Lessons from Delhi- Gurgaon Expressway - Four-S … from Delhi-Gurgaon Expressway. Four-S Infratrack ... Equity Analysis…………………………… ... Rajokri and IFFCO chowk

Four-S Infratrack Page 1 of 17

May 1, 2006

Lessons from Delhi-Gurgaon Expressway


CONTENTS

Special Feature

Lessons from Delhi-Gurgaon Expressway……………..03

Four-S Infra Index …………………………..05 Sector Update

Roads and Highways….06 Power…………………….07 Railways…………………08 Aviation………………….09 Urban Infrastructure…..10 Telecom…………………11 Ports and Waterways…12

Social Infrastructure……… ………………….13 Financing Aspect & Companies……………14

Equity Analysis………………………………..15

IFC plans massive investments in Indian

Infrastructure

The International Finance Corporation (IFC), a part of the World Bank, has decided to increase its investments in India’s overall infrastructuresector. IFC has decided to invest around $400-500mn in the country during 2006-07 in 4 segments — electricity distribution, electricity generation, road and water. According to Francisco Tourreilles, director of the infrastructure department of IFC, new investments by IFC in India will cross $700mn inthe next 2-3 years. This is due to the fact thatIFC sees a lot of scope of investments in Indian ports, roads, airports and power sector. IFC will also invest substantially in development of oil fields in India and putting up of infrastructure for Liquefied Natural Gas transportation and air transportation. Out of the planned investments in 2006-07, IFC has already announced plans for investing $150mn in oil fields, $50m in a merchant hydro power project in Himachal Pradesh and $75mn in the Tala transmission project in West Bengal. IFC is also looking to invest in the development of infrastructure for generation of renewable energy in India.


Why the GQ is getting delayed? Lessons from the Delhi-Gurgaon (NH8) Expressway

Eight years after work on the Golden Quadrilateral (GQ), India’s dream road project began, one-tenth of it is still needs to be constructed. The GQ project is representative of virtually all of NHAI undertakings, riddled with delays and problems. In this special report, Four-S analyses the Delhi-Gurgaon (NH8) expressway to study the macro problems of road construction from a micro perspective.

The Delhi-Gurgaon expressway is being undertaken by DS Constructions (DSC) on BOT with a total project cost of Rs 5,400mn. Majority of the project is estimated to be completed by December 2006, an 18 month delay with an excess price of Rs 2,000mn due to change of scope after construction began. Why the Delay? Land acquisition is the biggest problem that a road development project faces, and when the project involves more than one state, the problems grow exponentially. In the Delhi Gurgaon expressway project the various land acquisition hurdles have been: handing over of land from the Airport Authority of India for the Mahipalpur-IGI flyover, acquiring land from the Ministry of Defence for the RTR-Palam, Rajokri and IFFCO chowk flyovers and obtaining land from the Haryana Government for the toll plaza at the Delhi-Haryana border, which still needs to be resolved. Each body responsible for the land, which is in the right of way (ROW) of the project, has numerous organizational procedures and requires scores of approvals which makes land acquisition a tedious and time consuming process. For example, land that needs to be acquired from the Defence needs to undergo the following procedures: first the land type has to be ascertained (operational, administrative, residential, others) since each has a different method to be followed. Next the directorate of Defence Estates needs to be approached for purchase of land. However, this

organization does not have the authority to approve or disapprove land acquisition. Next the request goes to the Ministry of Defence which involves an intricate system of procedures which consumes an enormous amount of time and effort after which approval may be granted. After obtaining MoD approval, the infrastructure in use on the Defence land needs to be moved or dismantled which again involves a lot of time and energy. The payment procedures are also tedious involving interaction with the government treasurer and Ministry of Finance. Shifting of utilities is a major hurdle faced by road construction companies and the Delhi-Gurgaon expressway is no exception to this. The project has faced many problems related to the shifting of utilities primarily because of the number of agencies involved. In the case of phone lines coordination with

MTNL (Delhi) and BSNL (Gurgoan) was required. Shifting of power lines, sewage drains, and other utilities also required approval and execution by many organizations. For example, the process of shifting of electricity lines near the Radisson Hotel by the BSES was delayed due to inaction by BSES and delays have crept into the projects due to inefficient work being done in shifting the Main Sewage Lines that fall under the service roads of NH8. Multiplicity of agencies: In the expressway project, which is of a mere 27.7km, a total of seventeen government agencies are involved in non-construction activities. Some of them are DDA, HUDA, HSIDC, Haryana Tourism Ministry, MES, BSES, MTNL, BSNL, BHBVN, and many different state and central ministries, out of which seven bodies are involved in work relating to power, telephone and sewage alone.

