Hindustan Construction receives Rs1,259cr from NHAI on dispute resolution; Stock zooms 5% -

Hindustan Construction receives Rs1,259cr from NHAI on dispute resolution; Stock zooms 5%

HCC, Hindustan Construction Company

HCC Concessions Ltd (HCON), the infrastructure development arm of Hindustan Construction Company Group, concluded its conciliation with NHAl for all disputes concerning Baharampore-Farakka Highways Ltd (BFHL) and Farakka-Raiganj Highways Ltd (FRHL).

The SPVs entered into settlement agreements with NHAI for a comprehensive closure of all outstanding disputes and claims between the parties. BFHL will receive Rs405cr while FRHL will receive Rs854cr from the NHAI.

FRHL will release the settlement proceeds and further sums to HCC Group per the existing contractual understanding with FRHL’s buyer, Cube Highways & Infrastructure II Pte Ltd (Cube), as detailed below.

Besides part use of funds for NHAl project completion and an exit to the Xander Group, who hold a 14.55% share in HCON, a substantial portion of funds will be received by HCC as a settlement of their cost claim.

Farakka Raiganj Highways Ltd. (FRHL)

As a further consequence of this conciliation, Cube will release Rs233cr withheld as part of HCON’s sale of FRHL and also require to share a significant portion of FRHL’s growing revenue for the remainder of the concession’s 20 years. With 100% construction completion being achieved at FRHL, toll rates will increase -70% in FY22. Additionally, up to Rs100cr is further payable by Cube in 2023, contingent on traffic projections being realised.

Baharampore Farakka Highways Ltd. (BFHL)

BFHL’s closure of disputes with NHAl facilitates the required liquidity in the project to accelerate completion of a much-delayed Bypass, which along with the SPV’s strong free cash flow from toll operations, frees HCON to monetise this ~Rs2,000cr mega project earlier than planned. Despite the impact of COVID-19 and partial tolling, BFHL clocked revenues of Rs.168 cr in FY21, a 16% jump over FY20. On final completion, a toll increase of -67% will further generate material free cash flow.

On the occasion, Arjun Dhawan, HCC Group’s CEO, said, “Today, HCC settled disputes pertaining to its largest BOT projects, and we are thankful for the opportunity provided by the conciliation mechanism encouraged by MoRTH & NHAI. The proceeds of conciliation shall be used to expedite completion of our key projects and to strengthen HCC’s participation in future works of nation-building.”

BFHL and FRHL are among the largest Public Private Partnership (PPP) projects in the country. They encompass 200 Km of Bengal’s main artery, NH-34, and pass through major towns such as Baharampore, Farakka, Kaliachawk, Malda, and Gajol, besides being the only link over the river Ganges in the region. NH-34 provides north-south connectivity between the capital region and the ports of Kolkata & Haldia to the north-eastern states of India.

The west side of the highway borders Bihar and Jharkhand and the eastern side runs parallel to the Bangladesh border, where considerable import and export of goods occur. Both BFHL and FRHL faced significant delays mainly related to land acquisition, commencing toll operations on 14th May, 2014, and October 19, 2016, respectively. The concession periods are 25 years for BFHL and 30 years for FRHL. The full completion of this all-important corridor shall reduce the travel time from Kolkata to North Rennal by half.

FRHL was sold to Cube Highways & lnfrastructure II Pte Ltd (Cube) on 22nd September, 2020, at an enterprise value of Rs1,508cr.

At around 3:11 PM, Hindustan Construction Company was trading at Rs8.07 apiece up by Rs0.38 or 4.94% on Sensex.

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