nhai road toll info

S

FINANCIAL ADVISOR & MANDATED ARRANGER

SBI Capital Markets Limited A State Bank of India Subsidiary

Syndication of Term Loan for Chhapra - Hajipur Expressways Limited

(A Madhucon Group Company) for

4-Laning of Chhapra – Hajipur Section of NH-19/Bihar

June 2010

PROJECT INFORMATION MEMORANDUM

Strictly Private & Confidential

PROJECT INFORMATION MEMORANDUM Page i

DISCLAIMER

This Project Information Memorandum (PIM) contains proprietary and confidential information regarding

Chhapra-Hajipur Expressways Limited (or ‘the Company’). This PIM has been prepared by SBI Capital

Markets Ltd. (‘SBICAP’), on the basis of the information provided by the Company.

There are financial projections presented in this PIM, which have been prepared for the limited purpose of circulation

to the potential lenders to Chhapra-Hajipur Expressways Limited based on the information made available by

Chhapra-Hajipur Expressways Limited. A financial projection presents, to the best of the management’s knowledge

and belief, a company’s expected position, results of operations and cash flow for the projection period. Financial

projections require the exercise of judgment and are subject to uncertainties concerning the effect that changes in

legislation or economic or other circumstances may have on future events and different people may have different views

about the future. There will usually be differences between the projected and the actual results because events and

circumstances do not occur as expected, and those differences may be material. Under the circumstances, no assurance

can be provided that the assumptions or data upon which these projections have been based are accurate or whether

these business plan projections will actually materialize.

Neither SBICAP nor State Bank of India or any of its associates, nor any of their respective Directors, employees

or advisors make any expressed or implied representation or warranty and no responsibility or liability is accepted by

any of them with respect to the accuracy, completeness or reasonableness of the facts, opinions, estimates, forecasts,

projections, or other information set forth in this PIM, or the underlying assumptions on which they are based and

nothing contained herein is, or shall be relied upon as a promise or representation regarding the historic or current

position or performance of the Company or any future events or performance of the Company. This PIM is divided

into chapters & sub-sections only for the purpose of reading convenience. Any partial reading of this PIM may lead

to inferences, which may be at divergence with the conclusions and opinions based on the entirety of this PIM.

The information set forth in this document is intended solely for the use of potential lenders to Chhapra-Hajipur

Expressways Limited to whom it has been delivered and recipients must undertake such investigations as they see fit

before making any commitment or entering into a contract. SBICAP will not regard any person other than

Chhapra-Hajipur Expressways Limited as its client.


PROJECT INFORMATION MEMORANDUM Page i

CONTACT INFORMATION - SBICAP

SBI Capital Markets Limited, Hyderabad 3rd Floor Padmaja Landmark

6-3-648 Somajiguda Hyderabad 500 082 India Fax: +91 40 2331 6800

1. N. Prakash Vice President Project Advisory & Structured Finance

Tel / Fax: +91 40 2331 2891 Mob: +91 99496 55139 Email: [email protected]

2. K. Srinivas Assistant Vice President Project Advisory & Structured Finance

Tel: +91 40 2332 1605 Mob: +91 99899 23294 Email: [email protected]

3. Debashis Rath Deputy Manager Project Advisory & Structured Finance


4. Prasanna Krishnan Deputy Manager Project Advisory & Structured Finance



PROJECT INFORMATION MEMORANDUM Page ii

TABLE OF CONTENTS

1. INTRODUCTION ..............................................................................................................4 2. THE COMPANY .................................................................................................................8 3. SPONSOR’S PROFILE .....................................................................................................12 4. PROJECT DESCRIPTION ..............................................................................................23 5. PROJECT STRUCTURE ..................................................................................................28 6. PROJECT COST ................................................................................................................47 7. MEANS OF FINANCE .....................................................................................................50 8. NATIONAL HIGHWAY AUTHORITY OF INDIA .....................................................53 9. APPROVALS AND CLEARANCES ................................................................................58 10. FINANCIAL PROJECTIONS ..........................................................................................59

10.1 Assumptions ................................................................................................................ 59 10.2 Financial Projections .................................................................................................... 62

11. RISK ANALYSIS & SWOT ANALYSIS ...........................................................................69 11.1 Risk Analysis ............................................................................................................... 69 11.2 SWOT Analysis ............................................................................................................ 73

12. CONCLUSION ..................................................................................................................75 13. ANNEXURE ......................................................................................................................77


PROJECT INFORMATION MEMORANDUM Page iii

LIST OF KEY ABBREVIATIONS

Abbreviations DescriptionsBOT Build Operate TransferCA Concession AgreementCAGR Compounded Annual Growth RateCOD Commercial Operations DateCIN Company Information NumberCWIP Capital Work in ProgressDER Debt to Equity RatioDBFOT Design, Built, Finance, Operate & TransferDSCR Debt Service Coverage RatioEPC Engineering, Procurement & ConstructionFME Force Majeure EventFY Financial YearGDP Gross Domestic ProductGoI Government of IndiaIDC Interest During ConstructionIE Independent EngineerINR Indian RupeeIRC Indian Roads CongressIRR Internal Rate of ReturnJV Joint Venturekl Kilo Literkm KilometerLCV Light Commercial VehicleLD Liquidated DamagesLIA Lender’s Insurance AdvisorLIE Lender’s Independent EngineerMT Metric TonneMoRT&H Ministry of Road Transport and HighwaysNH National HighwayNHAI National Highways Authority of IndiaNHDP National Highways Development ProjectOD Origin DestinationO&M Operations and MaintenancePAT Profit After TaxPBDIT Profit Before Depreciation Income and TaxPBT Profit Before TaxPDC Pre Disbursement ConditionsPPP Public Private PartnershipRoW Right of WayRBI Reserve Bank of IndiaROCE Return on Capital EmployedSBAR State Bank Advance RateSPV Special Purpose VehicleTNW Tangible Net WorthTOL Total Outstanding Liabilities


PROJECT INFORMATION MEMORANDUM Page 4

1. INTRODUCTION

The Government of India (GoI) is according top priority to the development of infrastructure in

the country with the main objective of achieving higher average growth in the Gross Domestic

Product (GDP) in the coming years. GoI recognises that the expansion and development of an

efficient road network is one of the pre-requisites for the country’s economic progress. Roads

have emerged as the preferred mode of transport in India and as per the NHAI, about 65% of

freight and 80% of passenger traffic is carried by the roads. Although National Highways

constitute only about 2 per cent of the road network, it carries 40 per cent of the total road traffic.

The road sector, therefore, forms a key input for production processes and adequate provision of

roads and services helps in increasing productivity and lowering production costs.

The growth in goods movement and passenger mobility in India has led to a considerable rise in

vehicle population. The industrial as well as agricultural development and rapid increase in trade

(domestic and external) have led to higher transport demand. In addition, the increase in per capita

income and overall prosperity has led to higher demand from tourism sectors, etc. leading to

increased pressure on transport infrastructure. The growing mismatch between the road

infrastructure and the vehicle population has led to traffic congestion, poor levels of service and

increase in the number of road accidents.

GoI, through the Ministry of Road Transport and Highways (MoRT&H), is working towards

enhancing the traffic carrying capacity and safety levels of the heavily congested National Highway

(NH) sections for efficient transportation of goods as well as passenger traffic. The Road

Transport and Highways Ministry has set for itself a target of achieving 20 km per day. To achieve

this, necessary modifications to project documents and systems & procedures have been made to

attract bidders. MoRT&H had identified certain National Highway stretches for 4-laning on Build,

Operate and Transfer (BOT) basis under National Highway Development Programme (NHDP)

Phase III. These stretches comprising around 12,000 Kms. of roads were to be taken up for

widening from 2-lane to 4-lane standards on BOT basis, based on traffic density, connectivity to

state capitals, and centres of tourist and economic importance. The implementation of these

projects is managed by the National Highways Authority of India (NHAI).

National Highway 19 (NH 19) connects Ghazipur in Uttar Pradesh with Patna in Bihar. It covers

a distance of 240 km, of which 120 km is in Uttar Pradesh and 120 km is in Bihar. This road spans

across the districts of Ghazipur, Bhallia in Uttar Pradesh and Saran, Muzafarpur and Patna in

Bihar. In Bihar it passes through Chhapra, Dighwara and Hajipur and crosses the Ganges to



terminate at Patna. To cope with the rapidly rising traffic density, a number of 2-lane sections on

NH-19 were identified for widening to 4 lanes on BOT (Annuity) Basis under NHDP Phase III.

One of these sections is a 65 Km stretch from Chhapra to Hajipur section of NH-19 from km

143.200 to km 207.200 (Project Highway) in the state of Bihar.

In February 2010, NHAI had initiated the international competitive bidding (ICB) process inviting

proposals from eligible parties for taking up 4 laning of Chhapra - Hajipur section of NH-19 from

km 143.200 to km 207.200 in the state of Bihar under NHDP Phase III through a Design, Build,

Finance, Operate, Transfer (DBFOT) concession (the Concession) on Annuity basis for a

concession period of 15 years (2.5 years of construction period and 12.5 years of operating period)

(hereinafter referred to as Project).

Madhucon Projects Limited (MPL) emerged as L1 for the Project based on the lowest annuity

that the Company had sought from NHAI in consideration of the grant of Concession. Letter of

Award (LoA) was awarded to MPL on May 13, 2010. As per the LoA, the annuity sought by the

Company is a fixed Rs 130.86 crore per annum and is payable, in arrears, every 6 months from the

COD for an operating period of 12.5 years. The overall Project implementation framework

involves a special purpose vehicle (SPV), promoted by the successful bidder (i.e. MPL); entering

into an agreement (the Concession Agreement) with NHAI, wherein the SPV implement the

Project. Accordingly, an SPV, by the name of Chhapra-Hajipur Expressways Limited, (‘CHEL’ or

the ‘Company’), has been incorporated by MPL on June 2, 2010. The Concession Agreement is

expected to be executed between CHEL, as the Concessionaire, and NHAI in the month of June,

2010 (within 45 days from the date of LoA).

