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NHAI to again float Rs 10,000 Crore bonds towards the end of 2012 - 2013

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If you could not get a share of ~10,000-crore bond issue of the National Highways Authority of India (NHAI) this financial year, you will have to wait for the fourth quarter of 2012-13 for a second chance, as the highways authority plans to again hit the bond market around that time.

"The finance minister's announcement allowing us to raise ~10,000 crore through tax-free bonds is beneficial for us, as this will ensure cheap and long-term borrowings. Since we do not need the money immediately this year, we plan to launch our bonds by the fourth quarter of next financial year," J N Singh, member (finance), NHAI told Business Standard.

According to the current financial plan, the highways authority will require ~24,000 crore till the end of 2012-13. Of the total requirement, ~14,000 will come from the government in the form of cess and toll income, while the rest will come from money raised through the earlier bond issue.

NHAI had come out with a bond issue in December last. The issue was oversubscribed in the HNI and QIB category on the first day itself.

Though the highway authority proposed to issue ~5,000-crore bonds, it ended up raising ~10,000 crore with a greenshoe option as it got oversubscribed to the extent of ~25000 crore despite shaky market conditions.

Around 70 per cent of the ~10,000 crore will go in acquiring land for various projects, including expressways. The remaining will go for funding projects. The authority has also allocated funds for arbitration cases, to be soon taken to a committee. Around ~10,000 crore is estimated to be stuck in various disputes with contractors. For the second consecutive year, finance minister Pranab Mukherjee allowed NHAI to raise ~10,000 crore through tax-free fbonds. The Budget also announced to double the kitty of tax-free bonds for the infrastructure sector by increasing it to ~60,000 crore for 2012-13.

This ~60,000-crore bond window includes ~10,000 crore for IRFC, ~10,000 crore for IIFCL, ~5,000 crore for HUDCO, ~5,000 crore for National Housing Bank, ~5,000 crore for SIDBI, ~5,000 crore for ports and ~10,000 crore for the power sector. The Budget also annou-nced an increase in road award target to 8,800 km for next financial year, an increase from 7,300 km this financial year. The allocation of the road transport ministry has been enhanced by 14 per cent to ~25,360 crore in 2012-13.

Apart from tax-free bonds, NHAI raises money through short-term (three years) 54EC bonds. Any capital gains from sale of long-term capital assets, such as real estate or gold, can get tax exemption by investing in the 54-EC infrastructure bonds.

Under Roads Transport Minister C P Joshi, the current financial year has been a good year for NHAI and it awarded a record 7,300 km. For the first time ever, NHAI awarded 21 projects on a premium. The premium income from these 21 projects will come to around ~3,000 crore per year, and will increase by five per cent every year till the concession period ends.

A company offering a premium means it is committing to an annual payment to the government over a period of time, instead of seeking a grant for building a road.

A substantial increase in premium income has brought down NHAI_s borrowing requirement by half. The B K Chaturvedi committee had said the highway authority will need to raise ~191,000 crore by 2030-31, but now the requirement stands reduced by ~1 lakh crore to ~83,000 crore.

NHAI had come out with a bond issue in December that was oversubscribed on the first day.  
 
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