• Financed by a debt: equity ratio of 70:30 including a negative grant of Rs 1,610mn to NHAI

• Access controlled project with 27.70 kms of expressway, 46.80 kms of service roads, 11 flyovers / underpasses, 4 cattle / pedestrian crossings

• Construction period of 30 months Concession period for 20 years with 17½ years of toll collection.


Change of scope is an aspect of road construction that has forever plagued the industry. The extent of this can be clearly highlighted by looking at the Delhi-Gurgaon expressway project. The difference between the original plan and the modified plan is phenomenal. The scope of ten construction areas have been modified since May 2004 which include the Rao Tula Ram-Palam (RTR) stretch, the Hero Honda Chowk, Udyog Vihar stretch, the airport stretches where the government has changed the plan of entry and exit to the two airports, and many others. These changes are normally communicated by the state governments after the original plan has been made and construction begun. One can see the extent of the delays caused by looking at the Mahipalpur flyover, where the designs for the change of scope have not yet been communicated to the constructors by the DDA and AAI due to the delays in decision making that is associated with government bodies. Thus, it is extremely plausible that due to this, we can witness the expressway being completed except this one stretch, hence temporarily defeating the entire reason for building an expressway. The changes in scope also result in sudden excess price rises not foreseen at the original stage. This is one reason for the escalating price per kilometer of NHAI projects. For the Delhi-Gurgaon expressway alone, the project cost rose by approx Rs 2,000mn because of change of scope of the project. Raising these extra funds requires time; hence giving time overruns another dimension. Faced with these delays the project is slated for opening by December 2006 with certain sections taking longer to complete. Conclusion The glaring quandary currently faced by the Indian road sector can be accredited to one primary factor: the optimum allocation of responsibilities is not being done. The same problem gets repeated in virtually every project and its only solution could be that NHAI should be given greater autonomy and power in implementing a road project. Following the Chinese experience, where the government undertakes the responsibility to clear all hurdles- land transfers and shifting of utilities- for road construction, NHAI should provide all the basic needs to construction companies, so as to remove the bottlenecks and delays. Construction risks should be given to construction companies; however other risks should rest on the shoulders of the government, as they have the power to clear most of the bureaucratic obstacles. In fact, construction companies are generally not in a position to be aptly dealing with government bodies to negotiate land transfers and shifting of utilities etc., thus burdening them with this responsibility can only result in delays. Furthermore, all government bodies should accept NHAI as the apex body in regards to roads and all requests should be promptly cleared by them without delays. But NHAI should also plan out its procedures in best possible way for the efficient working of any project. For example, NHAI should get a No Objection Certificate from the state governments with regards to the construction plans, and once the NOC is issued, any change of scope should not be entertained- this would help to reduce the time and cost overruns. NHAI is in fact taking a step in the right direction by mandating the acquisition of 80% of ROW before awarding any contract. But still a lot more needs to be done for smooth and jolt free development of roads in accordance to plans. We have seen how effectively a Public Sector Undertaking can function when given a free hand with the Delhi Metro – Now the moot issue is how such a free hand can be given to an organization like NHAI operating at the National Level.

LOCATION ORIGINAL SCOPE

AFTER CHANGE OF SCOPE

CHANGE OF SCOPE NOTICE

RTR 84m long 3 lane flyover

Palam 84m long 3 lane flyover

RTR-Palam: 1305m long 6/8 lane + Ramps of

total length 1231.5m

Change of Scope decided in May, 2004

Mahipalpur-IGI There was no Up Ramp from

IGI

350m long 2 lane wide viaduct for traffic from IGI

Change of Scope decided

in May 2004 Udyog /

Kendriya Vihar 416m long 8

lane wide viaduct

400+295=695m long 8 lane flyover

Change of Scope revised

on Haryana Govt. request.

