[embee]

Image courtsey: http://profit.ndtv.com/

As per NDTV Profit news, The six-lane 165-km-long Yamuna Expressway, which connects Noida and Agra, has been put up for sale by Jaypee Group, according to a report in The Mint newspaper. The Yamuna Expressway, which is estimated to have cost around Rs 13,000 crore, became operational in August 2012.

The move should not come as a surprise because the Jaypee Group, comprising Jaiprakash Power Ventures, Jaiprakash Associates and Jaypee Infratech, is struggling under around Rs 60,000 crore in debt.

The performance of the Yamuna Expressway project has been below expectations because of the mismatch in traffic volume estimates. The company has been generating toll income revenue of not more than Rs 200 crore per annum versus the earlier expectation of more than Rs 1,000 crore.

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The deal would be a complex one due to the land parcels attached to the expressway and the group may have to carve out the roads portion to sell it.

The integrated Yamuna Expressway project includes construction, operation and maintenance of the expressway and rights for developing over 6,175 acres of land along the expressway. Jaypee Infratech is developing five townships on this land. Built under the private-public-partnership with the Uttar Pradesh government, the expressway had a project cost of over Rs.12,000 crore.

[saurabhdadhichi]

This is a very good example of how the Business Case (always looking at the greener pasture) ends up being a failure. In such business cases, worst case scenarios are nowhere close to the worst case scenarios.

I admire JP group and will always appreciate them to have brought Formula 1 to India. They have definitely created a world class Formula 1 track only to be used for events that don't generate enough cash for them.

Expressway is also repeating the story, while the returns should have been faster, it is nowhere close to reality.

I just wish they get support to recover the money & we keep encouraging such entrepreneurial efforts.

[libranof1987]

Since they've fallen massively short of the expected toll, they seem to have misjudged the amount of vehicular traffic using the expressway.

This will only get worse once the much-publicized Gatimaan express is operational. ~2.5 hrs to get to Agra from Delhi by either the Gatimaan/Shatabdi will make a hard argument against driving down.

[aditya101]

It shows that Indian populace is still not comfortable passing high tolls. They should have priced tolls very aggressively in beginning to change peoples habits.

Delhi metro's airport line was not doing well. Dmrc reduced the ticket price and ironically that line is now returning profits, albeit small

[ajitstreet]

Originally Posted by aditya101

Delhi metro's airport line was not doing well. Dmrc reduced the ticket price and ironically that line is now returning profits, albeit small

Just to add that Reliance in a similar situation left the Delhi airport metro line when the foot fall didn't arise as per prediction. Their corporate lawyers found some flaw in the contract and left the venture. That was possible because it was a public-private partnership project with Delhi Metro. But in case of Yamuna Expressway, Jaypee has to sell it. This seems another example failure of PPP model.

[rajneeesh]

When the project was conceived and awarded, I t was palnned that the Noida Greater Noida expressway will also be given to Jaypee and toll was supposed to be levied on the Noida to Greater Noida stretch as well . However, since the Noida Greater Noida Expressway had come up a lot earlier, and people were not paying any tolls the government excluded this stretch from tolling to prevent public outcry. Moreover, the Yamuna express way has not come up as the promoters of the express way expected.

The investment was also to be recovered by the revenue accruing from real estate development in the areas abutting the Yamuna express way as well as Noida Greater Noida expressway. Jaypee project in these area are way behind schedule.Even Greater Noida has very low occupancy levels in completed projects ( by Jaypee as well as other developers) and most projects are way behind schedule.

It will take atleast 5 years for this area to come up. Job opportunities from industry and new offices have to be there to make it attractive residential option. This has not really happened due to the anti industry policies of the successive state governments. So completed projects lay vacant as most jobs in NCR getting created in Gurgaon and around Sec 60 in Noida which are quite far from this area.

Greater Noida is home to a large student population who study in the numerous private educational institutions in the area. Most residential colonies are not comfortable in having students as tenants and there are few salaried tenants for the apartments. So property prices have stagnated . Developers like Jaypee are paying the price for being over ambitious ( at best) and unscruplous if you are less charitable towards them. They started multiple projects and have not been able to deliver any of them. Ultimately it is the buyers of the apartments and the Banks who have lent to these developers who are suffering.

Originally Posted by aditya101

It shows that Indian populace is still not comfortable passing high tolls. They should have priced tolls very aggressively in beginning to change peoples habits.