The draft of the Concession Agreement provided by NHAI (hereinafter referred to as the CA)

requires the Company to initiate and complete 4-laning of the Project Highway within a 910 day

period (Construction Period) starting from the Appointed Date1, operate and maintain the Project

Highway during the concession period of 15 years (construction period of 2.5 years and operating

period of 12.5 years), and, hand over the Project Highway to NHAI on expiry of the Concession

Period. The CA, on execution, will entitle the Company to receive an annuity of Rs 65.43 Crore

every 6 months, in arrears, starting from the date of commencement of commercial operations

(COD) from NHAI. 1 Appointed Date - The date on which Financial Close is achieved or an earlier date that the Parties may by mutual consent determine, and shall be deemed to be the date of commencement of the Concession Period. The CA requires achievement of Financial Close within 180 days from the date of the signing of the CA. For the avoidance of doubt, every Condition Precedent shall have been satisfied or waived prior to the Appointed Date and in the event all Conditions Precedent are not satisfied or waived, as the case may be, the Appointed Date shall be deemed to occur only when each and every Condition Precedent is either satisfied or waived, as the case may be;



MPL, the flagship company of the Hyderabad based Madhucon Group, is engaged in execution of

Infrastructure projects such as construction of National Highways, Fly-overs, Dams, Tunnels,

Aqua ducts, Bridges, Coal Handling plants, etc. MPL is one of India’s leading “Engineering,

Procurement and Construction (EPC)” and “Build, Operate and Transfer (BOT)” contractors.

MPL has also led the group’s foray into the BOT (Build, Operate and Transfer) Road sector,

Energy Sector, Mining and Real Estate Sector through various SPV (Special Purpose Vehicles).

MPL has, so far, developed more than 710 km of Road as EPC Contractor and is

developing a further 285 km of roads across various states.

MPL is listed on the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Hyderabad

Stock Exchange (HSE) and Luxembourg Stock Exchange. MPL achieved a turnover and PAT of

Rs 1314.93 Crore and Rs 43.22 Crore respectively for FY2010 (provisional). MPL’s long term

credit rating was enhanced from LA to LA+ by ICRA in March 2010. ICRA has also assigned a

rating of A1 to the Rs 75 Crore commercial paper programme of MPL. The order book position

of MPL is a healthy Rs 5700 Crore.

To ensure growth in the infrastructure segment, the Madhucon Group is in the process of

recasting its holding structure by vesting the infrastructure assets i.e. the BOT road projects,

thermal power projects and coal mining company in a subsidiary of MPL. The holding company

for the infrastructure assets has been named Madhucon Infra Limited (MIL).

The construction of the Project, to be undertaken by MPL, under fixed price, fixed time EPC

Contract, will begin immediately after Financial Close. The Company proposes to enter into an

EPC contract with MPL by July 2010. The Operations & Maintenance (O&M) responsibility is

proposed to be entrusted to Madhucon Infra Limited (MIL) based on the experience and skills of

the promoter.

The total cost of the Project, estimated at Rs.812.50 Crore, is proposed to be funded through a mix

of Term Loans and Equity in the ratio of 72:28. Equity will consist of Rs 39.00 Crore of equity

capital and Rs 188.50 Crore of interest free unsecured loan from the Promoters. CHEL has

appointed SBI Capital Markets Limited (“SBICAP”) as its Financial Advisor & Funds Arranger to

undertake a broad due diligence of the Project to assess its debt servicing ability and to assist

CHEL in raising the envisaged debt.

The graphs below provide an overview of the road construction projects executed and under

execution by the Promoter group.

Road Co

Road Co

BOT-EPC-

The cha

completio

under exe

onstruction P

onstruction P

- Projects Execute-Projects Executed

rts indicate

on of over 7

ecution proj

Projects Ex

Projects un

ed on Build, Operd as an EPC cont

e MPL’s s

710 km of r

jects is over

EPC, 456

EPC, 10

Strictly Private

xecuted

der Implem

rate, Transfer basitractor

strong cred

road stretch

Rs 4000 cro

B

.41 km

04.5 Km

& Confidentia

mentation

is

dentials in

hes. The tot

ore.

BOT, 254.25 km

BOT, 181.45

al

the roads

tal value of

m

5 Km

s sector wi

the comple

ith success

eted and tho

sful

ose



2. THE COMPANY

Chhapra-Hajipur Expressways Limited (CHEL / the Company) has been incorporated as the SPV

to undertake the implementation of Four- laning of Chhapra to Hajipur section of NH-19 from

km 143.200 to km 207.200 in the state of Bihar under NHDP Phase III on Design, Build, Finance,

Operate, Transfer (DBFOT) Annuity basis.

Brief Particulars of Chhapra Hajipur Expressways Limited (CHEL)

Name of the Company : Chhapra Hajipur Expressways Limited Date of Incorporation : June 2, 2010 Constitution : Limited Company CIN : U45209AP2010PLC068742 Sector : Infrastructure – Roads & Highways

Registered Office : Madhucon House, Plot No.1129/A, Road No.36, Jubilee Hills, Hyderabad - 500033,Andhra Pradesh

Site Location : Chhapra-Hajipur section of NH-19 from km 143.200 to km 207.200 in the state of Bihar

Authorized Capital :

Rs.1.00 crore divided into 10, 00,000shares of Rs 10 each. Authorized Capital will be suitably enhanced as per the financing plan of the proposed Project.

Project Description : Four-laning of Chhapra Hajipur section of NH-19 from km 143.200 to km 207.200 in the state of Bihar under NHDP Phase III on Design, Build, Finance, Operate, Transfer (DBFOT) Annuity basis.

Business Areas of CHEL

As per the Memorandum and Articles of Association of CHEL the Company’s main objects are:

• To carry on the business, to bid for and secure contracts and execute strengthening of 4-

laning of Chhapra-Hajipur Section of NH-19 from Km 143.200 to Km 207.200 on

Design, Build, Finance, Operate and Transfer (DBFOT) Annuity basis

• To carry on the business of O&M (Operation & Maintenance) contracts relating to the

said road works during the concession period of 15 years and to continue for such other

extension periods from time to time



Present Arrangement with Banks and Financial Institutions

CHEL, currently, does not have any fund-based and non-fund based limits from any bank or financial institution. Existing Operations and Past Financials

CHEL is a special purpose company and has been formed for the purpose of implementation of

the proposed Project and as of now, there are no existing operations or past financials of the

company.

Board of Directors

As per the Memorandum & Articles of Association of CHEL, the number of directors on the board of the Company shall not be less than 3 (three) and not more than 12 (twelve). The following persons shall be the first directors of the Company.

Table 4.1 Board of Directors of CHEL No. Name Designation Experience

1. Mr. Nama Seethiah

Director He is a civil engineer with vast experience in project construction works and has developed skill to effectively manage large construction projects. He is presently the Managing Director of Madhucon Projects Ltd.

2. Mr. Kamma Srinivasa Rao Director Bachelor in Engineer (Mechanical) with

vast experience in construction works.

3. Mr. Nama Prithvi Teja

Director -

Organization & Management Structure

The Board of Directors of CHEL will be responsible for the direction and management of the

SPV and the Project. The Madhucon Group will depute persons with relevant experience for

execution of the day to day management of the Company. On achievement of COD, the

management team will be further supplemented by the following senior staff to ensure the

successful delivery of the O&M responsibilities.



The Madhucon Group is professionally managed and employees are qualified and experienced in

various fields for conduct of business as shown in the following table:

Name of the Management Personnel

Designation Qualification Experience

Mr. Nama Seethaiah Managing Director Diploma in Civil Engineering

He is a civil engineer with vast experience in project construction works and has developed skill to effectively manage large construction projects. He is presently the Managing Director of Madhucon Projects Ltd.(MPL)

Mr. S Vaikuntanathan Director Chartered Accountant

Over 25 years experience in banking and investment banking sector and corporate finance.

Mr. S V Patwardhan Executive Director M Tech & LLB

Over 15 years of experience with various companies across India.

Dr. N Janakiram Executive Director M Tech, Ph D Over 40 years of experience with various companies across India.

Mr. N. Ramesh General Manager (Projects)

BE (Mech) He is having more than 20 years of experience in project construction works and has developed skill to effectively manage large construction projects.

Mr. I. Vidya Sagar Deputy General Manager (Coordinator)

M Tech (Civil) 20 years of experience

Mr. Santosh Kumar Project Manager BE (Civil) 16 years of experience

Mr. V.K. Singh Project Manager – Coordination (Site/HO/Consultant)

BE (Civil) 20 years of experience

Mr. V.N. Jha Deputy Project Manager

BE (Civil) 20 years of experience

Mr. Hardhan Bhuin Survey Manager Diploma in Civil Engineering

12 years of experience

The above are supported by a team of experienced and qualified employees. Besides the above,

the company recruits qualified and experienced professionals at various levels to strengthen the

various functional teams as and when required.



Capital Structure

The capital structure of the CHEL as on May 21, 2010 is as under:

Share Capital Particulars Rs.

Authorized Capital 1,000,000 Equity Shares of Rs 10 each 10,000,000

Issued, Subscribed & Paid up Capital

5000 Equity Shares of Rs 10 each 50,000

Considering the paid up equity requirement of Rs. 40.20 crore for the Project, the authorized share capital of Rs. 1.00 crore will be suitably increased and a suitable condition to this effect has also been suggested in the Term Sheet.



3. SPONSOR’S PROFILE

CHEL is promoted by Madhucon Projects Limited (MPL), the flagship company of the

Hyderabad based Madhucon Group. A snapshot of CHEL’s holding structure is provided below:

Details of the Promoter and Group Companies

Madhucon group

Madhucon group, promoted by Mr. N. Nageswara Rao, has business interests in Construction of

Highways, Thermal power projects, Dams, Tunnels, Aqua ducts, Bridges, Coal Handling plants

and other civil projects. It is also engaged in the manufacture/production of sugar, and mining of

coal and granite.

The major operating companies forming part of the Madhucon group include;

1. Madhucon Projects Ltd. (MPL) and its subsidiaries

2. Madhucon Granites Ltd. (MGL)

3. Madhucon Sugar and Power Industries Ltd. (MSPIL)

The aggregate turnover, profit and Net worth of the three companies during FY09 was Rs.

1218.67 Crore, Rs. 70.92 Crore and Rs.705.24 Crore respectively.



Two of the BOT investments of the road sector and mining operations of Pt Madhucon have

started commercial operation. Other two BOT road projects and the Phase I of the power SPV

are expected to start commercial operation by July/August 2010 and February 2011 respectively.