IFFCO Chowk 304 m long 8 lane wide viaduct

400 m long 8 lane wide viaduct

Change of Scope decided in April 2003

Hero Honda Chowk

At grade highway with

no intersection

90m long 6 lane Cross Flyover

Decided in May 2004


Four-S Infrastructure Index

Four-S Infra Index has shown upward movement during the fortnight ending April 30, 2006, with growth of 6.7%. The index has again outperformed the Nifty, which has grown by 6.3% during the same period. Though the index has shown good growth of 6.7%, some of the companies have also underperformed. These companies include – Madhucon Projects (4.6%), Tata Power (3.4%), CESC (2.9%), Suzlon Energy 91.5%), and NTPC (1.4%). CONCOR, which was the underperformer last fortnight (1.9%), has now entered in the list of top 5 performers.

Company GrowthMahindra GESCO Developers Ltd. 72.1%Unitech Ltd. 71.0%Ansal Properties & Infrastructure Ltd. 52.1%Era Construction Ltd. 44.0%CONCOR 24.9%

Top Performers of Four-S Infra Index Company Growth

L&T 30.2 Unitech Ltd. 12.7 Jaiprakash Associates 10.8 CONCOR 9.3 BHEL 6.9

Top Contributors to Four-S Infra Index

Mahindra Gesco is planning to launch 4 more SEZs across the country. 3 of these will be product specific SEZs, while the fourth will be a multi-product SEZ located in eastern India.

The board of directors of Ansal Properties and Infrastructure Ltd. has approved a scheme of amalgamation, entailing merger of unlisted firm Ansal Township and Projects Ltd. with the company. The board has cleared a swap ratio of one equity share of Rs 5 each of the company against 2 equity shares of Rs 2 each held in Ansal Township and Projects Ltd.

CONCOR and Boxtrans Logistics (India) Pvt. Ltd. has entered into a MoU to use each other's assets to provide efficient and cost-effective logistics-related services.

CONCOR is eyeing a huge market in storage and retailing of fruits and vegetables and plans to invest Rs 15bn across the country for the same.

Some important information of top performers

1,300

1,330

1,360

1,390

1,420

13 A

pril'0

6

17 A

pril'0

6

18 A

pril'0

6

19 A

pril'0

6

20 A

pril'0

6

21 A

pril'0

6

24 A

pril'0

6

25 A

pril'0

6

26 A

pril'0

6

27 A

pril'0

6

28 A

pril'0

6

29 A

pril'0

63,340

3,390

3,440

3,490

3,540

3,590

Infra Index Nifty


The National Highways Authority of India (NHAI) has made a total plan outlay for Investment of Rs 103bn in 2006-07 for development of Highways. The NHAI would raise Rs 35bn of the required funds through issue of bonds.

SECTOR UPDATE Roads & Highways

The overall costs of all National Highway Development Programmes (NHDP) have been increased by 30%, from estimated Rs 1,695bn in January 2005, to Rs 2,200bn in January 2006. As per estimates, the NHAI would incur a cost of Rs 76.5mn per km of road in 2006, an increase of 19% over Rs 64mn per km of road in 2005. NHAI has decided to convert the Surat-Vadodara stretch on National Highway (NH)-8 in to a 6-lane road from the existing 4-lane road, in view of the increasing traffic on this stretch. The width of the road would be increased to 11 metres from existing 7 metres. This Rs 10.5bn proposal for the 6-lane road project, prepared by NHAI, is awaiting final clearance from the Union surface transport ministry. An agreement has been signed between the Government of India, Central Public Works Department (CPWD), Indian Railway Construction Company (IRCON) and the Bihar road construction department for the construction and upgradation of 2382.47 km of state highways in Bihar. The CPWD will upgrade 2,000 km of state highways while the rest would be upgraded by IRCON at a cost of Rs 15mn per km. The Jammu & Kashmir (J&K) Government, in collaboration with the NHAI has completed the construction of 823 km of National Highways in the state. Moreover, the J&K Government has now entrusted the Border Roads Organisation to construct 279 km of roads in the state. The Delhi-Gurgaon expressway will be extended by 3 km from the present length of 27.7 km with the inclusion of Dhaula Kuan in the network. The NHAI has invited proposals for consultancy services to prepare a feasibility study and detailed project report for improvement and upgradation of the stretch from Dhaula Kuan to Rao Tula Ram Marg. The extension would be completed by 2007 and would consist of a network of flyovers and elevated sections.

