[alpha1]

Originally Posted by smartcat

Some of the road toll companies are listed on the stock exchange. All you need to do is read the annual report from the company's website to see how much revenues they are generating, their operating expense, debt on the books (gives an idea about the project cost) and finally their return on equity (lets you know if they are making a killing at road user's expense or just scraping by)

Noida Toll Bridge Company (DND Flyway)
http://www.ntbcl.com/

IRB Infrastructure (Mumbai Pune Expressway)
www.irb.co.in

BF Utilities (NICE Road Bangalore)
http://www.bfutilities.com/

GMR Infra (owns & operates 6 or 7 toll roads all across India)
www.gmrgroup.in

The annual report detailing the financials are available in the "investors" section of the website

Just checking the IRB:
Income = 3731
Profit BIT = 1276 (34%)
Finance cost = 756!!! (20%)
Net Profit = 459 (12%)

Looks to be all right, nothing spectacular. But margins are anyway incomplete story. So what about profit yield?

Total assets = 15711
Therefore Return on asset = 2.9% (What! I can earn more money by keeping in bank)

ROCE = 1276/13333= 9.5% (just barely enough to repay money back to the lenders)

I don't see them doing anything spectacular overall.

Originally Posted by tsk1979

GMR EBITA 2594 over ~10500 income, which is a healthy 25% profit margin.

How much/low gross margin should be acceptable (floor and ceiling)?

[tsk1979]

Originally Posted by alpha1

How much/low gross margin should be acceptable (floor and ceiling)?

Well anything from -100000% to +1000000% is okay by me.
All I ask for is very simple. When I go to a shopkeeper and pay money I get goods. When I go to a toll gate and pay 95 crores, I expect a road not ditches, "khandars", and death traps.

The issue is very simple. Money was collected. Yet construction was more or less halted during 2012-2014 timeframe. Only with supreme court intervention work has restarted now. All these years money was taken for no goods.

That is the crux of the argument.

[SmartCat]

Gentlemen, you need to dig a little deeper into the financials. Most of the listed companies have businesses other than tolled roads.

From reading the pink papers on this topic all these years, Govt/NHAI is finding it difficult to get private companies to invest in tolled road projects. That probably means things are not going well for the owners of such projects.

http://www.hindustantimes.com/busine...1-1318285.aspx

The earlier PPP model mandated that developers tie up 100% of the investment through a mix of equity and debt. But with a slowdown in the economy, private developers were finding it difficult to tie up funds. In the last three years, 21 PPPs worth Rs 27,000 crore failed to get bids with developers citing lack of equity.

[reverse_gear]

Originally Posted by tsk1979

GMR EBITA 2594 over ~10500 income, which is a healthy 25% profit margin.

May be relevant to compare the EBITA to the total amount they have invested (i.e. total equity investment + borrowings), which will give you a return on investment. Margins will typically be on the higher as the operating costs of an infrastructure asset are quite low. But the investment in the balance sheet is very high and return on investment will present a more accurate picture.

In the case of GMR specifically, they have more business from airports and power plants as compared to roads, even more so since they sold many of their roads some time back.

You can also look at another 2 companies that are pure road operators - Ashoka Buildcon and ITNL. You should be able to download the latest investor presentation from their site, in which they will have a couple of slides indicating statistics for each toll road that they operate - i.e. length/ lane km, project cost, traffic, toll collection, etc. Makes it easier to assess which roads are making decent returns and which are not.

Of course, with all of this, you will not be able to tell if (and how much) leakage there is in the system. In terms of over-charging on the project cost, toll leakage, etc.

Last thing I will mention is that all the NHAI contracts (at least last 10 years) have a provision wherein if the road construction cost plus a specified return is recovered through toll before the expiry of the toll collection period, then the toll collection can be stopped. Can't recall if any toll road (other than Delhi-Gurgaon NH) has been closed on this account, but the provision is there nonetheless and can be invoked.

[i74js]

Guys, the EPC contracts are over invoiced at-least by 20-30%
- To reduce equity component to zero / negative, the concessioner earns money from day zero.
- The debt taken for project is partially routed / invested as equity in other projects
- Reduced sharing of revenue with the government

In books it may just look like a reasonable business, yet for the project owner it is a very profitable venture, can be used for laundering of large sums

You will find that all of them work on annuity model and not on reduced debt model or marginal cost of operation.