Delhi metro's airport line was not doing well. Dmrc reduced the ticket price and ironically that line is now returning profits, albeit small

The Airport Express line is not aking any money. Yes the ridership has gone up after the reduction in ticket prices but it is still unprofitable. The basic issue is most people when travelling have luggage and wnat point to point connectivity so they take private cars or taxis. The passangers taking fligts to and from the Delhi Airport form a small percentage of Airport Express users. Most are office goers who take it from Dwarka to CP and the otherway round . A significant number of people working in th Airport also use this service. The ridership will go up if the line is extended to connect it to Gurgaon (around NH8). but that then is a different discussion.

[petrol_power]

In India the fall and rise of an empire depends upon the political party in rule, to a greater extent, and the good terms which they have with the ruling party. What happened to Jaypee group, Why they are in debt after the new government took over? Is it facing the same issues DLF is facing currently with the new government?

[sudev]

Originally Posted by aditya101

It shows that Indian populace is still not comfortable passing high tolls. They should have priced tolls very aggressively in beginning to change peoples habits

Is just not that. The older Mathura highway users pay Rs270 (car) for return trip vs Rs500. The problem is for lots of users on south west Delhi getting across Delhi to Expressway itself is challenging. I use old route often enough and but for this problem of crossing Delhi from Gurgaon would use expressway for safety and comfort vis old highway

[alpha1]

Finally ... I always used to wonder how does the Noida-Agra expressway make financial sense with so less traffic on it.

[WorkingGuru]

Firstly

They should allow a tempting super low cost annual subscription. Tie up with transport companies maybe.

Cars that over speed should be penalised (use tech support to somehow do this).

Company will earn thru penalties.
Delhi's drivers / riders will become safe drivers.

Along with the above

They should have specific regular track days & use it exclusively for allowing people to put themselves with their machines, to test.

This project should teach people that there can be a lot that CAN go wrong with private companies doing govt projects by private sector.

When big companies with huge debt, crash, the debt brings down banks too. RBI has to curb this menace!

[N.A.GTC]

Originally Posted by WorkingGuru

Cars that over speed should be penalised (use tech support to somehow do this).

Company will earn thru penalties.
Delhi's drivers / riders will become safe drivers.

So, delegate sovereign powers to private entities? Can you not see how this can go wrong? The authority to collect fines and penalize people should always be with an accountable body - the State.

What about a company resorting to malpractices while collecting fines? Their claims that "you were overspeeding" when you were not? Or just allegations that the company is doing so?

Originally Posted by WorkingGuru

Along with the above

They should have specific regular track days & use it exclusively for allowing people to put themselves with their machines, to test.

That would be for BIC, right (and not the expressway talked about here)? They already do that. Maybe increasing frequency etc. can help, but that's a financial decision to be taken by the company itself and is not the topic here.

Originally Posted by WorkingGuru

When big companies with huge debt, crash, the debt brings down banks too. RBI has to curb this menace!

A genuine question: What can the RBI do without creating unnecessary hindrances to essential development?

[quickdraw]

This is sad news, the infrastructure is definitely great but there are hardly any cars on it. I wonder what planning went into it before they developed it. And its quite clear that it was always meant to be an exercise in increasing the connectivity of their own investments (almost all of the land to the right of the expressway till greater noida is owned by Jaypee) and now with their real estate projects stalled they are facing a cashflow crunch.

[sourabhzen]

Originally Posted by petrol_power

In India the fall and rise of an empire depends upon the political party in rule, to a greater extent, and the good terms which they have with the ruling party. What happened to Jaypee group, Why they are in debt after the new government took over? Is it facing the same issues DLF is facing currently with the new government?

Originally Posted by quickdraw

This is sad news, the infrastructure is definitely great but there are hardly any cars on it. I wonder what planning went into it before they developed it. And its quite clear that it was always meant to be an exercise in increasing the connectivity of their own investments (almost all of the land to the right of the expressway till greater noida is owned by Jaypee) and now with their real estate projects stalled they are facing a cashflow crunch.

Change of Government (both in State as well as Center) and slump in real estate proved fatal for Jaypee Group. I frequently travel from Gurgaon to Taj Nagari (after Taj Mahal) and this expressway, though longer, takes lesser time to commute. It is safer than the other road as there are no robbers, bullock carts, autos and numerous other chaotic encounters during the drive.

I am sure it will start making money in years to come but immediate cash crunch at developers end wont allow them to wait for the good times. I wonder if there is any Indian cash rich company that can afford to buy this project considering there are no land issue or approvals to take care of. Any investor with cash for long term investment plan should crack a deal with Jaypee.