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IRB Infra Falls 10% Over Fears Of Losing Mumbai-Pune Expressway Contract

Shares of the Mumbai-Pune expressway operator declined 10 percent over concerns the project would be awarded to a new operator.

A feeder road giving access to India’s first superhighway, the expressway between Mumbai and Pune. (Photographer:Santosh Verma/Bloomberg)
A feeder road giving access to India’s first superhighway, the expressway between Mumbai and Pune. (Photographer:Santosh Verma/Bloomberg)

Shares of IRB Infrastructure Developers Ltd., which operates the Mumbai-Pune expressway, declined about 10 percent today over concerns that the National Highways Authority of India may award the project to a new operator when its contract comes up for renewal later this year.

The toll-road operator won the bid to operate the expressway—one of India’s oldest to be awarded under the build-operate-transfer model—for a concession period of 15 years in August 2004 by paying Rs 918 crore upfront to Maharashtra State Road Development Corporation. The NHAI is looking for a new investor once the agreement period with IRB Infrastructure ends, the Economic Times reported citing two people privy to the development. New bids, the report said, are expected to be in the range of Rs 7,000–8,000 crore.

Till now there has been no communication on rebidding by the government, Sudhir Hoshing, joint managing director of IRB Infrastructure, told BloombergQuint. The company will bid for the project again whenever it comes up, he said, adding that they’re at an advantage after having managed the project for the last 15 years. He refused to comment on the bid amounts.

The expressway is critical to the fortunes of IRB Infrastructure, which operates 12 BOT road projects across India. The Mumbai-Pune expressway has subsidised other loss-making projects for the company, Nilesh Bhaiya, research analyst at Macquarie, wrote in a recent report.

The company had indicated in a presentation that the project contributed nearly 38 percent to its total revenue for the year ended March. That’s over twice the revenue it generates from its second-biggest project—the Ahmedabad-Vadodara toll highway.

Revenue from the company’s road segment grew 3.6 percent year-on-year in FY19.

Kotak Institutional Equities pegged the expressway’s contribution at Rs 39 per share in its sum-of-parts valuation report.

As many as 12 out of the 18 analysts tracking IRB Infrastructure have a ‘Buy’ recommendation. The Bloomberg consensus estimate shows a potential upside of 90 percent on the stock, which has corrected 68 percent since April last year.