These investments will generate assured and stable cash flows. To ensure focus on the

infrastructure sector, the Group is in the process of recasting its holding structure by vesting the

infrastructure assets namely – Madhucon Agra-Jaipur Expressways Limited (MAJEL), TN (DK)

Madhucon Projects Limited (MPL)

CHEL

Madhucon Infra Limited (MIL)

NHAI

Concession Awarded to CHEL

SPV to carry out the Project

100% (MIL+MPL)

85% Subsidiary of MPL

Infrastructure Holding Company of MPL



Expressways Limited, Trichy – Thanjavur Expressways Limited, Madurai – Tuticorin Expressways

Limited, Simhapuri Energy Private Ltd (power generation) and Pt Madhucon (coal mining) to a

subsidiary of MPL. The holding company for the infrastructure assets has been named Madhucon

Infra Limited (MIL). The company has initiated the process for necessary approvals from

statutory authorities, lenders, etc for the change in the holding structure.

After getting the necessary approvals, Madhucon Infra Limited (MIL) proposes to raise equity of

about Rs 400 Crore by way of private placement and a further Rs 400 Crore by way of IPO.

IDFC- SSKI has been mandated to raise Rs 350 Crore – Rs 400 crore by way of private placement

/ pre-IPO placement for the company. The placement is likely to be completed by July 2010.

For the IPO of Rs 400 Crore, the company has mandated IDFC-SSKI, SBI Capital Markets

Limited, Edelweiss Securities and ICICI Securities as Book Running Lead Managers (BRLM).

Canara Bank and Motilal Oswal Financial Services Limited have been appointed as co-lead BRLM.

Amarchand Mangaldas are the legal advisors to the management and AZB Partners are the

advisors to the underwriters. Jones Day is the legal advisor for the foreign offering. The draft

DRHP will be filed on completion of statutory and non-statutory formalities relating to the

transfer of investments from MPL to MIL and due diligence and compliances required by SEBI.

3.1 Madhucon Projects Ltd (MPL)

The flagship company of the group is Madhucon Projects Ltd (MPL). MPL was originally

incorporated on 15th March, 1990 in the name of Madhucon Continental Constructions Private

Ltd. It was converted into a Public Limited Company in the year 1995 and the name of the

company has been changed to Madhucon Projects Limited. MPL is listed on the Bombay Stock

Exchange (BSE), National Stock Exchange (NSE), Hyderabad Stock Exchange (HSE) and

Luxembourg Stock Exchange. MPL achieved a turnover and PAT of Rs 1045 Crore and Rs 47

Crore respectively for FY2009. The company as on 31.03.2009 had a Tangible Networth of

Rs.548.46 Crore. MPL achieved a turnover and PAT of Rs 1314.93 Crore and Rs 43.22 Crore

respectively for FY2010 (provisional).

MPL is engaged in execution of Infrastructure projects such as construction of National

Highways, Fly-overs, thermal power projects, Dams, Tunnels, Aqua ducts, Bridges, Coal Handling

plants, etc. MPL is one of India’s leading “Engineering, Procurement and Construction (EPC)”

and “Build, Operate and Transfer (BOT)” contractors.



3.1.1 Share Holding Pattern

The share holding pattern of Madhucon Projects Limited (MPL) as on December, 2009 is as

follows:

Particulars No. of Shares %age

shareholding

(A) Shareholding of Promoter and Promoter Group

(1) Indian Individuals / Hindu Undivided Family 30,087,600 40.77% Bodies Corporate 12,461,438 16.89% Sub-Total 42,549,038 57.66% (2) Foreign - - Total Shareholding of Promoter & Promoter Group (a) 42,549,038 57.66%

(B) Public Shareholding

(1) Institutions

Mutual Funds / UTI 9,139,387 12.38% Foreign Institutional Investors 9,324,815 12.64% Sub-Total 18,464,202 25.02% (2) Non-Institutions

Bodies Corporate 6,462,694 8.76% Individuals 4,915,001 6.66% NRIs/OCBs 343,605 0.47% Sub-Total 11,721,300 15.88% Total Public Shareholding (b) 30,185,502 40.90%

Total (A)+(B) 72,734,540 98.56% (C) Shares held by Custodians and against which Depository Receipts have been issued (c) 1,060,400 1.44%

Total (a)+(b)+(c) 73,794,940 100%



3.1.2 Major Road Projects of MPL

MPL has executed/executing around 997 km of 4/6 laning on National Highways in the last 15 years. The major road projects executed by MPL are as

under:

Sl.

No

Name of the

Company

Executing the

Project

Assignment

awarded by

Brief Particular of the Project Length in

km

Current Status Value of

the Project

(Rs Crore)

1. Madhucon Agra-

Jaipur

Expressways

Limited (MAJEL)

NHAI/BOT

Projects

The consortium of MPL (85%) along with SREI International Finance

Limited (15%) won the bid to execute the project, on BOT basis, for

improvement, operation and maintenance, rehabilitation and strengthening of

existing 2-Lane road and widening to 4 lane Divided Highway of Km 63 to

Km 120 of NH-11 (Bharatpur - Mahua section) in the state of Rajasthan.

The CA was signed on 13th October 2005. The Concession is valid for 25

years from the appointed date (13th December 2005) i.e. till 13th December

2030.

57.305 The project achieved

COD in May 2009 and

the toll collections are

in line with original

assessment.

327.39

2. TN (DK)

Expressways

Limited

NHAI/BOT

Projects

TN (DK) Expressways Limited was incorporated as a SPV by MPL &

associates (99.9%) and SREI International Finance Limited (0.1%)

Consortium for Design, Construction, Development, Finance Operation and

Maintenance of Km (305.6 – 373.725) for the stretch Karur Bypass to

Dindigul and improvement, operation and maintenance of Km (292.6 –

305.6) for the entire stretch of Karur Bypass on NH-7 in the state of Tamil

Nadu.

68.125 The project road

achieved COD in

November 2009 and

the toll collections are

in line with original

assessment.

381.06

3. Trichy – NHAI/BOT Trichy – Thanjavur Expressways Limited was incorporated as a SPV by MPL 55.75 As on date 96% of the 390



Thanjavur

Expressways

Limited

Projects for Execution and Maintenance of 4 - Lanes of Trichy – Thanjavur Section,

Km (80.00 – 135.750) on NH- 67 in the state of Tamil Nadu on BOT Basis.

work is fully

completed. The COD

is expected in June,

2010.

4. Madurai -

Tuticorin

Expressways

Limited

NHAI/BOT

Projects

Madurai – Tuticorin Expressways Limited was incorporated as a SPV by

MPL & Associates - SREI & Associates Consortium for Execution and

Maintenance of 4 - Lanes of Madurai – Tuticorin Section, Km (138.8 – 264.5)

on NH- 45 B in the state of Tamil Nadu on Build Operate Transfer (BOT)

Basis.

125.7 As on date 97% of the

work is completed and

the COD is expected

in July, 2010.

920

5. MPL NHAI/EPC

Contract with

IWM

Strengthening of Vijayawada to Eluru road section of NH-5 (Km 3.40 to Km

75.00 including 4-laning from Km 3.40 to Km 13.00 and construction of

Bypass for Eluru town in Andhra Pradesh

71.6 Completed 325.65

6. MPL GMR EPC

Contract

Widening and Rehabilitation of the existing 2-lane highway from Tada to

Nellore (Km 54.38 to km 111.60) of NH-5 section in Andhra Pradesh


7. MPL GMR /EPC

Contract

Strengthening of the existing 2-lane highway from Tuni to Anakapalli (Km

300.00 to Km 359.20) and widening to 4-lane dual carriageway of NH-5 in

Andhra Pradesh


8. MPL GMR /EPC Contract/ Expressways

& Highways

Strengthening and widening to 4-lane of NH-45 from Tambaram to

Tindivanam (Km 28.00 to Km 121.00) in Tamil Nadu

93 Completed 146.31

9. MPL NHAI/EPC

Contract/

Rehabilitation and Upgrading of 4/6 lane divided carriageway for package

(KU-5) from Chittorgarh – Mangalwar from Km 220.00 to Km 172.00 of

48 Completed 124.70



Expressways

& Highways

NH – 76 in Rajasthan.

10. MPL MPRDC/EPC

Contract

State Highway–14 & State Highway–27: Six State Highway Corridors –

Agar-Sarangpur & Susner-Khilchipur Road of Package 04, Madhya Pradesh.

The

Project is funded by Asian Development Bank.


11. MPL MPRDC/EPC

Contract

State Highway–23: Project Road No.8, Guna – Fatehpur – Paron: 65.80 kms

State Highway–14: Project Road No.10, Biora–Maksudangarh-Siroj: 88.00

kms

(funded by Asian Development Bank)


12. MPL NHAI/EPC

Contract

National Highway–28:Lucknow – Muzaffarpur, Km 440 to Km 480 in the

State of Bihar (funded by World Bank)

40 Under Implementation 318.78

13. MPL NHAI/EPC

Contract

4 lane National Highway –37: Nagaon to Dharamtul from km 255.00 to km

230.50 on East– West Corridor, Assam.

24.5 Under Implementation 273.80

14. MPL NHAI/EPC

Contract

National Highways NH-57 between Jhanjapur to Dharbanga section, Bihar. 40 Under Implementation 388.23

Total (km) 996.61



3.1.3 Financials of MPL

MPL achieved a turnover and PAT of Rs 1314.93 Crore and Rs 43.22 Crore respectively for

FY2010 (provisional). The tangible networth of the company as on March 31, 2010 was about Rs.

