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Infrastructure Finance Update

August 2022

Infrastructure finance update for the month of August 2022 primarily focuses on five sectors, namely, railways, roads and highways, ports, real estate and telecom. The majority of the news coverage from the previous month focused on the new policies and rules implemented by the government in the telecom and ports sector to enhance the development activities.

Roads & Highways:

In the sector of roads and highways, the minister of has set an ambitious target for the current fiscal year: to build new national highways at a record rate of 40 kms per day. In 2020-21, a record 37 km/day was attained, up from 29 km/day in the previous fiscal year. Efforts are being made to fulfil the most recent goal, despite continued challenges such as land acquisition.

The National Highway Authority of India (NHAI) intends to increase the fee for prohibited vehicles on the Delhi-Meerut Expressway (DME). Two-wheelers and three-wheelers are not permitted on the expressway. The NHAI, in collaboration with local authorities, intends to increase traffic fines by 20 times in order to discourage two-wheelers, three-wheelers, and other prohibited vehicles from using the highway. The current penalties for breaking this traffic violation on DME is Rs 1,000. The NHAI and local police believe that raising the fine from Rs 1,000 to Rs 20,000 will help keep two-wheelers and three-wheelers off the DME.

The most significant impediment to the on-time completion of the Mumbai-Ahmedabad bullet train project is land acquisition. According to the most recent Union Railways Ministry project update, land acquisition in Maharashtra is still at 75.25%. While Gujarat has obtained 98.8% of the land for the project and Dadra and Nagar Haveli has got 100%, the Maharashtra bottleneck has arisen as a source of concern. Until April, only 150 hectares of the requisite 298 hectares had been acquired in Maharashtra. The new Maharashtra administration accelerated the land acquisition procedure and obtained all state approvals for the project.

Through the NIIF Master Fund, the National Investment and Infrastructure Fund (NIIFL) has acquired a 100% share in the SP Jammu Udhampur Highway owned by the Shapoorji Pallonji Group for more than $290 million. The fund’s road portfolio now includes four assets with a combined annual revenue rate of more than $170 million as a result of this acquisition. The National Highways Authority of India (NHAI) granted SP Jammu Udhampur a Build-Operate-Transfer (Annuity) concession to build the roadway. The NHAI makes fixed, semi-annual payments to the project, supplying consistent and dependable cash flows.

The National Highways Authority of India (NHAI) plans to provide retail investors access to its upcoming infrastructure investment trust (InvIT) and is also looking into ways to give them access to its toll-operate-transfer (TOT) projects in the future. This is expected to help the company meet its Rs 200 billion asset monetisation target for fiscal year 2019. According to the NHAI, retail investors’ interest in road projects has increased, and depending on how well InvIT with retail investors goes, TOT and BOT (build-operate-transfer) projects may be made available in the future as well.

Railways:

In railways, RailRestro, a leading food tech firm, announced that it will invest USD 20-30 million in developing a strong logistics infrastructure and will rapidly expand its coverage, with an emphasis on the east. The authorised catering partner of the Indian Railway Catering and Tourism Corporation (IRCTC) is engaged in the delivery of restaurant food to passengers directly into trains at railway stations of choice. The infrastructure exercise primarily focuses on a company-owned delivery fleet to service all of the railway stations that it covers across the nation. The company claimed that it is currently offering food delivery service at about 450 stations as an aggregator and by the end of the year, it will have covered all of the railway stations.

Real Estate

In the sector of Real Estate, Prestige Estates Projects expects to sell apartments worth at least Rs 12,000 crore this fiscal year, an increase of 16% year on year, as housing demand shifts to reliable developers. Prestige Estates’ sales bookings have already increased 310 percent year on year to Rs 3,012.1 crore in the first quarter of this fiscal year. The new market of Mumbai contributed Rs 750 crore in sales bookings. Prestige Estates Projects Ltd has a large presence in South India and has entered the Mumbai market.

In the three months ended June, Indiabulls Real Estate reduced its net debt by 54% to Rs 464 crore, compared to the March quarter. According to the investor presentation, IBREL’s net debt was Rs 464 crore at the end of the June quarter, down from Rs 1,005 crore on March 31, 2022. Its gross debt reduced from Rs 1,310 crore to Rs 739 crore. IBREL raised Rs 865 crore in April by issuing shares to institutional investors, mostly for land purchase and debt reduction.