Cheers

[Grr7]

Originally Posted by tsk1979

When I go to a toll gate and pay 95 crores, I expect a road not ditches, "khandars", and death traps.

Thanks for sharing the RTI info Tanvir.

Reminds me of one of my worst experiences trying to report an accident and plead/fight/abuse with these fancy-swanky tolls to initiate the trauma rescue process. Now I wonder if that ambulance even had a first aid kit, they had no doctor or a proper paramedic for sure! This happened on the Chandi Mandir toll linking Chandigarh to Shimla.

http://www.team-bhp.com/forum/street...nt-victim.html

I had even wrote to pgportal, but no positive response. NHAI and the ministry are in good collusion with these toll operators.

[r.praveen]

In a perfect world, the income generated by way of tolls on highways should be fixed in such a way that it covers the regular maintenance expenditure. It can also be made to include the cost of improvements such as guardrails, lighting etc. For example, take Railways. The ticket fare collected should finance its revenue expenditure and not expansion of the network.

For the construction of Highways and all other amenities expected from the government, TAXES are collected. Though a portion of the toll revenue may be set aside for future construction (if the toll is operated by government), comparing the toll revenue to the cost of construction is not necessary.

The issue in question is revenue collection without proper completion.

Construction of highways is a lucrative business, regardless of instances of big companies wanting to exit the field. As TsK pointed out in his workings, there is zero probability of less-earnings. Besides, most earnings are through cash (which are easier to evade tax). These are the prime reasons why any private company would want the BOT project of highways. I have seen first hand how late the government is, in settling the payments of projects and that is the primary reason behind the highway contractors falling behind schedule. Every delay by the government increases their costs and it is reasonable (overall) for them to recover this lost money in the form of tolls. Again this is just a calculated reasonable conjecture on my part with the available information.

There are two aspects that should be managed at least differently.
1. Fixing Reasonable toll charges that cover only the maintenance of Highways
2. Reducing delay in payments or any other issue that affects timely completion of project. This delay aspect is the main culprit behind reputed companies backing out of highway construction.

The toll collection in incomplete highways is nothing less than a daylight robbery. Perhaps, it can be made to collect some percentage of the total toll till completion (say, 25% of the toll). But this is the 'government' we are talking about !!

[reverse_gear]

Originally Posted by r.praveen

For the construction of Highways and all other amenities expected from the government, TAXES are collected. Though a portion of the toll revenue may be set aside for future construction (if the toll is operated by government), comparing the toll revenue to the cost of construction is not necessary.

Under the PPP scheme (which is the case for this road as well as many other NH roads), the construction cost is borne by the private developer and has to be recovered out of the toll collection.

[r.praveen]

Originally Posted by reverse_gear

Under the PPP scheme (which is the case for this road as well as many other NH roads), the construction cost is borne by the private developer and has to be recovered out of the toll collection.

That may be the case here. But regardless, I am trying to bring in to focus the burning question - " Why should a Highway-user who had already paid the necessary contributions to the government in the form of taxes be made to pay again? If we begin to contribute separately for each and every infrastructure project, aren't we paying twice (loosely translated) at least in principle?

If we take Highway department as a whole, the government can finance its infrastructure projects through its Taxes, by issue of NHAI and other Bonds and by obtaining loans. But, PPP and BoT seems to be examples wherein the government has transferred even the funding of projects directly to the people. What is use of government in such cases??

[samdarshi.pali]

Toll collection is a scam in our country. This looks like the most organized mafia operation in the name of PPP. Government at center, state & local level should make efforts to abolish tolls. No scientific studies relate better road conditions, its maintenance and collected tolls. Statistics for toll collection is never communicated to public.

Tolls are bottleneck for free flow to goods/passengers and obstruct economic development.

Good roads are government’s responsibility. It should be full filled utilizing funds collected through established revenue sources. PPP and related concepts are to handover revenue collection to private parties.