576.00 Crore. The financial highlights of MPL for the previous five years are furnished below: (Rs Crore)

Particulars 2006 2007 2008 2009 2010

Audited Unaudited

Total Income 349.54 531.52 737.99 1044.53 1314.93

PBDT 56.72 84.29 10347 116.48 120.59

Depreciation 19.13 25.30 33.94 43.34 44.85

PBT 37.58 58.99 69.53 73.13 68.14

Provision for Tax 4.32 17.42 2228.34 26.24 24.90

PAT 33.26 41.57 47.25 46.90 43.22

Dividend 1.69 2.21 2.21 2.95 --

Net Cash Accruals 50.70 64.66 7897.2 90.24 88.07

Net Fixed Assets 113.38 195.56 247.99 288.41 289.38

Investments 1.29 231.12 299.69 372.75 461.69

Net Current Assets 401.81 229.96 153.31 207.16 --

Total Assets 516.49 656.65 700.99 868.32 --

Tangible Net worth 409.53 447.91 50480 548.46 --

Total debt 103.42 201.16 196.20 319.86 --

Total Liabilities 516.49 656.65 700.99 868.32 --

EBIDTA (%) 20.06% 18.44% 16.25% 13.69% 11.13%

PAT (%) 9.52% 7.82% 6.40% 4.49% 3.39%

Debt equity ratio 0.25 0.45 0.39% 0.58 --

TOL / TNW 0.79 1.20 2.49 1.51 --

Current Assets 628.88 581.60 708.62 714.98 --

Current Liabilities 227.07 351.63 555.30 507.81 --

Current Ratio 2.76 1.65 1.28 1.40 --

MPL’s long term credit rating was enhanced from LA to LA+ by ICRA in March 2010. ICRA has

also assigned a rating of A1 to the Rs. 75 Crore commercial paper programme of MPL. The order

book position of MPL is a healthy Rs. 5700 crore as on May 31, 2010.



3.1.4 Associate / Subsidiary Companies of MPL / MIL



The status of each of the projects is presented below:

a) Simhapuri Energy Private Limited

SEPL, the SPV for energy sector, envisages the development of a coastal based power plant with

an aggregate capacity of 1890 MW (2x135 MW + 2X150 MW + 2x660 MW) to be implemented in

four phases near Krishnapatnam in the Nellore District of Andhra Pradesh. While Phase I and

Phase II are under implementation, Phases III and IV (2x660 MW) are at planning stage.

Phase I:

The Company is currently implementing Phase I of the project consisting of 2x135 MW power

plant. The Project cost has been estimated at Rs 1336.50 Crore and is being funded by equity of

Rs 334.10 Crore and term loan of Rs 1002.40 Crore. The project is scheduled to be operational in

February 2011.

Phase II:

The scope of this report covers the Phase II of the project of 300 MW. The cost of the project is

estimated at Rs. 1605.88 Crore, to be funded by equity contribution of Rs. 401.47 Crore and

balance by term loan of Rs. 1,204.41 Crore. The financial tie-up for the Phase II is underway and

is likely to be completed by June 2010. The projected is expected to be completed by July 2012.

b) PT Madhucon Indonesia

MPL had set up a wholly owned subsidiary in the name of Pt Madhucon Indonesia, a limited

liability company under the Indonesian Laws. Pt Madhucon has a mining license for 8660 hectares

in South Sumatra. All the clearances have been obtained and the initial production has

commenced. The mine has started operations is expected to export about 6,00,000 MT by March

2011 and which will be scaled up gradually. The estimated reserves of the mine are about 900

Million MT.

Pt Madhucon has been granted another coal mining contract to excavate and export coal in 3188

Hectares of land in East Kalimantan, Indonesia. The said Coal mines are estimated to have 250

Million MT of Coal Reserves.



Pt Madhucon also has a third mine of 4000 hectares is in East Kalimantan which is also licensed in

its name The exploration work is in progress and the company is hopeful of obtaining all the

licenses within 6 months.

c) Nama Hotels Private Limited

MPL, as the developer, has incorporated Nama Hotels Private Limited (NHPL), on December 24,

2007 as an SPV for vesting the assets of the 4 Star Hotel awarded to it by Andhra Pradesh

Housing Board. The 4- Star Hotel (Project) will consist of 14 floors, developed within an area of

2.62 acres with the total built up area of 5,76,169 Sft and having 436 rooms (including 72 service

apartments), 2 banquet halls, 5 conference rooms, specialty restaurant, 24 hour coffee shop, Spa,

Gym etc.

The Project has achieved Financial Closure with the debt tie up of Rs 252.7 Crore on 31st July,

2009. The COD of the project is expected in March, 2012.

3.2 Madhucon Granites Limited (MGL)

MGL is a 100% Export Oriented Unit, with registered office at Khammam, Andhra Pradesh,

India. It is a supplier of an exquisite array of fine granite of varied colours and designs. MGL is a

top player with respect to production and dispatches. MGL owns quarries spanning over 2400

acres of abundant granite deposits. The mines of MGL are spread across five states in the country.

MGL is equipped with mining, quarrying and processing expertise; the factory has processing

capacity to the tune of over 7 containers a month. MGL is ranked among the top 3 export

oriented units for granite in the country.

3.3 Madhucon Sugars & Power Industries Limited (MSPIL)

MSPIL has its registered office at Khammam, Andhra Pradesh. Madhucon acquired a loss-making

sugar factory from the co-operative sector at Khammam and turned it around into a profit making

company. The total installed capacity for the sugar plant is 4000 TCD (Tonnes Crushed per Day)

and the capacity of the Co-gen plant is 20 MW; the company is planning to add an ethanol

distillery.



Salient financials of MGL and MSPL are provided below:

(Rs Lacs)

Particulars Net Sales PBIDT PBT PAT Net Fixed Assets

Secured Loans

Net worth

MGL FY 2007 11483 5321 3388 3169 5915 3238 7160 FY 2008 13062 4121 2636 2632 5557 2417 9710 FY 2009 11898 4424 2922 2274 5582 1094 10483 MSPIL FY 2007 3220 370 8 4 2862 795 1418 FY 2008 1921 249 -77 -68 15628 10353 1348 FY 2009 5516 1899 380 128 16970.826281 12393 5429

3.4 Group’s Banking Relationships

The Madhucon group has developed strong banking relationships over the last 15 years. The

various facilities enjoyed by the Group’s operating companies and the outstanding limits are

summarized below: (Rs Crore)

Company Bank Name and Branch

Facility Outstanding as on

31/03/2010 Fund based Limits

Non Fund Based Limits

Fund based Limits

Non Fund Based Limits

MPL

Canara Bank 100.00 200.00 50.25 2.42 State Bank of India 50.00 100.00 50.00 66.69 IDBI Bank 50.00 150.00 50.00 1.11 United Bank of India 0.00 100.00 0.00 24.66 ICICI Bank 0.00 150.00 0.00 38.90 Oriental Bank of Commerce 100.00 100.00 0.53 45.06 Centurion Bank of Punjab 0.00 100.00 0.00 89.21 IndusInd Bank 0.00 50.00 0.00 44.25 Standard Chartered Bank 0.00 25.00 0.00 25.00 Bank of Bahrain & Kuwait 0.00 1.00 0.00 0.00 Axis Bank 125.00 0.00 125.00 0.00 TOTAL 425.00 976.00 275.78 337.3

Madhucon Sugar & Power Industries Limited

Canara Bank 25.00 0.00 19.66 0.00 Vijaya Bank 15.00 0.00 11.63 0.00 Andhra Bank 61.50 13.00 56.36 4.81 Indian Bank 30.00 13.00 23.97 0.00 TOTAL 131.50 26.00 111.62 4.81

Madhucon Granites Limited

State Bank of India 20.00 10.00 7.38 4.68

TOTAL 20.00 10.00 7.38 4.68



The status of loans disbursed for SEPL’s thermal power project (Phase I) is provided below:

(in Rs Crore) S. No.

Name of the Bank Term Loan Sanctioned

Term Loan Disbursed as of Apr 30, 2010

Earmarked for FLC

Balance

1 Canara Bank 206 91.61 57.00 57.39 2 State Bank of India 138.4 61.56 38.31 38.53 3 Andhra Bank 70 31.12 19.37 19.51 4 Allahabad Bank 70 31.12 19.37 19.51 5 Central Bank of India 70 31.12 19.37 19.51 6 Oriental Bank of Commerce 70 31.12 19.37 19.51 7 Punjab & Sind Bank 35 31.12 19.37 19.51 8 United Bank of India 35 31.12 19.37 19.51 9 Corporation Bank 35 15.55 9.68 9.77 10 Indian Bank 35 15.55 9.68 9.77 11 Indian Overseas Bank 35 15.55 9.68 9.77 12 State Bank of Patiala 28 15.55 9.68 9.77 13 UCO Bank 70 15.55 9.68 9.77 14 Vijaya Bank 70 15.55 9.68 9.77 15 Tamilnad Mercantile Bank 35 12.50 7.75 7.75

Total 1002.4 445.69 277.36 279.35

The status of loans disbursed for Nama Hotels Private Ltd. is provided below:

(in Rs Cr.) S. No.

Name of the Bank Term Loan Sanctioned

Disbursed as of Mar 31, 2010

Balance Amount

1 Canara Bank 45.50 4.14 41.36 2 State Bank of Travancore 22.75 2.07 20.68 3 State Bank of Mysore 45.50 4.14 41.36 4 Punjab & Sind Bank 45.50 0.00 45.50 5 Corporation Bank 22.75 2.07 20.68 6 Andhra Bank 22.75 2.07 20.68 7 Union Bank of India 22.75 2.07 20.68 8 Oriental Bank of Commerce 25.43 2.30 23.13

Total 252.93 18.86 234.07



4. PROJECT DESCRIPTION

4.1 Scope of the Project

As per NHAI’s terms, CHEL has been incorporated by MPL for executing the Project. The

Project envisages Design, Build, Finance, Operate, Transfer (DBFOT) of 4 laning of Chhapra -

Hajipur section of NH-19 from km 143.200 to km 207.200 in the state of Bihar under NHDP

Phase III on Annuity basis for a period of 15 years (2.5 years of construction period and 12.5 years

operating period). The Project envisages the following:

i) Construction of the Project Highway and Project Facilities as per the Schedule A of the CA

ii) Operations & Maintenance of the Project Highway

iii) Performance and fulfillment of all other obligations of the Concessionaire in accordance with

the provisions of the CA and matters incidental thereto or necessary for the performance of

any or all of the obligations of the Concessionaire under the CA.

iv) Transfer of the Project to NHAI at the end of the Concession Period

4.2 Site & Project Location

National Highway 19 (NH 19) connects Ghazipur in Uttar Pradesh with Patna in Bihar. It covers

a distance of 240 km, of which 120 km is in Uttar Pradesh and 120 km is in Bihar. This road spans

across the districts of Ghazipur, Bhallia in Uttar Pradesh and Saran, Muzafarpur and Patna in

Bihar. In Bihar it passes through Chhapra, Dighwara and Hajipur and crosses the River Ganges to

terminate at Patna. To cope with the rapidly rising traffic density, a number of 2-lane sections on

NH-19 were identified for widening to 4 lanes on BOT (Annuity) Basis under NHDP Phase III.