Telecom

In telecom sector, mobile tower firms are preparing to invest over Rs 2 trillion by 2025, half of which would be spent in the next two years to enable telecom operators fulfil their aim of bringing 5G to 50% of the country. These are the data published by the Digital Infrastructure Providers’ Association (DIPA), the industry’s governing organisation. While the attention has so far been on the massive expenditure of around Rs 2-3 trillion that telecom companies must undertake to build out 5G, tower businesses would also have to spend roughly the same amount to enable high-speed services. Tower firms’ investments will involve the deployment of critical small cells, which are vital for the success of 5G. Over 727,000 towers and 100,000 small cells have already been commercially deployed in India. According to DIPA, the necessity for network densification for 5G will necessitate the construction of 1,000 base stations per square km.

According to the government’s new Right of Way Rules, telecom operators would no longer be required to seek permission from authorities before constructing cables or placing mobile towers or poles over private property. To facilitate the roll out of networks, particularly 5G services, the centre also announced guidelines for using infrastructure for the installation of small mobile radio antennae or the laying of overhead telecom cables, as well as costs. According to the Indian Telegraph Right of Way (Amendment) Rules, 2022, firms would be obliged to provide a written notification to the competent authority prior to the erection of a mobile tower or pole over a private building or structure.
Adani Group firm AdaniConneX plans to create 1,000 megawatt data centres over a 10-year span, nearly doubling the current industry scale. The company’s first seven data centres will open in Mumbai, Chennai, Hyderabad, Delhi, Bengaluru, and Pune. Data centre capacity is measured in terms of the amount of power consumed. According to market research firm Arizton, India’s data centre market size in 2021 will be 447 MW, worth USD 10.9 billion. The six cities that will receive the first seven data centres will have a total capacity of 450 MW over the following three years, with tier 2 and 3 locations receiving 550 MW. The government has granted digital infrastructure status to data centres and seven states have already come up with a data centre policy.

Ports

In the sector of ports, Adani Ports and Special Economic Zone (APSEZ) reported a 16.86% drop in consolidated net profit to Rs 1,091.56 crore for the first quarter of the current fiscal year on Monday. According to a regulatory filing, the country’s largest integrated logistics business made a combined net profit of Rs 1,312.9 crore in the same time last year. Its overall income increased to Rs 5,099.25 crore in the June quarter, up from Rs 5,073 crore in the first quarter of FY22. Total expenses for the company climbed to Rs 4,174.24 crore from Rs 3,660.28 crore previously.

Adani Ports, which is constructing a transshipment port in Vizhinjam, Thiruvananthapuram, has petitioned the Kerala High Court for police protection against protesters protesting the development work. In their petition, the Adani Group claimed that the continued agitation by fishermen posed a threat to the lives of its employees and that, despite representations, the government was taking no action. Since a few weeks, a large number of fishermen have been protesting outside the main entrance of the multi-purpose seaport in nearby Mulloor, pressing their seven-point charter of demands, which include halting construction work and conducting a coastal impact study in connection with the multi-crore project. Protesters claim that the unscientific construction of bridges, or artificial sea walls as part of the future Vizhinjam port is one of the causes of the district’s increasing coastline erosion. They are demanding rehabilitation for families who had lost their homes due to sea erosion, effective steps to mitigate coastal erosion and financial assistance. The Kerala High Court has now verbally remarked that those protesting the building of the Vizhinjam International Seaport project might do so peacefully, but the question is whether they could entirely halt the project’s construction activities.

The Mangaluru International Airport (MIA), which is owned by Adani Airports, has requested an urgent increase in the user development charge. The MIA has requested an increase of Rs 100 in the user development fee (UDF) for domestic passengers in order to fund development efforts. In its most recent tariff submission, the airport proposed charging Rs 250 user development fee to domestic travellers beginning in October. The airport intends to progressively raise it to Rs 725 by March 31, 2026. It has proposed for Rs 525 user development fee for international passengers. It intends to raise it to Rs 1,200 by March 2026. If the AERA agrees, both outgoing and arriving passengers will be charged the users development fee. Currently, the UDF is paid solely on departing travellers and is Rs 150 for domestic travellers and Rs 825 for foreign passengers. According to the report, the cumulative impact of these variables will have an impact on the tariff. The proposed development projects, which include runway recarpeting and the construction of a new terminal building and cargo terminal, are anticipated to cost approximately Rs 5,200 crore.

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