01 June 2020

Interaction - Bajrang Kumar Choudhary, MD, BRNL

BRNL is strongly placed to capitalise on it’s financial engineering capability and asset management skill set


Bharat Road Network Limited, (BRNL) is a road BOT company in India, focused on development, implementation, operation and maintenance of roads/highways projects in several states in India. BAJRANG KUMAR CHOUDHARY, MD, BRNL spoke to CONSTRUCTION OPPORTUNITIES on his company’s contribution to the road construction sector in India.



Briefly tell us about your company’s position in the Indian market and your areas of expertise specific to the road sector.


Bharat Road Network Limited (BRNL), a Srei Initiative, is a road BOT company in India, focused on development, implementation, operation and maintenance of roads/highways projects in PPP. Our Company was incorporated in 2006 as a developer and operator for highways, road and related projects on a BOT basis. Leveraging on our deep domain knowledge, expertise and access to capital and rich pool of contractors, we are probably India’s only company focusing exclusively on Road assets under PPP model exploring both primary and secondary market opportunities. Our main business operations can be clearly divided into three categories, i.e. project development and implementation; operation and maintenance of tolling operations and providing advisory and project management services to our projects.

As PPP model is aimed at leveraging on the private capital for infrastructure development and making the best use of the asset management skill set of the infrastructure companies, we see ourselves as strong enabler for PPP projects while acting as a bridge between the Public Asset and Project Authority. We leverage on our strong asset management skill set, access to capital and rich pool of contractors through our corporate promoter (Srei) and our expertise in financial engineering to implement projects.

As an infrastructure developer operating on the asset aggregation platform, our business growth strategy is strongly driven by portfolio expansion and improving operational efficiency for value accretion.



Give us an understanding about the company’s approach towards adopting best construction practices and technologies that has contributed in strengthening its footprint in India?


Technology is integral part of almost every aspect of our operations, from business development to procurement and quality management. With gaining prominence of IT system and other internal processes in every aspect of business and operations, we are constantly strengthening our IT system and capabilities to create an environment friendly sustainable business eco system.


As a BOT player working along with strong and efficient EPC partners for project execution, we do support and encourage our construction partners to adopt best construction technologies.


At BRNL, we are indeed committed towards driving efficiency in tolling operations and management through more advanced and fully proven technologies to minimise human error resulting from manual intervention and also moving towards more environment friendly transportation solutions that are sustainable both from energy consumption and an environment perspective. Our increasing focus on the IT infrastructure, applications, and other internal processes necessitates further investments to improve its reliability and functionality.


We intend to strengthen our IT systems and other internal processes to reduce manual intervention and improve reliability and efficiency of our business and operations. Improved IT systems help us in achieving low operating costs, high operational efficiency and reduced toll leakages. We are in the process of upgrading our existing IT systems and are currently in the process of implementing a fully automated “hands-off” operation management system integrating technology primarily to improve the flow of vehicular traffic and improve safety.




As a developer tell us of the crucial challenges faced by players like you while executing road projects in India? Is there a concern on smooth availability of financial resources and what is the company’s approach in funding projects?


We believe that the project where bidding has been done on conservative parameters, availability of financial resources is not a problem. Even though there are still many instances of project failing to achieve financial closure, raising funds should not be much of a challenge for organisations with strong balance sheets and good credit ratings. Being in infrastructure sector for over a decade now, we don’t see any issues in raising resources for any of our projects


Having said that, we must admit that there are still some issues related to lenders confidence in the sector which has taken a huge hit in the past few years. The lenders are still struggling with high volume of stressed road assets caught in a vicious circle of inordinate project delays, cost overrun, and default in debt repayment leading to project turning NPA. Moreover recent circular from RBI in February has further complicatedinfrastructure lending and brought uncertainty on refinancing of such assets. One has to understand that these assets on PPP are a pool of cash flows over a period of time and hence needs a provisioning guideline which should consider this fact and not be painted with same yardstick of other sectors which has a very different business dynamics. The Government and the central bank are therefore expected to make a concerted effort to bring back lenders confidence in the sector and once we see that happen, we can expect a big turnaround for the sector.


Though we have so far seen the present regime to be quite empathetic to the concerns of the industry and have shown honest intent to resolve the crisis through a series of reform measures, the actual action on the ground needs to be effective enough to tackle the core issues related to Land Acquisition, time bound resolution of disputes, faster settlement of claims and local administrative support to streamline on-ground execution mechanism.




Which mode of project execution -- EPC/BOT/BOOT/DBFOT – can be considered as a favorable approach for road projects in India?


Future of the road development in India lies only in PPP model irrespective of the choice of execution mode in BOT (Toll), BOT (Annuity), HAM or TOT. Although we must acknowledge that the government has so far been fairly successful in reviving the sector through increased public sector allocation and awarding projects on EPC mode. But the investment need for the sector is humongous and given the budgetary constraint, it is imperative that focus should start shifting towards facilitating increased private sector participation.