NHDP suffers cost

overruns

NHAI to invest Rs 103bn on

roads

Surat –Vadodara stretch on

NH8 to be 6- laned

2382.47 km of Bihar

highways to be

constructed Highways

construction in J&K in

full wing Delhi-

Gurgaon expressway

to be extended by 3 km


Company Hydel projects coming up

JaiPrakash Associates

JaiPrakash is working on 2 more hydel projects — a 400MW project at Vishnu Prayag in Uttaranchal, which will become operational this year, and a 1,000MW project in Himachal Pradesh.

Gammon India 60MW hydel project in Sikkim at an estimated cost of Rs 4.5bn.

Nagarjuna Construction, SSJV Projects and Maytas Infrastructure

100MW hydel project in Himachal Pradesh at an estimated cost of Rs 4.99bn.

After roads, it’s now the turn of hydel projects to go the BOT way. A number of construction companies, including JaiPrakash, Gammon and Nagarjuna Construction, have taken up hydel-power projects on a BOT basis. As of now, only 2 large hydel projects- 300MW hydel project of JaiPrakash Hydel Power on the river Baspa in Himachal Pradesh and 82MW hydel project of LNJ Bhilwara Group in Himachal Pradesh, at a cost of Rs 3.2bn- have been developed by private sector players. However, others are also trying to join the fray and many more of them may follow.

The 4,000MW ultra mega thermal power project will come up at Tadri village in Uttar Kannada district of Karnataka. The project is estimated to cost Rs 160bn. The project will be constructed with public-private participation on build-own-operate basis. As many as 20 entities, including some of the major players in Indian power sector, have filed their expression of interest for the project.

Work on the 4,000MW Girye power project in Maharashtra, estimated to cost around Rs 160bn, is to commence soon. The project has seen expression of interest from 22 Indian energy groups including, National Thermal Power Corporation, Reliance Energy and Essar Power. The project will start functioning in the next 5 years.

The Haryana Government will set up a 500MW power plant near Panipat, using petcoke as fuel. The project, to be completed in the next 2 years, would cost about Rs 20bn. The decision to use petcoke as fuel has been taken since petcoke, obtained as a waste from the IOC Panipat refinery, will be a cheap input and would also reduce the cost of transportation and production. For India's first power projects under the Group Captive Scheme of the Electricity Act, 2003, the Maharashtra Industrial Development Corporation (MIDC) has signed a MoU with private sector Reliance Energy Ltd. (REL) to set up 2 group captive power projects in Maharashtra. These projects would be established at Thane to generate 165MW and at Nagpur for the generation of 130MW. REL will invest Rs 18bn in the 2 projects and would incorporate 2 special purpose vehicles for execution of both the projects. National Thermal Power Corporation Ltd. (NTPC) will set up a 2,000MW nuclear power plant and has appointed consultants to speed up the project. NTPC is formulating plans to set the nuclear power plant by 2017. It is also in talks with GE Energy for technology and fuel. To increase the power supply in the state, the Punjab government is going to commission 43 new Grid Sub-Stations by January, 2007. This would require an investment of Rs 4.47bn. The new sub-stations would be set up in a phased manner, so as to provide uninterrupted power to the industry, agriculture and consumers. The state government will also spend additional Rs 9.24bn on improving the distribution and transmission of the power.