One of these sections is a 65 Km stretch from Chhapra to Hajipur section of NH-19 from km

143.200 to km 207.200 (Project Highway) in the state of Bihar.

Hajipur is around 10 km from Patna whereas Chhapra is around 70 km from Patna. The area

nearer to Patna falls under Zone-4 of earthquake hazard zoning of India. The latest seismic zoning

map of India given in the earthquake resistant design code of India [IS 1893 (Part 1) 2002] assigns

four levels of seismicity for India in terms of zone factors. In other words, the earthquake zoning

map of India divides India into 4 seismic zones (Zone 2, 3, 4 and 5) unlike its previous version

which consisted of five or six zones for the country. Zone-4 is called the High Damage Risk Zone

and it covers areas in Indo-Gangetic basin and the capital of the country (Delhi, Jammu) and

Bihar.



Figure 5.1 Site Map of the Project Highway

4.3 Existing Project Highway Characteristics

a. Land

The project road generally lies between latitude N840 to N 850 +23’23” and longitude E250 to

E260 + 31’43”. The road traverse through plain terrain and this road lies in Seismic Zone IV.

b. Carriageway

The present carriageway of the Project Highway is a 2-lane carriageway with paved shoulders in its

entire length, from Km 143.200 to Km 207.200 of NH - 19. The Site does not include any

Permanent Bridge, Bye Pass or Tunnel costing Rs. 50 crore or more.

c. Total Number of Structures

The total number of existing structures on the Site is noted below:

a. No. of Major Bridges 01 b. No. of Railway Over Bridges 01c. No. of Fly-over 01 d. No. of Minor Bridges 04 e. No. of Underpass 03 f. No. of Pipe Culverts 30 g. No. of Slab Culverts 17h. No. of Arch Culverts 10



d. Bus bays & Truck Lay byes

The total number of bus bays and truck lay byes on the Project Highway is noted below:

No. of Bus bays on LHS - Nil

No of Bus bays on RHS - Nil

No. of Truck lay-bays on LHS - Nil

No. of Truck lay-bays on RHS - Nil

4.4 Proposed Scope of Work under the CA

The scope of work under the CA constitutes providing a four–lane Project Highway. The Project

Highway shall be widened to four lane dual carriageway configuration with paved shoulder with or

without Service Roads.

a. Width of Carriageway

The paved carriageway shall generally be 17.5 meters wide excluding the median. Covered drains

shall also be provided on both sides of the building edge in built-u sections, wherever service

roads are provided during four laning.

b. Alignment and Longitudinal Section

An alignment plan and vertical profile of the Project Highway are to be designed as per Appendix

BII of the Technical Schedule of the Manual of Specifications and Standards for 4-laning of

National Highways through Public Private Partnership published by MoRT&H.

c. Provision of Bypasses/New Alignment/ Realignment

3 bypasses having an aggregate length of 37.962 km, as mentioned in the table below, need to be

provided in the Project Highway.

S. No. Name of Bypass Length in Km

1. Chappra Bypass 15.012 2. Aami & Digwara Bypass 4.95 3. Shitalpur Bypass 18.00

Total 37.962

d. Service Roads

There are no service roads and/or lay byes existing on this project road. e. At Grade Intersections

At grade intersections shall have to be provided at all the intersecting roads at 1 location for major

intersections and at 12 locations for minor intersections in the CA.



f. Grade Separated Intersections

Grade separated intersections shall have to be provided at 24 locations. g. Underpasses

3 Existing 2 lane underpasses shall be widened to 4-lane. The existing underpasses shall be

rehabilitated/ maintained by Concessionaire during the entire concession period.

h. Major Bridges

3 new Major Bridge shall have to be constructed and 1 bridge shall have to be

rehabilitated/repaired/widened.

i. Minor Bridges

17 new Minor Bridges shall have to be constructed and 4 bridges shall have to be

rehabilitated/repaired/widened.

j. Culverts

81 new Culverts have to be provided, while 19 existing Culverts have to be widened.

k. ROB

Details of the proposed ROB is shown

S. No.

Location Name of Crossing

Existing Structure

Proposed Structural Configuration

Proposed Structure type

1

Chappra Bypass

Level crossing No.28 (Chokti) b/w Mansi – Maheshkunth Section

Proposed Three span simply supported on pile foundation

Pre-cast PSC I Girder

2 Chappra Bypass ROB-13 @ Rly km 69/8-9 Proposed Single span simply supported

on pile foundation Pre-cast PSC I

Girder 3 Chappra Bypass - Proposed Three span simply supported

on pile foundation Pre-cast PSC I

Girder 4 Aami &

Digwara Bypass - Proposed Five span simply supported on pile foundation


5 Existing Hajipur Bypass - Steel Girder

(1 x11+1 x18)Two span simply supported on pile foundation


Existing ROB shall be rehabilitated / maintained by Concessionaire during entire concession period. Project Facilities

The Concessionaire shall have to provide Project Facilities in accordance with the provisions of

Schedule C in the CA to form part of the 4-lane Project Highway. Such Project Facilities shall

have to be completed on or before the Project Completion Date and shall have to include the



following and it shall conform to the Manual of Specifications and Standards for Four Laning of

Highways through Public Private Partnership (IRC:SP:84-2009) published by the Indian Roads

Congress.

a) Toll plazas: One toll plaza has to be provided at Km 174+700 to Km 175+235

b) Roadside furniture

c) Street Lighting

d) Pedestrian facilities

e) Landscaping and tree plantation

f) Rest areas

g) Truck lay-byes

h) Bus-bays and Bus shelters

i) Cattle crossings

j) Traffic aid posts

k) Medical aid posts

l) Vehicle rescue posts

m) Telecom system

In case of any discrepancy in the locations of any of the project facilities mentioned above, the

Independent Engineer is required to finalize the numbers/locations of these facilities as per site

requirements.

4.5 Project Timetable

The main milestones and the corresponding dates for the implementation of the Project from the Appointed Date are as under:

Project Completion Schedule Days 0 days 180 days 400 days 650 days 910 days

Event Appointed

Date Project Milestone - I Project Milestone - IIProject Milestone –

III Scheduled Four-Laning Date

Progress Compliance

Greater or Equal to 10% of the Total Project Cost set in the Financial Package



100% of the Total Cost

1. During Construction Period, the Concessionaire shall comply with the requirements set forth in this Schedule-G for each of the Project Milestones and the Scheduled Four-Laning Date 2. Within 15 (fifteen) days of the date of each Project Milestone, the Concessionaire shall notify the Authority of such compliance



5. PROJECT STRUCTURE

5.1 Project Structure

The relationships among the Project’s various key parties are set out hereunder:

5.2 Project Agreements

5.2.1 Concession Agreement

The CA is based on the Model Concession Agreement of NHAI. The key terms and conditions of the CA are summarized below: 5.2.1.1 The Concession In February 2010, NHAI had initiated the ICB process inviting proposals from eligible parties for

the “Project”. MPL emerged as L1 for the Project based on the lowest annuity that the Company

had sought from NHAI in consideration of the grant of Concession. Letter of Award (LoA) was

awarded to MPL on May 13, 2010. As per the LoA, the annuity sought by the Company is a

fixed Rs 65.43 crore per annum and is payable by NHAI every 6 months from the COD for an

operating period of 12.5 years. The overall Project implementation framework involves a special

purpose vehicle (SPV), promoted by the successful bidder (i.e. MPL); entering into an agreement

(the Concession Agreement) with NHAI, wherein the SPV shall implement the Project.

Accordingly, an SPV, by the name of Chhapra Hajipur Expressways Limited, (‘CHEL’ or the

Chhapra Hajipur Expressways Limited (CHEL)

Madhucon Projects Ltd (MPL)

Government of Bihar

GoI/NHAI Lenders/FIs

Lenders Independent Consultant

MPLO&M Contractor

Insurers

EPC ContractIndependent Consultants

O&M Contract

Progress Report

Concession Agreement

State Support Agreement

Consultation/ Reports

Insurance Policies

Financial Arrangement

Madhucon Projects Limited + Madhucon Infra Limited

100%

Infrastructure Holding Subsidiary of MPL

Sponsor

85%



‘Company’), has been incorporated by MPL on June 2, 2010.

NHAI shall grant to CHEL (the Concessionaire) a concession including the exclusive right, license

and authority during the subsistence of the CA to construct, operate and maintain the Project (the

“Concession”) for a period of 15 (Fifteen) years commencing from the Appointed Date2:

The Concession shall oblige or entitle (as the case may be) the Concessionaire to, inter-alia;

− Finance and construct the Project Highway

− Manage, operate and maintain the Project Highway in accordance with the provisions of

CA, and

− Performance and fulfillment of all other obligations of the Concessionaire in accordance

with the provisions of CA.

− Transfer of the Project to NHAI at the end of the Concession Period

5.2.1.2 Scope of the Project

The Project envisages the Design, Build, Finance, Operate, Transfer (DBFOT) concession (the

Concession) of 4 laning of Chhapra - Hajipur section of NH-19 from km 143.200 to km 207.200

in the state of Bihar under NHDP Phase III on Annuity basis for a specified period of 15 years

(including construction period of 2.5 years).

5.2.1.3 Concession Period

Unless extended or terminated earlier in accordance with the terms of the CA and subject to

provisions explained in the following paragraphs, the term of the Concession will be 15 years (the

Concession Period or CP) starting from the Appointed Date, including a 2.5 years construction

period.

5.2.1.4 Concession Fee

In consideration of the grant of Concession under this Agreement, the Concession Fee payable by

the Concessionaire to the Authority shall be Re.1.00 (Rupee One) per year during the term of this

Agreement. The Concession Fee, for each year, shall be paid in advance within 90 (ninety) days of

the commencement of the Accounting Year, for which it is due and payable.

