
Refinancing in UK is governed by the Refinancing Clause in Office of Government Commerce (OGC) Guidance
on Standardisation of PFI Contracts which provides that Private sector will share the gain of refinancing with
Government Authority. The provisions of refinancing is mentioned below-
• The Contractor shall obtain the Authority’s prior written consent to any Qualifying Refinancing and both the
Authority and the Contractor shall at all times act in good faith with respect to any Refinancing
• The Authority shall be entitled to receive a 50 per cent share of any Refinancing Gain.
• The Authority shall not withhold or delay its consent to a Qualifying Refinancing to obtain a greater than 50
per cent share of the Refinancing Gain.
• The Contractor shall promptly provide the Authority with full details of any proposed Qualifying Refinancing,
including a copy of the proposed financial model relating to it (if any) and the basis for the assumptions used
in the proposed financial model. The Authority shall (before, during and at any time after any Refinancing)
have unrestricted rights of audit over any financial model and documentation (including any aspect of the
calculation of the Refinancing Gain) used in connection with that Refinancing (whether the Refinancing is a
Qualifying Refinancing or not).
• The Authority shall have the right to elect to receive its share of any Refinancing Gain as:
o a single payment in an amount less than or equal to any Distribution made on or about the date of
the Refinancing;
o a reduction in the Unitary Charge over the remaining term of the Contract; or
o a combination of any of the above.
• The Authority and the Contractor will negotiate in good faith to agree the basis and method of calculation of
the Refinancing Gain and payment of the Authority’s share of the Refinancing Gain (taking into account how
the Authority has elected to receive its share of the Refinancing Gain under the point e above). If the parties
fail to agree the basis and method of calculation of the Refinancing Gain or the payment of the Authority’s
share, the dispute shall be determined in accordance with provisions of dispute resolution.
The Refinancing Gain shall be calculated after taking into account the reasonable and proper professional costs
45
Conversion rate for the purpose of this paper has been taken as 1 BP=2 USD
pwc 136
Draft Final Report
September 2007
that each party directly incurs in relation to the Qualifying Refinancing and on the basis that all reasonable and
proper professional costs incurred by the Authority will be paid to the Authority by the Contractor within 28 days
of any Qualifying Refinancing.
Government guarantees to the downside of concessionaire’s revenue is the key reason for
sharing of refinancing gain in UK. Because the concessionaire is assured a particular return
on his investment in PFI projects and the authority takes the entire traffic risk, it is expected
that the authorities share any significant upside in concessionaire’s revenue.
pwc 137

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Draft Final Report for the WORLD BANK

6 ANNEXURE 1 - PROCESS FOR SELECTION OF PPP INFRASTRUCTURE SECTORS FOR

EXHIBIT 61: REDUCING RESETS ............................................................................................................................ 88

PWD Public Works Department

The good sign is that the year on year the

(accounting for more than 75% by value and Companies

also number of projects). HUDCO

project costs, on an average). The

Financial investors and other strategic

2.1 Some Points/Assumptions to be Kept in Mind

published by the Reserve Bank of India includes “Storage Infrastructure” as a part of

2.2 Objective of the Study

3 Objective 1: Evidence Based Description of Present

Number Value (USD billion)

Number % of total Value % of total

Project Information* 231 100% 15.80 100%

Detailed Financing Information 104 45% 11.48 72%

Exhibit 2: Trends in Total 231 Projects and Sample of 104 Projects

Value of PPP Projects Number of PPP Project

PPP Projects in India by Number

Roads & Bridges Ports Airports

PPP Projects in India by Value

Roads & Bridges Ports Airports

Exhibit 3: PPP Projects in Different Sectors by Number and Value

Financial Structuring of PPP Infrastrutcure Projects

Sources of Senior Debt Composition of Other Sources of Senior Debt

Sources of Debt by Sector Share of Commercial Banks by Type

Airports Public Sector

Commercial Banks Institutions Others

Changes in Financial Structure Over the Year

Other key trends and analysis are presented in

4 Objective 2: Analysis of the Financing of PPP in India

4.1.1 Debt financing

Average Tenure and Concession Period

Year of Debt Debt

project, Calle 30 (Spain)

Source: Project Finance Magazine various issues

Minimum DSCR Desired by Banks

More than 1.5 1.2-1.5

2006 Low Risk 9.09

4.1.2 Equity Financing

Exhibit 11: Increased Gearing over the Years

Debt to Equity Ratio

Debt to Equity Ratio by Project Sizes

Exhibit 13: Sources of Pure Equity

Source of Equity by Year Source of Equity by Sector

2005 56% 24% 20%

2004 61% 11% 29% Airports 65% 15% 20%

2003 73% 27%

2002 86% 3% 11% Ports 90% 5%

2001 84% 15% 1% 2%

Roads & Bridges 76% 5% 17%

4.1.3 Significance of Subordinated Debt

Exhibit 15: Instances of Sub-Debt by Year and Sector

4.1.4 Strategic Investors and their Investment in the Projects

No of project with Equity Infused (USD

Water Supply 1 30.00

4.1.5 Summary of Major Issues on the Debt and Equity Side

4.1.6 What is Happening in Infrastructure Financing in Other Countries?

5 Objective 3: To Identify Changes Required to Reduce and

5.1 New Areas to Focus on the Debt Side

5.1.1 Bonds as a Source of Fund