Vehicle owners bear hidden cost in the form of fuel & time wastage in long queues at toll plazas. Before new bridges at NH-3 in Nashik, it took 60-80 minutes to cross Nashik. Now you cross Nashik in 10-15 minutes & wait at plaza for 40-50 minutes to pay toll at peak hours.

[Higgs_Boson_i]

I would like to add that the toll being collected appear to be arbitrary in many places. One example is the NICE corridor in Bangalore where one pays a toll of Rs 33 one way from Bannerghetta road to electronic city. Now, I have asked many times at the toll gates and sometimes even parked my vehicle on the side and spoke with the supervisors the following 3 questions:
1) What is the rationale behind the arbitrary number of Rs 33/- (for LMV)?
2) Why can't they give a 2 -way ticket for less say Rs 45 (2 way)?
3) Why can't they enable a smart card/season pass?

The answer I got are
A1) It is our management's wish
A2) No we do not give 2 way (on probing further) management wish
A3) Same as answer 2.

This is daylight robbery as many professionals working in Electronic city take the NICE road and pay the heavy toll day in and day out.

[nettooran]

Well.. This is what an anti-toll road activist I had talked to, told me about how BOT roads function..

The finance is never done 100% by the operator, but its a partnership between govt and the operator where the govt also puts in money.

for example..


*percentage approved ratio : 60:40 ( operator:govt)
*total actual cost of construction : 100Cr.
*total projected cost ( under govt babus+ private nexus) 200 Cr.
*total input by govt ( as per ratio) 80 cr.
*total input by operator : 120 Cr. However, his actual input is only 20 cr since it takes only 100 cr to build the road of which 80 cr is already put in by the govt.
* The operator is allowed to collect toll for an amount of Rs. 120 cr + his margin + interest accumulated for 120 Cr over the period.


N.B: This is completely a third party opinion. please don't question me on the truthfulness of the observation. People who know how NHAI works may please clarify if there is really a ratio wherein the govt also has to input money

[alpha1]

Originally Posted by tsk1979

When I go to a toll gate and pay 95 crores, I expect a road not ditches, "khandars", and death traps.

Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you ...

http://www.team-bhp.com/forum/street...ood-roads.html

The observation was made by a division bench of justices AS Oka and CV Bhadang which passed a detailed order on a PIL highlighting the poor condition of roads in the state and incidents of motorists losing their lives due to potholes-ridden roads

So the court understands your pain, at least from now on, and you should be able to successfully sue the infrastructure provider for not keeping up with the promise but charging the full amount.

[Aroy]

What I am unable to understand, is why do we have to pay the toll. Money for development is collected from users at registration time, and a hefty percentage of the fuel cost are taxes. Then there is a separate cess. All in all, plenty of money (more than twice that required to make and maintain) is collected from the transport sector, but not much is plowed back.

Time that a PIL is initiated to find where the thousands of crores of rupees collected as taxes from the transport sector end up, and why a substantial amount is not used to upgrade the infrastructure.

[acidkill]

Originally Posted by tsk1979

A long time back, I filed an RTI for the amount of toll collected for 2014.
Since toll Plaza was shifted in November, I got data for

01.04.2014 - 30.11.2014 = 8 months.

Guess how much toll was collected?
95 crores!!

This plaza is responsible for around 150kms of road max, maybe even less.
Cost/km of fresh load relaying of a lane is around 20 lakhs approx.

For 6 laning, and re-carpeting existing road, cost comes to around 50 lakhs/km

Do the maths. Just 8 months of Toll collection was enough for road construction, yet we paid so much for a road which was partially constructed, with incomplete flyovers.

Now toll is increased, and many flyovers are still not constructed, giving a huge profit to the concessionaire!

Attachment 1372977

Questions
1. Where did you get the 20 lakhs and 50 lakhs figures? Could it not be more?
2. What about the extent of highway which is not covered between the toll booths?
3. What about salaries, cleaning, repair and maintenance and insurance costs?
4. What about the bank interest that the concessionaire has to be paid? What about the depreciation of the rupee, in case the loans were dollar denominated?
5. Besides, what about the fact that the concessionaire has to make funds to bid for other projects?

You make a fair point, but lets not jump to conclusions either. People have to understand that in this world every thing has to be viable for it to work in the long term.