5.2.1.5 Conditions Precedent

The rights and obligations of the Concessionaire under the CA are subject to satisfaction of the

following Conditions Precedent on or before Financial Close: 2Appointed Date for this purpose means the date on which all the conditions precedent to the initial availability of funds under the Financing Agreements are fulfilled (Financial Close) or an earlier date agreed upon by the parties. The CA requires achievement of Financial Close within 180 days from date of signing of the CA.



a) The Concessionaire shall have obtained all the applicable permits & clearances specified in

the Schedule E of CA;

b) The Concessionaire shall have provided Performance Security to the Authority;

c) The Concessionaire shall have executed and procured execution of the Escrow

Agreement;

d) The Concessionaire shall have executed and procured execution of the Substitution

Agreement;

e) The Concessionaire shall have executed the Financing Agreements

f) NHAI shall have procured the Right of Way to the site for the Concessionaire in

accordance to the provisions in Clause 10.3.1 of CA;

g) NHAI shall have procured approval of the Railway authorities in the form of a general

arrangement drawing that would enable the Concessionaire to construct road over

bridges/under bridges at level crossings on the Project Highway in accordance with the

Specifications and Standards and subject to the terms and conditions specified in such

approval;

h) NHAI shall have procured all Applicable Permits relating to environmental protection

and conservation of the Site;

5.2.1.6 Land/Site

The Site for the Project comprising the real estate and the right of way (ROW) is to be provided

by NHAI to the Concessionaire. Provision of site and the ROW by NHAI shall also include leave

& license rights in respect of all the land (along with any buildings, constructions or immovable

assets, if any, thereon) on an “as is where is basis” for the duration of the Concession Period and

for the purposes permitted under the CA. The schedule of handing over of the Site and ROW to

the Concessionaire and liquidated damages prescribed for failure to adhere to such schedule,

provided such failure is for reasons other than Force Majeure or breach of CA by the

Concessionaire, are shown below:

Site and ROW as %

of total requirement

Schedule of handing

over

Liquidated damages payable for delay

80% On or before Appointed Date

0.1% of the Performance Security for each day’s delay subject to a maximum of 20% of the Performance Security.

Remaining 20% Within 90 days of the Appointed Date

Rs.50 (Rupees fifty) per day for every 1,000 (one thousand) square metres or part thereof, commencing from the 91st (ninety first) day of the Appointed Date



5.2.1.7 Performance Security, Financial Close, Project Schedule, Damages & Completion Performance Security:

The Concessionaire is required to furnish to NHAI a Performance Security, not later than 180

days from the date of the signing of the CA, in the form of an irrevocable and unconditional bank

guarantee of Rs. 28.75 Crores for the due and faithful performance of its obligations during the

construction period. Until above mentioned Performance Security is provided, the Concessionaire

has to provide a Bid Security of Rs 6.91 Crore. Bid Security shall be retained by NHAI till the

Concessionaire has provided a Performance Security as per the Concession Agreement. The

Performance Security shall have to be valid for one year from the Appointed Date. It can be

released earlier upon the Concessionaire expending on Project construction an aggregate sum not

less than 20% of the Total Project Cost and provided it is not in breach of its obligations under

the CA.

Financial Close:

The Concessionaire is required to achieve Financial Close (FC) within 180 days from the date of

signing of the CA. In the event of a delay in achieving Financial Close, the Concessionaire would

be entitled to a further period of 120 days subject to payment to NHAI of Damages at the rate of

0.1% of the Performance Security for each day’s delay, or for a further period not exceeding 200

days, subject to payment to NHAI of damages at the rate of 0.2% of the Performance Security for

each day’s delay (subject to a maximum of 20% of performance security). However, no Damages

would be payable if such delay in Financial Close has occurred solely as a result of any default by

NHAI or due to Force Majeure.

Project Schedule:

Apart from achievement of FC, the Concessionaire is also required to comply with each of the

following project milestones during the Construction Period, (Project Milestones)

Milestones and Requirement Min. Amount reqd. to be

spent (as % of capital cost as per Financial Package)

No of days from the Appointed Date

1. Project Milestone – I 10% 180

2. Project Milestone – II 35% 400

3. Project Milestone – III 70% 650

4. Completion of 4-lane Project Highway (Scheduled 4-Laning Completion Date or COD or SPCD)

100% 910



Failure to achieve the above milestones within 90 days of the scheduled dates shown above will

result in the levy of damages payable @ of 0.1% of the Performance Security amount per day till

the milestone is achieved. In case the COD is achieved by the scheduled date shown above,

NHAI would refund (without any interest) the damages collected by it from the Concessionaire

for delays in achievement of the preceding milestones. In the event the four – lane Project

Highway is not completed within 270 days after the Scheduled Four-Laning Date, NHAI shall be

entitled to terminate the CA. However, payment of damages and termination of CA by NHAI

would be possible only when the delay is not on account of reasons solely attributable to NHAI or

Force Majeure.

Completion (COD or commencement of Commercial operations):

The commercial operations date (COD) would be the date certified (in the form of a Completion

Certificate) by the Independent Engineer appointed by NHAI under the terms of the CA. The

Project Highway would be deemed to be complete and open to traffic from the date of receipt of

the Completion Certificate. The CA would also allow the IE to permit commencement of

commercial operations by issuing a provisional certificate, on request of the Concessionaire, even

though certain works or things forming part thereof are outstanding and not yet complete

(“Punch List” items). All items in the Punch List are required to be completed by the

Concessionaire within 90 (ninety) days of the date of issue of the Provisional Certificate. However,

as per the CA a Provisional Certificate may, upon request of the Concessionaire to that effect, be

issued for operating part of the Project Highway, if at least 75% of the total length of the Project

Highway has been completed. Subject to the provisions of Clause 12.4 in the CA, if COD does

not occur prior to the 91st (ninety first) day after the Scheduled Four-Laning Date, unless the

delay is on account of reasons solely attributable to NHAI or due to Force Majeure, the

Concessionaire shall pay Damages to the Authority in a sum calculated at the rate of 0.1% (zero

point one per cent) of the amount of Performance Security for delay of each day until COD is

achieved.

5.2.1.8 Annuity

From the date of receipt of the Completion Certificate (or Provisional Certificate) i.e. the

Concessionaire upon achieving COD for the Project Highway, the NHAI will make Annuity

payment to the Concessionaire for each Annuity Payment Period, on each Annuity Payment Date.

The Annuity payment will commence from COD The first Annuity Payment Date shall be the

date falling after 6 (six) calendar months from COD. In case COD is different from the Scheduled

four-laning Date in the CA, the Annuity Payment Schedule in the CA would be suitably modified.



In case the Concessionaire achieves COD after to the Scheduled four laning Date then it shall be

liable for reduction in its first Annuity for delayed completion of the Project. Such Reduction shall

be effected on the first Annuity payment on the first Annuity Payment Date. The Reduction for

such delayed completion shall be the product of Average Daily Annuity and the number of days

by which the COD exceeded the Scheduled Four Laning Date.

5.2.1.9 Assured Lane Availability

If due to Concessionaire’s failure to perform/discharge its obligations the actual availability of the

Carriageway during any Annuity Payment Period was less than the Assured Lane Availability, the

Concessionaire’s right to receive Annuity shall proportionally reduce.

5.2.1.10 Other Revenue

The Concessionaire shall not levy, or collect or be entitled to charge for commercial advertising,

display and hoardings any sum whatsoever in the nature of a toll or fee. However, this restriction

shall not apply to the Toll Plaza, rest areas, bus shelters and telephone booths located on the

Project Highway if the advertising does not in the opinion of the Authority, distract the Users or

violate extant guidelines of MoSRTH.

5.2.1.11 Independent Engineer

A consulting engineering firm would be appointed by NHAI to act as the independent consultant

under the CA (“Independent Engineer” or IE). The IE is required to review and approve the

design, drawings, contracts (relating to construction and operation); manuals etc.; review,

inspect & monitor the construction works; conduct tests on completion of construction and

issuing Completion/ Provisional Certificate; review, inspection and monitoring of O&M;

determine costs of any works or services; evaluate and report to NHAI, on issues related to the

CA. The appointment of the IE shall be made by 90 days from the date of this Agreement and

shall be for a period of 3 years. The Independent Engineer shall submit regular periodic reports to

the Authority in respect of its duties and functions set forth in Schedule-Q of the CA. In

determining the nature and quantum of duties and services to be performed by the Independent

Engineer during the Development Period and Construction Period, the NHAI shall endeavour

that payments to the Independent Engineer on account of fee and expenses do not exceed 2% of

the Total Project Cost.

On expiry or termination of the aforesaid period of 3 years, NHAI may renew the appointment,

or appoint another firm to be the Independent Engineer for a term of 3 years and such procedure

shall be repeated after expiry of each appointment. Duties and services to be performed by the



Independent Engineer during the Operation Period shall be determined by NHAI. All payments

made to the Independent Engineer on account of fee and expenses during the Operation Period

shall be borne equally by the Authority and the Concessionaire

5.2.1.12 Change of Scope

NHAI may require the provision of such additional works and services, which are not included in

the Scope of the Project or the Concessionaire may also propose a Change of Scope for providing

safer & improved services to the users. The costs arising out of such Change of Scope during the

Construction Period will be reimbursed by NHAI as per actuals, provided however, that costs

upto 0.25% of the Project Cost would be borne by the Concessionaire. The Concessionaire would

be entitled to nullify any Change of Scope order if the cumulative costs relating to all the Change

of Scope orders exceed 5% of the total project cost as per the CA (TPC) in the immediately

preceding 3 years or if such cumulative costs exceed 20% of the TPC at any time during the

Concession Period.

5.2.1.13 Operation and Maintenance

The Concessionaire is required to operate and maintain the Project Highway in accordance with

the provisions of the CA either by itself, or through the O&M Contractor, the Applicable Laws

and Applicable Permits, and to conform to Good Industry Practice. The obligations of the

Concessionaire are permitting safe, smooth and uninterrupted flow of traffic on the Project

Highway during normal operating conditions, carrying out periodic preventive maintenance of the

Project Highway, undertaking routine maintenance, undertaking major maintenance, etc.