Work on Girye Project to

commence soon

Power

Haryana to set up 500MW

power plant

REL to set up 2 power projects

NTPC to set up nuclear

power plant by 2017

4,000MW power

project in Karnataka

Punjab to have more

power infrastructure

Hydel power attracting

private participation


Railways The financial turnaround of the Railways in 2005-06 has led the Indian Government to consider the construction of dedicated freight corridors in the country. An east-west dedicated rail freight corridor is on the anvil in the 11th FYP period. The financial calculations for the project are being done and requirement of funds would be met through market borrowings, external aid and internal accruals. The Approach Paper for the 11th Plan will also consider setting up freight corridors along the Golden Quadrilateral through for connecting all ports on the western region. The existing 56 km long meter gauge single line on the Attur – Salem section (Tamil Nadu) of the Southern Railway will be converted into broad gauge, at an estimated cost of Rs 614mn. The conversion will be completed over the next 12 months. The project, which would also entail engineering works, electrical works and replacement of the existing signaling system, would be undertaken by the Rail Vikas Nigam Ltd. The Indian Railways is planning to set up a rail link with neighboring Myanmar through the Northeast, at an estimated cost of Rs 13.39bn. The Rail India Technical and Economic Services, an ancillary of the Indian Railways, had already completed the drawing up of a preliminary feasibility survey to build a broad-gauge track between Moreh, a border outpost in southeast Manipur, and Segyi in Myanmar. The Indian Railways will upgrade 335 railway stations across the country. All the 67 Divisional Railway Managers have been directed to engage private architects and submit detailed reports within the next 6 months. 5 railway stations of each division will be revamped and fully equipped with amenities like toilets, eateries and cyber-cafes. The stations to be refurbished include all state capitals, tourist destinations and other Class A railway stations. The Indian Railways, for the 10 days period ending April 10, 2006, has earned Rs 16.03bn in revenues as compared to Rs 14.08bn during the corresponding period last year, registering an increase of 13.87%. The total goods earnings were Rs 10.70bn showing an increase of 17.31% over the same period last year. The total passenger revenue earnings on originating basis were Rs 4.83bn compared to Rs 4.56bn earned during the same period last year showing an increase of 6.1%.

Dedicated Freight

corridors likely in the 11th plan

period

Indo-Myanmar rail link planned

Attur-Salem section to be broad gauged

335 railway stations to

be refurbished

Railway earnings up by 13.87%


Aviation The Union Ministry of Civil Aviation has announced that all airports being built in the metro and non-metro cities of India will be equipped with infrastructure capable of handling larger aircraft like the Airbus A-380. Thus, now for all theses airports the runways, hangars and the terminal buildings would be constructed as per international standards. Boeing is going to invest $185mn on MRO and allied activities in Nagpur airport. Investment in the first phase would be around $100mn to set up its MRO hub in Nagpur. Boeing will also invest $75mn in an aviation academy in the city to train pilots. GVK Industries Ltd. and GMR Consortium have formally taken over the functioning of Mumbai and New Delhi airports respectively. The first meeting of the joint ventures formed by these companies would be held soon to start the work of restructuring and modernisation of the two airports. The Government of Andhra Pradesh has taken up for consideration a proposal, put up by the Korean conglomerate DG Infrastructure, to set up an international class airport in the Greater Hyderabad region. The company has proposed a 2 runaway airport at Bhongir near Hyderabad at a cost of Rs 40bn. The need for this airport has risen since; the Shamshabad airport is unable to cope up with the increasing traffic which has led to increasing congestion. The International Council of Civil Aviation has undertaken a feasibility study for the Chakan airport project at Pune. The report would be submitted to the Union Civil Aviation Ministry by June 2006. Chakan Airport would have 2 runways and would be constructed over 950 hectares of land, at an estimated cost of Rs 5.50bn. GoAir is about to finalise its proposed partnership with Singapore Airlines to set up a chain of MRO facilities in India in the next 2 months. The JV will set up between 8 and 12 MRO facilities.

International airport being considered

for Hyderabad

Airports handed over to GVK and

GMR

Feasibility study report taken up for

Chakan airport

Airports to be made

capable of handling

large aircraft

Boeing to invest $185 for Nagpur airport

Airline Details

Jet Airways

Planning to purchase 30 aircraft over the next few years and continue with its sale and lease back policy to strike a balance between owned and leased planes in its 53-strong fleet.

GoAir The airline has chalked out a plan for acquiring 20 Airbus aircrafts. This $1.6bn deal was signed at the Singapore Airshow last month.

Kingfisher

The airline has become the latest customer for the Rolls-Royce Trent engine series, following its order for 5 A340-500 airliners and an option for 5 more. The deal, which includes a long-term Total Care maintenance agreement, is valued at around $1bn. The aircrafts are scheduled for delivery in 2008.

