The Maharashtra State Road Development Corporation (MSRDC) has proposed setting up of Nagpur Mumbai Super Communication Expressway Company Limited, a special purpose vehicle (SPV) under the Companies Act, 1956, for the ambitious Nagpur-Mumbai Expressway project.
According to MSRDC officials, creation of an SPV is essential for a project that is estimated to cost Rs46,000 crore. The proposal to create an SPV will be placed before the MSRDC board for its approval on Friday. Confirming the development, Kiran Kurundkar, joint managing director, MSRDC said, “There was a strong case for the creation of an SPV for such a huge project. The proposed SPV will ensure financial discipline and it also would create confidence amongst prospective investors.”
The corporation plans to raise Rs 26,750 crore from a multilateral agency and domestic market for the 710-km Expressway and an SPV will facilitate in borrowing funds, the MSRDC official said.
Kurundkar explained that if a special purpose vehicle is not created then the revenue that would come in from the project would go in to the common kitty of MSRDC and get mixed up. “With an SPV, whatever revenue comes in, it will only remain with the company. And the SPV can ensure that all the revenue out of the project can be escrowed to the non-redemption account of the SPV,” he added.
MSRDC, which will hold majority stake in the SPV, is expecting revenue of over Rs 1,000 crore annually from the project once it is operational. Another official added that the revenue would be used to repay the loan from that and for the maintenance of the expressway.
Out of the Rs 26,750 crore, Asian Development Bank (ADB) is expected to fund Rs 13,750 crore for the project, while MSRDC has roped in SBI caps to raise the remaining funds. According to an MSRDC official, out of the total project cost of Rs 46,000 crore, around Rs 24,000 crore is required for civil construction, while the rest is required for land acquisition, development of nodes, contingencies and financial charges, utility shifting, etc.
The project, which will pass through the most backward districts and 30 tehsils, will also have 24 development nodes or prosperity hubs, which include truck terminuses, commercial sites, knowledge city, IT industries, manufacturing units, etc.
Senior MSRDC officials added that the corporation is expected to get possession of 60% of the required land along the proposed route by February-end. Though, officials are claiming to float construction bids by March 2017, the crucial detailed project report is not expected to come in before May 2017.