In the event that the Concessionaire fails to repair or rectify any defect or deficiency set forth in

the Maintenance Requirements within the period specified therein, it shall be deemed to be in

breach of this Agreement and the Authority shall be entitled to recover Damages, to be calculated

and paid for each day of delay until the breach is cured, at the higher of (a) 0.5% (zero point five

per cent) of Average Daily Annuity, and (b) 0.1% (zero point one per cent) of the cost of such

repair or rectification as estimated by the Independent Engineer. If the actual traffic exceed the

design capacity, during any year or part thereof and the Concessionaire fails to repair or rectify any

defect or deficiency set forth in the Maintenance Requirements within the period specified, it shall

be deemed to be in breach of this Agreement and the Authority shall be entitled, from such date,

to recover Damages, to be calculated and paid for each day of delay until the breach is cured, at

the higher of (a) 5% (five per cent) of Average Daily Fee, and (b) 1% (one per cent) of the cost of



such repair or rectification as estimated by the Independent Engineer, for the balance period of

the concession.

5.2.1.14 Escrow Account

The Concessionaire is required to open and establish an Escrow Account with a bank prior to the

Appointed Date. All funds constituting the Financial Package, all Annuities and any other

revenues from or in respect of the Project Highway including proceeds of any rentals, deposits,

capital receipts or insurance claims, and all payments by NHAI after deducting any outstanding

Concession Fee shall be credited to such account. Also, all capital as well as revenue expenditure

of the Project shall be made from this account.

5.2.1.15 Financing Arrangements and Security to Lenders

Substitution Agreement:

As per the provisions of CA, a tripartite substitution agreement would be signed among NHAI,

the Concessionaire and the Lenders (represented through the Lenders’ Representative) providing

that the Lenders shall have the right to substitute the Concessionaire by a Selectee for the residual

period of the Concession, in case of the Concessionaire’s event of default under any of the

Financing Documents.

Upon substitution of the Concessionaire under and in accordance with the Substitution

Agreement, the Nominated Company substituting the Concessionaire shall be deemed to be the

Concessionaire under this Agreement and shall enjoy all rights and be responsible for all

obligations of the Concessionaire under this Agreement as if it were the Concessionaire; provided

that where the Concessionaire is in breach of this Agreement on the date of such substitution, the

Authority shall by notice grant a Cure Period of 120 (one hundred and twenty) days to the

Concessionaire for curing such breach.

Charges & Assignments

The CA cannot be assigned by the Concessionaire to any person, save and except with the prior

consent of NHAI. Also, the Concessionaire cannot create nor permit to subsist any Encumbrance,

or otherwise transfer or dispose of all or any of its rights and benefits under the CA or any Project

Agreement to which it is a party except with the prior consent of NHAI. However, these restraints

are not applicable to the following:

- Liens arising by operation of law (or by an agreement evidencing the same) in the ordinary

course of business of the Project Highway;



- Mortgages/pledges/hypothecation of goods/assets other than Project Assets, and their related

documents of title, a charge on the Escrow Account, arising or created in the ordinary course

of business of the Project Highway, and as security only for indebtedness to the Senior

Lenders under the Financing Agreements and/or for working capital arrangements for the

Project Highway;

- Assignment of rights, interest and obligations of the Concessionaire to or in favour of the

Lenders’ Representative as nominee and for the benefit of the Senior Lenders, to the extent

covered by and in accordance with the Substitution Agreement as security for financing

provided by Senior Lenders under the Financing Agreements; and

- Liens or encumbrances required by any Applicable Law.

5.2.1.16 Termination and Terminal Compensations

The CA can be terminated in the following circumstances:

Termination Due to Default:

Either party can terminate the CA upon occurrence of an event of default (Event of Default) on

the part of the other Party.

Termination due to Force Majeure

Either party can terminate the CA upon occurrence and subsistence of a force majeure event (a

‘Force Majeure Event’) for a period of 180 (one hundred and eighty) days or more within a

continuous period of 365 (three hundred and sixty five) days,

i. Termination Due to Default:

(a) Concessionaire Event of Default

Apart from the usual events of default used in such agreements, the following constitute a default

on the part of the Concessionaire:

- failure to replenish or provide fresh Performance Security within a cure period of 30 days;

- failure to achieve Financial Close within prescribed period;

- failure to achieve the latest outstanding Project Milestone and such default continues to subsist

for 120 days;

- failure to achieve Project Completion within the 270 days from the Scheduled Four-Laning

Date

- failure to complete the Punch List items within 90 days of the issue of Provisional Certificate.

- failure to make timely payments to NHAI within the period specified in the CA



- failure to cure the escrow default (if happens) within a cure period of 15 days

- transfer of the Concessionaire’s rights and/or obligations under any of the Project Agreements

or all or material part of the assets which may affect the Concessionaire’s ability to perform;

- Winding up, bankruptcy or appointment of receiver for the Concessionaire;

- breach of any of the Project Agreements resulting in a Material Adverse Effect;

- material default in complying with any provision of the CA if such default causes a Material

Adverse Effect on NHAI;

- material breach under the Financing Agreements or a continuous default in Debt Service for a

minimum period of 3 (three) months (Financial Default);

- the Concessionaire abandons the operations of the Project Highway for more than 15

consecutive days without the prior consent of NHAI;

- a Change in Ownership has occurred in breach of the provisions of Clause 5.3 of the CA

- The concessionaire repudiates the CA or otherwise evidences an intention not be bound by

CA;

- The concessionaire suffers an execution being levied on any part of its assets/equipment

causing a material adverse effect on the project continuing for a period of 15 days; and

- The concessionaire has delayed any payment that has fallen due under the CA exceeding 90

days.

Should the Concessionaire fail to remedy the breach within the prescribed period, NHAI may

evoke termination proceeding by issuing a notice of its intention to the Concessionaire. Following

this, the Concessionaire will have a further fifteen (15) days to make its representation. After the

expiry of the said period, NHAI may at its sole discretion proceed to issue the termination notice.

(b) NHAI Event of Default

The Concessionaire may terminate CA pursuant to a 90 days notice in writing to NHAI upon the

occurrence of the following events deemed as NHAI’s default. The following events constitute an

NHAI Event of Default:

- a material default on the part of NHAI in complying with any of the provisions of the CA and

such default has a Material Adverse Effect on the Concessionaire;

- failure to make any payment to the Concessionaire within the period specified in the CA;

- NHAI repudiates the CA;



- NHAI/GoI or GoB or any governmental agencies have caused circumstances that have a

material adverse effect on the performance of the Concessionaire and have failed to remedy

within ninety (90) days of notice.

(c) Compensation upon Termination due to Default

The details of the termination payments for these termination events are as under:

Termination payments under Events of Default: Events of Default Termination payments to concessionaire by NHAI 1 Concessionaire

Events of Default Post COD An amount equal to discounted value of future Annuity payments, the discounting factor applied being the then SBI PLR + 3% less Insurance Cover; provided that if any insurance claims forming part of the Insurance Cover are not admitted and paid, then 80% of such unpaid claims shall be deducted from the termination payment so assessed. Pre COD No termination payment shall be due or payable

2 NHAI Events of Default

An amount equal to the discounted value of future Annuity payments, the discounting factor applied being the then SBI PLR -3%

In case of termination due to a Concessionaire default during the construction period, no

compensation is payable by NHAI. Termination Payment shall become due and payable to the

Concessionaire within 15 days of a demand being made by the Concessionaire to NHAI with the

necessary particulars, and in the event of any delay, NHAI shall pay interest at a rate equal to 3%

above the Bank Rate on the amount of Termination Payment remaining unpaid; provided that

such delay shall not exceed 90 (ninety) days.

ii. Termination Due to Force Majeure:

Force Majeure Event (FME) is defined as the occurrence of an event, in India of any or all of Non

Political Event, Indirect Political Event and/or Political Event, provided that such event affects

the performance by the Party, claiming the benefit of Force Majeure (the “Affected Party”) of its

obligations under the CA. Provided further that such act or event (i) is beyond the reasonable

control of the Affected Party, and (ii) the Affected Party could not have prevented or overcome

by exercise of due diligence and following Good Industry Practice, and (iii) has Material Adverse

Effect3 on the Affected Party.

3 Material Adverse Effect is defined as the effect of any act or event on the ability of either Party to perform any of its

obligations under the CA and which act or event causes a material financial burden or loss to either Party;



Non-Political Events These include acts of God or events beyond the reasonable control of the Affected Party (such as

extremely adverse weather conditions, landslide, earthquake, cyclone, flood, volcanic eruption or

fire or explosion); radioactive contamination or ionizing radiation; strikes or boycotts (other than

those involving the Concessionaire or EPC Contractor); any judgment or order of any court in

India made against the Concessionaire or NHAI (other than failure of the Concessionaire to

comply with any applicable Law or applicable permit); or any event or circumstance of a nature

analogous to any of the foregoing. When the Force Majeure Event is a Non Political Event, the

Parties shall bear their respective costs.

Indirect Political Events

These include an act of war, invasion, armed conflict or act of foreign enemy, blockage, embargo,

riot, insurrection, terrorist or military action, civil commotion or politically motivated sabotage;

industry wide or state wide strikes or industrial action for continuous period of 24 (twenty four)

hours and exceeding an aggregate period of 7 (seven) days in an Accounting Year; civil

commotion, boycott or political agitation which prevents collection of Fee by the Concessionaire

for an aggregate period exceeding 7 (seven) days in an accounting year; any Indirect Political Event

that causes a Non-Political Event; or any event or circumstances of a nature analogous to any of

the foregoing. For Indirect Political Event, the costs attributable shall have to be borne by CHEL

to the extent of the Insurance Cover, and to the extent such Force Majeure Costs exceed the

Insurance Cover, one half of the same shall be reimbursed by NHAI to CHEL.

Political Events

These include change in law; expropriation or compulsory acquisition of any Project Assets or

rights of the Concessionaire or of the Contractors; unlawful or unauthorized or without

jurisdiction revocation of, or refusal to renew or grant without valid cause, any clearance of permit

or exemption required by the Concessionaire or any of the Contractors (to the extent not caused

by a breach on their part) to perform their respective obligations under the Project Agreements; or

circumstance of a nature analogous to any of the foregoing. For Political Events, all the Force

Majeure Costs shall be reimbursed by NHAI to CHEL.

