ORR gets Rs 7380 crore international competitive TOT bidding
Telangana Government announced that it has awarded ORR, Hyderabad on Toll, TOT basis for 30 years to IRB Infrastructure Developers Ltd for Rs 7,380 crore
Hyderabad: In one of the largest asset monetization deals executed in Country’s road sector, the Telangana Government on Thursday announced that it has awarded Nehru Outer Ring Road (ORR), Hyderabad on Toll, Operate and Transfer (TOT) for 30 years to IRB Infrastructure Developers Ltd. for Rs 7,380 crore (USD 0.9 billion).
The Letter of Award (LOA) of the TOT has been issued to the highest bidder, i.e., IRB Infrastructure Developers Ltd, which is country’s leading infrastructure developer in highways sector, on Tuesday, Special Chief Secretary, Municipal Administration and Urban Development (MA&UD), Arvind Kumar said.
Also Read
The 30-year TOT agreement is expected to bring in significant revenue for the state and boost the overall infrastructure development in the region. Considering the revenue multiplier of the transaction value, it is one of the best bids finalized for the road infrastructure projects in the country, Arvind Kumar said.
Under TOT, the ownership of the asset remains with the state government. The TOT (Asset monetization) serves two critical objectives, firstly it unlocks value from public investment in Infrastructure and secondly it taps private sector efficiencies in operations and management of infrastructure.
The TOT also helps the Government to utilize private sector investment for new infrastructure creation. It is an internationally accepted model for asset monetization while the ownership of the ownership of the asset continues to be with the state government, the senior MA&UD official said.
The bid amount is calculated on NPV method (net present value) of future collections duly discounting for inflation and price index and in that sense, it’s not a simple sum total of annual toll collections of future years. The revenue multiplier ie bid amount / present toll collections, a criteria commonly followed to evaluate the robustness of any TOT bid – is 13.64 for ORR. Only one among the 6 bundles of NHAI and one of MSRDC is slightly higher at 13.7 and that way, ORR TOT is one of the best and most competitive bids nationally, officials explained.
The TOT model is a proven method for monetization of operation assets and large-scale infrastructure projects. Under this model, the successful bidder would be responsible for collecting tolls from road users and maintaining the road for the duration of the contract.
While the submission deadline was March 31, 2023, a total of 11 prospective bidders participated during the bidding stage and a total of 142 days was provided to interested parties to prepare their bids.
Chief Minister, K. Chandrashekar Rao expressed happiness over the development. “This transaction will give a further boost to investment opportunities in the region and open doors for many other infrastructure and state development projects. These projects will create job opportunities and attract investments, leading to the overall development of the region. The successful bid confirms the confidence of investors in the robust growth of Hyderabad and future prospects and are affirming the pro-investor growth policies of the state government”.
Minister for MA & UD, Industries and ITE & C, KT Rama Rao said “The Telangana Government is committed to promoting private sector participation in the development of public infrastructure. The transaction showcases the potential for lucrative investment opportunities in the state, which is rapidly growing and evolving. With its favourable policies and supportive environment, Telangana is one of the most favourable states for investment and is highly business-friendly. The state holds immense potential for investors and entrepreneurs alike. It is a prime destination for those seeking to establish or expand their business ventures.”