However, we do believe that Government must continue with its current practice of judicious mix of PPP and EPC projects based on the individual merits of the projects. While public funding for EPC projects would keep the contractors engaged with a robust order book, private capital in PPP would give major fillip to infra creation at the required scale and size.




Tell us about your present order book status? How optimistic are you about FY 18- 19 and which sector is expected to drive your business volumes this fiscal?


Bharat Road Network Limited is a Road BOT company constantly focused on portfolio expansion through primary and secondary market opportunities. Ever since we entered in PPP space at its nascent stage almost a decade back, we have managed over $2 bn of Highway assets either directly or through our sponsors, subsidiaries and associates.


Today, while the Government is focusing on Transforming India through infrastructure creation at gigantic scale with estimated investments of over `6.92tn towards constructing 83,677km of roads under Bharatmala and other road development program, we see the road investment cycle in primary market reaching an unparalleled scale and magnitude. On the other hand, the opportunities at secondary market are too growing exponentially as lenders are eagerly looking out for strong project partners who are capable to put the stalled projects in their portfolio back on track. Additionally, the EPC contractors, who were once forced to join PPP projects as cash contract had completely dried out, are today desperately looking to sell assets for debt paring and free up their capital. Looking at such enormous opportunity opening up in the sector, we do see a strong potential for a growth generating platform working on asset aggregation model to make the most of existing opportunities in both primary and secondary market. At BRNL, we do intend to capitalise on primary market opportunities under BOT and HAM while aiming to strengthening our position in road infrastructure development business through increased activity in the secondary market especially when assets are available in the market at attractive valuation.




Considering the threefold rise expected in India’s urban population, tell us about your future outlook on the emerging opportunities and the strategies adopted in expanding your business volumes?


As we know that India is today standing at the cusp of a major economic transformation aiming to accelerate its growth to 9 per cent CAGR over the next few decades, there is an urgent need for massive infrastructure ramp up to commensurate with the growing economic activities. As physical infrastructure is the key driver for country’s economic growth, it is imperative to continue the focus on revitalising Public Private Partnership to ensure time-bound creation of world class infrastructure. Since, apart from attracting investment in infrastructure, the biggest benefit of PPP is its ability to draw on the asset management skill set of the private sector.


We do believe that Indian policy-makers’ dream of making “SabkaSaath, SabkaVikaas” a reality hinges largely on the development of country’s road network. We are therefore quite optimistic about the future growth of Public Private Partnership. Besides revitalising the primary market bidding in PPP, the future growth of aggregator platform through portfolio consolidation also looks very promising. We do believe that going forward there would be a lot of activities in both primary and secondary market for value accretion.



Future outlook for the industry and from a company perspective


When the policymakers’ intent and actions are directed towards revitalising road development plan targeting a whopping 190 percent growth in capital outlay over the past 5 years, the estimated investment volume of `6.9 tn speaks for themselves about the outlook for the sector. The initial success of road monetization program and investment plans under Bharatmala has given the much need booster dose to the sector and has setup the stage for exponential growth for companies engaged in highway construction and development. Furthermore, Government’s 40km/day road construction target and large bid pipeline is expected to ensure that NHAI’s project award over the next couple of quarters remains robust. While both the central and some key state government heading up towards election next year, we do believe that capex allocation for infrastructure to remain encouraging and would continue to drive growth for road focused companies.


With such a huge opportunity shaping up the roadmap for growth of the sector, we at BRNL are strongly placed to capitalise on our financial engineering capability and asset management skill set to make the most of the opportunities and strengthen our asset portfolio.



Tell us about your landmark and recent ongoing roadprojects in India – location, size, investment, technologies used etc? Do you have an experience in overseas projects, if yes, then kindly detail?


We are involved in the development, operation and maintenance of national and state highways in several states in India. Leveraging on the execution experience in implementing 14 Road projects of over 5412 lane km under BOT/Annuity model by the Company, its sponsors, subsidiaries and associates, BRNL is currently managing a diverse project portfolio of 6 road projects of over `67 Bn aggregating to almost 2,095 lane kms across India.


Out of the six (6) BOT Projects in our portfolio, currently five (5) Projects are operational and one (1) Project is under Construction.


Our well diversified portfolio of BOT/Annuity projects has a geographically widespread presence in India.


Following Five (5) projects have commenced operations —

  • Guruvayoor Infrastructure Pvt Ltd (Thrissur to Angamali in the State of Kerala),
  • Kurukshetra Expressway Pvt Ltd (connecting Rohtak to Bawal section in the state of Haryana),
  • Mahakaleshwar Tollways Pvt Ltd (connecting Indore and Ujjain in the State of Madhya Pradesh)
  • Ghaziabad – Aligarh Expressway Pvt Ltd (connecting Ghaziabad and Aligarh in the State of Uttar Pradesh)
  • Shree Jagannath Expressways Pvt Ltd (connecting Chandikhole to Bhubaneswar Section of NH-5 in the state of Orissa and One (1) project is under construction phase
  • Solapur Tollways Pvt Ltd (starts from Solapur and ends at Maharashtra-Karnataka Borderin the state of Maharashtra).

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