NHAI Approves Additional Lending Policy

To bring greater liquidity for the infrastructure companies National Highway Authority of India (NHAI) has approved a policy for securitisation or additional lending (up to 30% of the cost of the original projects). The companies which were awarded NHAI projects earlier and are facing financial crunch in completing the projects will benefit from the move. Major problems for infrastructure players are cheap source of finance and clearance from the concerned authority. It seems that financial problems for the companies will be solved up to some extent as the companies can now take 30% of additional loan on the original cost of projects. 

This is for the second time in the month (March 2014) that NHAI and government have taken steps to accelerate the project completion and provide assistance to the companies. Before this, in the first week of March 2014, Ministry of finance had approved all the recommendations made by the Rangarajan committee. In its recommendations to the road transport ministry, the committee has said that the premium reschedule for projects should happen only if the toll revenues collected at a particular project is not enough to meet the cost of the project (which includes committed premium payments to the government, operations and maintenance cost and debt servicing cost ). One of the recommendations state that the developer will have to pay an interest equal to bank rate plus 2% on the premium amount deferred. 

From the past couple of year’s infrastructure sector is among those sectors which are facing lots of problem, but now the government is showing some interest at the very last minute of its tenure. From these developed moves infrastructure players' stock price may witness some upward trend in medium term.