NHAI to recognise IDFC as a limited-rights lender

The National Highways Authority of India (NHAI) has decided to recognise Infrastructure Development Finance Company (IDFC) as a lender to the prestigious Delhi-Gurgaon expressway project. However the company has been given only limited rights considering that the government does not recognise it as an official lender.

Decision contrary to previous stand by NHAI and Road ministry:

This is contrary to its previous stand taken along with the Roads ministry that the infrastructure lender does not classify to be a lender. IDFC had not been recognised as a lender because the change of lender effected by Delhi-Gurgaon Super Connectivity Ltd (DGSCL) had not got approval. Incidentally, DSSCL had replaced its authorised lender, State Bank of India (SBI) in 2010, with an IDFC-led consortium, which has a 1,600-crore exposure in the Delhi-Gurgaon expressway project.

NHAI wants IDFC to comply with its demands in return:

IDFC has been given limited rights by the NHAI on the condition that one of its toll gates on the Delhi side be moved so as to make entry into Gurgaon toll free. As a result, more than 2,50,000 vehicles passing through the toll gates would be exempted from paying toll charges. In return, the NHAI will demand that IDFC complies with its demands that includes removing the first toll plaza from Delhi. The objective behind this demand is that the public sector banks in the consortium should not be affected in the process. Discussions are being held in this regard, that include the possibility of a lender being in charge of a project.

DGSCL created as Special Purpose Vehicle to undertake project:

In the event of the IDFC agreeing to its terms, the NHAI would recognise it as a lender with limited rights. As are result, IDFC would be bound to the concession agreement undertaken between the government and DS Construction. Incidentally, DGSCL was created as a Special Purpose Vehicle (SPV) to undertake the Delhi-Gurgaon expressway project. The project which was initially funded by a consortium led by Housing and Urban Development Corporation Limited (HUDCO) was later replaced by SBI. Violating its concession agreement, the SPV raised loans from IDFC, without informing the government.

IDFC’s negotiations with Govt bears fruit:

The consortium that is led by IDFC includes Punjab National Bank, State Bank of Bikaner and Jaipur and Oriental Bank of Commerce. In the event of NHAI terminating the project, these lenders would have had to incur a combined loss of Rs.1,400 crore. This is due to the fact that the NHAI would have refunded only Rs.175-200 crore. Faced with the prospect of incurring such a huge loss, IDFC was prompted to initiate negotiations with the government. These negotiations bore fruit as a result of which the IDFC was recognised as a lender to the Delhi-Gurgaon expressway project, even though with limited rights.