Airlines acquiring Aircrafts

GoAir to tie up with

Singapore Airline


The Asian Development Bank (ADB) will invest $264mn in the capitals of 5 North-East Indian states to boost economic growth and develop their urban infrastructure. This will be part of a $377.1mn project, in which the Central government will contribute $113.1mn for the development of Agartala, Aizawl, Gangtok, Kohima and Shillong. The project aims to develop roads, drainage systems, water supply facilities, sanitation, solid waste management, transportation, landslip protection and slum upgradation. The implementation of the project will start from January 2007 and the project would be completed by 2012. Prozone Enterprises has announced a Joint Venture (JV) agreement with Omaxe Group to develop their Prozone Shopping Mall concept on land banks owned by Omaxe across the country. The venture will function as a Special Purpose Viechel. As part of the project, 10 malls will be developed in phase one at an investment of around Rs 15bn. The Brihanmumbai Municipal Corporation will start work on 3 major projects for the development of urban infrastructure in Mumbai city. The projects are the Middle Vaitarna project (for drinking water), Brimstowad (for Storm Water harvesting) and Mumbai Sewage Disposal Project II. These 3 projects would require an investment of Rs 2bn. 20% of the cost would be funded by the way of viability gap funding by the Central Government, while the balance requirement would be provided by the State Government. The Aeren group has chalked out plans to put in place a dozen odd theme malls across the country over the next 3 years with an investment of around Rs 25bn. The first of the malls is coming up at Ludhiana. Shristi Infrastructure Development Corporation Ltd. and Housing and Urban Development Corporation Ltd. have tied up with Intercontinental Hotels Group to set up a 5-star hotel-cum-service apartment complex in Kolkata. The hotel complex will have shopping arcades and provide a range of living options, including hotel rooms and service apartments. The complex, to be built on 8 acres of land, would be ready by 2008. The Bhubaneswar Municipal Corporation (BMC) has earmarked Rs 60mn for the development of infrastructure in Bhubaneswar. The city slums would be upgraded to residential colonies at a cost of Rs 40mn. BMC will spend Rs 10mn on pipe water supply to Bharatpur and Rs 10mn will also be invested in establishment of parking lots in the city. The Hyderabad Urban Development Authority (HUDA) will invest Rs 2.5bn to construct an integrated bus terminus in Secunderabad. Huda will take up the project on a engineering procurement contract basis. The land for the project would be provided by the Andhra Pradesh government and the required funds would be raised through borrowings from banks.

Urban Infrastructure

3 projects for infrastructure development

in Mumbai

Prozone-Omaxe JV for

mall construction

Aeren group to invest Rs

25bn for malls

Hotel complex to come up at

Kolkata

ADB to develop capitals in the

North East

BMC to improve

infrastructure in

Bhubaneswar

HUDA to construct bus

terminus in Secunderabad


Videsh Sanchar Nigam Ltd. (VSNL) plans to link India and Europe by broadband cable in a project that includes laying 6,214 miles of undersea line. The project, to cost around $300mn, includes lying cable from Bombay West into the Gulf of India, on to Egypt and then along the bottom of the Mediterranean Sea north into a junction in Southern Europe. VSNL expects to prepare the blueprint for the venture by the end of 2006. It is also in talks with Etisalat of United Arab Emirates and Saudi Telecom of Saudi Arabia about investing in the venture. Bharat Sanchar Nigam Ltd. (BSNL) will invest Rs 10bn to release 45MHz of spectrum from defence to civilian use. The project conceived by the Department of Telecom aims at transferring the armed forces' wireless communication operations to Optical Fibre Cable, which would release 45MHz of spectrum on various bands including the 1,900MHz band to enable Third Generation Mobile Services. Idea Cellular, has added 500,000 new subscribers in the Maharashtra and Goa circle in the year 2005-06, taking the total number of its subscribers in the circle to over 1.8mn. The company has added 300 new cell sites in the circle and coverage has been extended to 32 out of the 33 districts of Maharashtra in addition to national and state highway coverage. Cellular Services provider Aircel will invest Rs 3.5bn for expanding its services in Orissa. The Orissa circle would cover more than 400 towns and over 2,500 km of state and national highways. To provide good service to the customers, the company is establishing 6,000 retail outlets for sale of its product, in addition to exclusive branded sales outlets. Mahanagar Telephone Nigam Ltd. (MTNL) will finalize the tender for 4mn cellular lines by mid-May 2006. MTNL is looking to add 2mn cellular lines each in the Delhi and Mumbai. The contract for Mumbai will go to ITI-Alcatel, under government rules that 30% of new capacities to be reserved for ITI, which has a manufacturing joint venture with French major Alcatel. Of the total 4mn lines, about 1.5mn will be for 3G networks. Hong Kong's Hutchison Whampoa Ltd. has offered to pay $400mn for a 5.11% stake, held by Hinduja group, in Indian mobile operator Hutchison Essar Ltd. Hutchison Essar is 49.6% owned by Hutchison Telecommunications International Ltd., the cellular arm of Hutchison Whampoa.

Telecom

Idea Cellular expands in

Maharashtra

VSNL to link India and Europe

BSNL to take up spectrum

release project

Aircel to expand in

Orissa

MTNL to finalize

tenders for 4mn lines

Hutchison eyes Hinduja

stake in Hutch


To boost trade in South Asian region, the Indian Government has proposed the setting up of an Inland Port Corporation of India and 13 new dry ports, involving an estimated expenditure of Rs 9bn.The proposal, which involves setting up 8 new dry ports on Indo-Bangladesh border, 4 on Indo-Nepal border and 1 at Indo-Pakistan border, is likely to be submitted to the Union Cabinet by the middle of May 2006. This project, to be implemented by RITES under public-private partnership, is expected to be completed within 3 years.

The Government of Orissa will sign a MoU with the Orissa Stevedores Ltd. (OSL) for the development of the fair weather Gopalpur port to all weather port. OSL would invest about Rs 7.2bn for this port in 2 phases. The port, to be developed over 514 acres of land, would initially handle 140,000 tones of cargo annually and later the capacity would be increased to 550,000 tones. The Mormugao Port Trust (MPT) will construct a permanent cruise terminal of international standards at Mormugao port. The project, estimated to cost Rs 1.85bn, is at the tendering stage. The project would entail construction of a berth of 500 metres length for cruise vessels and container traffic, dredging up to 11 metres and creating a breakwater facility. Gangavaram Port Ltd., a special purpose vehicle developing a Rs 20bn port near Visakhapatnam, has tied up with Malaysia-based Integrax Berhad for the completion of the Greenfield port project. Integrax will have about 20% equity in the port. The port would be fully mechanized and accommodate vessels up to 200,000 DWT. The phase I of the project includes the construction of 5 berths having an annual cargo handling capacity of 25-30mn tones and is expected to be completed by December 2007. The Gujarat Maritime Board (GMB) has embarked on an explicit policy of port-led development in Gujarat. GMB is creating special purpose vehicles with participation by the Railways, state government and private port players to build broad gauge links between the new ports at Mundra and Pipavav and the Delhi-Mumbai rail artery to grab all hinterland traffic from Mumbai. New ports are planned at Positra, Dholera, Maroli, Simar, Vansi Borsi, Mithirvirdi, and New Bedi. Dubai Ports (DP) World will soon float a tender for the design of its planned $450mn container terminal in Kochi Port in Kerala. This will be followed by another tender for the project's main construction.

Ports and Waterways

Government plans 13 new

dry ports

Malaysian firm in

Gangavaram port project

Mormugao port to have cruise berth

GMB rolls out port

development plans

Orissa to sign MoU with OSL for Gopalpur

port

DP to float tenders for Kochi port

The indian Government is expecting an investment of about $2,409mn, by private parties, in various ports and terminal projects in the coming years. To enable private-public partnership in the port projects, the government is also developing new model concession agreement by engaging international law firms.

Private participation

in Indian ports


Social Infrastructure

The Ministry for Non-Conventional Energy Sources will invest Rs 20bn to provide electricity to 10,000 remote villages in 2006-07, through renewable energy. The electrification of the villages would be carried out through the Remote Village Electrification Programme. The Ministry will set up District Advisory Committees, with involvement of Gram Panchayats and Non Governmental Organisations, for smooth implementation of the project. The Power Finance Corporation has signed a MoU with the US National Rural Electric Cooperative for electrification of villages. The MoU would help implement the rural electrification project under the 'Rajiv Gandhi Gramin Vidyutikaran Yojana' for providing electrification to every Indian village by 2009 and every household by 2012. The Manipur government has constituted a high level committee for monitoring all developmental programmes and schemes that have been undertaken in Manipur under Bharat Nirman Programme for up gradation of rural infrastructure. The committee will monitor the implementation of schemes which include providing electricity to all the un-electrified villages, safe drinking water to every habitation, all weather-roads to all villages in the plains, hilly and tribal areas, and telephone connectivity to all unconnected villages, increased irrigation capacity and houses to the rural population by 2009. To address the problem of rural population migrating to cities, the Confederation of Indian Industry (CII) has proposed to set up 100 intermediate cities, complete with physical and social infrastructure including industrial cluster. The initiative would be termed as Bharat Nirman II, which would look beyond just the rural infrastructure. For development of the cities, Special Purpose Vehicles would be created to encourage participation of the private sector. Coimbatore-based non-profit organisation, Isha Foundation will set up English medium computer-friendly schools in every block of Tamil Nadu (TN). Isha Foundation will take up the project as part of its Action for Rural Rejuvenation to cover 1,400 villages in TN. The Central Government will launch Rural Surgery, a scheme to provide and upgrade surgical care facilities in remote rural areas and to medically equip thousands of doctors in India’s primary healthcare centers. Doctors would be trained to handle small cases like cataract surgery, minor ear surgery and tumors on external body parts to cater to around 400mn rural population having no access to basic surgical care.

Village electrification at investment

of Rs 20bn

Monitoring committee constituted for Bharat Nirman in Manipur

PFC signs MoU for rural electrification

100 intermediate cities mooted

Schools to be set up in TN

New scheme to upgrade

rural healthcare


FINANCING ASPECT & COMPANIES

IIFC & IL&FS to finance power projects

The India Infrastructure Finance Company (IIFC) and Infrastructure Leasing and Financial Services (IL&FS) have entered into a pact to develop and finance power projects all over the country to generate 10,000MW in public-private partnership. The initial projects to be undertaken include the 2,000MW gas-based project in the Andhra Pradesh, which would entail an investment of Rs 55bn and a 1,500MW hydel project in Sikkim. Approx. 20% of the investment (about Rs 70bn) would be met by the way of both equity and debt routes by these companies.

JP Morgan plans real estate fund

An asset management company of JP Morgan Chase & Co is planning to raise Rs 15bn fund for investing in the Indian real estate sector. The objective of JP Morgan is to tap the opportunities in the real estate market in India, which is growing 25-30% a year. The funds would be deployed primarily into commercial development and project financing.

New Vernon & Tigerveda picked up stake in B Seenaiah & Company

New Vernon and Tigerveda have picked up a 12% and 7% stake respectively in Hyderabad-based construction/infrastructure major B Seenaiah & Company for Rs 1.5bn. Few others, including Goldman Sachs, have also lined up for a second round of private equity infusion in the company, ahead of its IPO scheduled for the last quarter of '06.

AIG to invest in Indian real estate

The American International Group (AIG) will invest $250-300mn in development of real estate in India. AIG will form a joint venture with Tata Housing Development Corporation to foray into the construction business of residential and commercial complexes.

Indiabulls to invest in infrastructure

Indiabulls Financial Services has tied up with Delhi-based real estate company DLF Universal to form a 50:50 joint venture called Kenneth Builders & Developers to develop residential and commercial complexes across India. Initially, Kenneth Builders & Developers has acquired 35.8 acres of land from Delhi Development Authority (DDA) to develop residential complexes at an investment of Rs 4.5bn.


EQUITY ANALYSIS Top 24 Companies in the Sector by Revenue (April 15– April 30, 2006)

Price Movements in Financing Company’s Shares Vs Nifty

The financing companies showed mixed trend but, majority of them under performed the Nifty. However, as far as volumes are concerned, most of the companies showed negative values.

Change in average daily Volumes compared to last fortnight

% ch an g e

-15%

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ICIC

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IDFC IDB

I% c h a n g e

-1 0 0 %

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1 1 0 0 %

1 3 0 0 %

SBIN

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IDFC

IDB

I


Construction Companies

Price Movements in Construction Shares Vs Nifty

Majority of construction companies showed positive trend and over performed the Nifty. Volumes however, showed mixed trend with some of the companies showing positive values and others showing negative.

% Change in Volumes compared to last fortnight

% ch an ge

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% changes

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