In addition to the above, for each of these events , any failure or delay of a Contractor, to the

extent caused by another event of the same category is also included under the force majeure



provision provided however, such an event should not result in any offsetting compensation being

payable to the Concessionaire by or on behalf of such Contractor;

Further, inclusion of ‘Change In Law” events under Political Events above, is applicable only

when:

- the effect of the underlying change in law exceeds the higher of Rs. 1 Crore and 0.5%of the

Annuity in any accounting year, and

- provided that such effect cannot be addressed in accordance with the change in law provisions

existing in the agreement. These change in law provisions envisage appropriate amendments in

the CA or any other mutually agreeable arrangement to place the Concessionaire in the same

financial position as it would have been but for the change in law

Allocation of costs arising out of Force Majeure

• Upon occurrence of any Force Majeure Event prior to the Appointed Date, NHAI and

the Concessionaire shall bear their respective costs and no Party shall be required to pay to

the other Party any costs thereof.

• Upon occurrence of a Force Majeure Event after the Appointed Date, the costs incurred

and attributable to such event and directly relating to the Project (the “Force Majeure

Costs”) shall be allocated and paid as follows:

a. upon occurrence of a Non-Political Event, the Parties shall bear their respective

Force Majeure Costs and neither Party shall be required to pay to the other Party

any costs thereof;

b. upon occurrence of an Indirect Political Event, all Force Majeure Costs

attributable to such Indirect Political Event, and not exceeding the Insurance

Cover for such Indirect Political Event, shall be borne by the Concessionaire, and

to the extent Force Majeure Costs exceed such Insurance Cover, one half of such

excess amount shall be reimbursed by the Authority to the Concessionaire; and

c. upon occurrence of a Political Event, all Force Majeure Costs attributable to such

Political Event shall be reimbursed by the Authority to the Concessionaire.

Compensation upon Termination due to FME

The details of the termination payments for the above-mentioned FME are as under:



Termination payments under Force Majeure events: Force Majeure

Event Termination payments to the Concessionaire by NHAI

1 Non Political Event An amount equal to 90% of the Book value of physical Project Assets less Insurance Cover

2 Indirect Political Event

An amount equal to the discounted value of future Annuity payments, the discounting factor applied being the then SBI PLR – (minus) 3%.

3 Political Event An amount equal to the discounted value of future Annuity payments, the discounting factor applied being the then SBI PLR -(minus) 3%

The Termination Payment payable by NHAI upon Termination consists of payments on account

of and restricted to the Debt Due and Adjusted Equity, as the case may be, which form part of the

Total Project Cost in accordance with the provisions of the CA; provided that the amount payable

in respect of any Debt Due expressed in foreign currency shall be computed at the Reference

Exchange Rate for conversion into the relevant foreign currency as on the date of Termination

Payment.

Within 60 days from the COD, the Concessionaire is required to notify to NHAI the Total Project

Cost as on COD and its break-up between Equity & Debt Due. Only the amounts so conveyed

shall form the basis of computing Termination Payment and in the event such break-up is not

notified to NHAI, Equity shall be deemed to be the product arrived at by subtracting Debt Due

from Total Project Cost as per the CA.

5.2.1.17 Arbitration

Any dispute between the Concessionaire & NHAI, which is not resolved amicably, shall be finally

decided by reference to arbitration by a Board of Arbitrators, which will consist of three

Arbitrators of whom each party shall select one and the third Arbitrator shall be appointed in

accordance with the Rules of Arbitration of the Indian Council of Arbitration.

5.2.1.18 Governing Law and Jurisdiction

The CA is governed by the Laws of India and the Courts at New Delhi, India shall have

jurisdiction over all matters arising out of or relating to the CA.

5.2.1.19 State Support

A Memorandum of Understanding (MoU) will be executed between NHAI and the GoB for

enabling support from the GoB for proper implementation of NHAI road projects in the State of

Bihar. Four laning of various stretches in Bihar were amongst the projects identified and this MoU

will facilitate the development of the projects.



5.2.2 EPC Agreement

CHEL proposes to enter into a formal EPC contract with MPL by July 2010.

General Scope of Work

MPL will be responsible for the works of the entire stretch from km 143.200 to km 207.200 of the

Project. The Scope will reflect all the construction requirements from the Concession Agreement

on a back-to-back basis.

♦ Contract Price

The EPC contract shall be fixed time and fixed price lump sum contracts with MPL for an

aggregate value of Rs.720.13 Crore.

♦ Construction Commencement Date

The construction commencement date for the Project Highway is expected to be January 1, 2011

i.e. within 180 days of signing the CA. CHEL is to provide possession of site and access to the site

on or before this day in accordance with the handover of the site from NHAI.

♦ Completion Dates

The completion date of construction has been scheduled at May 31, 2013 with the view that the

construction activity shall be completed in 29 months against the available period of 30 months

for the construction as per the CA.

♦ Certification for Completion of Work

The Work shall be certified complete only when the Independent Engineer issues the relevant

certificate(s) under the CA.

♦ Damages for Failure to complete by Completion Dates

o In case of failure on part of the EPC Contractor(s) to achieve completion by the respective

completion dates, the EPC Contractor(s) shall be liable to pay suitable liquidated damages

to CHEL, for such default for every week or part of a week.

o LDs to be recovered from Monthly Interim Payments

o No LD payable if delay arises on account of reasons solely attributable to NHAI or due to

Force Majeure.

♦ Maintenance of Existing Highway

The EPC Contractor shall maintain the existing highway during the construction period to the

same extent required of the Concessionaire under the CA.



♦ Defects Liability Period

o There shall be a 365-days defects liability period from the issuance of Completion

Certificate by the IE i.e. COD

o Defects so identified in the Defect Liability Period by the O&M operator to be corrected

by MPL. If MPL fails to carry out the repairs then the defects shall be got rectified by

CHEL and the cost of the same would be recoverable from the EPC Contractor.

♦ Performance Guarantee

The EPC Contractors shall provide performance guarantee equivalent to 10% of the EPC

Contract Price in the form of corporate guarantee before commencement of work. The

Performance Guarantee shall be released within 28 days of the issue of Defect Liability Certificate.

♦ Design Responsibility

The EPC Contractor shall be responsible for the design of the Project Highway and its approval

by NHAI/IE.

♦ Obtaining Permits

The EPC Contractor shall be responsible for obtaining Applicable Permits, licences and approvals

necessary for the design, execution and completion of the works as defined in the CA with the

assistance of the Concessionaire.

♦ Payment

The EPC Contractor will serve in notice “Request for Payment” requesting payment of the sum

which it considers to be due in respect of the preceding month. Within seven days of the receipt

of the request, the Concessionaire will inspect the relevant works, and upon satisfaction, will issue

the Certificate of Payment. The amount shall become due on the issue of Certificate of Payment.

There shall be a mobilization advance payment of 10% of the Contract Price. To ensure the

payment due to the EPC Contractor, CHEL proposes to open a Letter of Credit in favour of the

EPC Contractor. Appropriate retention money clause shall be built into the EPC contract.

♦ Insurance

The EPC Contractor will be responsible for CAR Policy, Third Party Liability Insurance,

workmen’s compensation insurance; plant and equipment insurance, marine / transit insurance;

any other insurance that the EPC Contractor may be required to take out under Indian law.



♦ Definition of Effects of Force Majeure

The definition and consequences of Force Majeure would generally follow those in the CA.

♦ Termination

Termination by the Concessionaire would generally follow the provisions in the CA. The EPC

Contractor, upon the occurrence of Project Company Event of Default, may terminate the

Contract by issuing a Termination Notice.



5.2.3 O&M Agreement

Under the DBFOT framework, the Concessionaire is responsible for the O&M of the Project

Highway throughout the Concession Period. The Operations & Maintenance (O&M)

responsibility is proposed to be entrusted to MIL/MPL.

5.2.3.1 Obligation of the O&M Contractor:

Some of the obligations of the Concessionaire are provided underneath:

(i) Permitting safe, smooth and uninterrupted flow of traffic on the Project Highway during

normal operating conditions

(ii) Allowing and assisting Authority or Authority Contractor(s) in collecting and appropriating the

Fee

(iii) Carrying out periodic preventive maintenance of the Project Highway

(iv) Undertaking routine maintenance, undertaking major maintenance which includes resurfacing

of pavements, repairs to structures, and repairs and refurbishment of tolling system and other

equipment

(v) Operation and maintenance of all communication, control and administrative systems

necessary for the efficient operation of the Project Highway

(vi) Maintaining a public relations unit to interface with and attend to suggestions from the Users,

government agencies, media and other agencies, etc.

(vii)Preventing, with the assistance of the concerned law enforcement agencies, any

encroachments on the Project Highway

(viii) Maintenance of approach roads to underpasses, overpasses upto 100 meters from the Project

Highway in accordance with good industry practices

5.2.3.2 Maintenance Manual

The O&M Contractor shall prepare Maintenance Manual in consultation with the Independent

Engineer and the Concessionaire for the regular and periodic maintenance as per Maintenance

Manual.

5.2.3.3 Maintenance Programme

Not later than 45 days before the beginning of each Accounting Year during the Operation

Period, the O&M Contractor shall prepare a programme for maintenance of Project Highway in

consultation with the Independent Engineer as per the requirements set forth in Maintenance

Manual, schedule L which shall include, but not limiting to the following:

• criteria to be adopted for deciding maintenance needs;



• preventive maintenance schedule;

• intervals for major maintenance works and the scope thereof;

• lane closure schedule for each type of maintenance (length and time);

• intervals at which the Concessionaire shall carry out periodic maintenance;

• intervals and procedures for carrying out inspection of all elements of the Project

Highway;



6. PROJECT COST

The Project Cost comprises the EPC contract Cost, Design & Engineering expenses, Site Expenses, Interest During Construction, Financial Fees & Expenses, Preliminary & Pre-operative expense and Contingency cost. The capital cost estimates have been provided by the Company y based on its in-house data base. Considering the MPL’s established credentials in implementing road projects, the estimates provided by the Company may be considered reasonable. The break-up of the Project Cost is set out below:

Item Amount in Rs Crore % of total cost

EPC Cost 720.13 85.99% Interest During Construction 37.71 4.64% Preliminary & Pre-operative Expense 29.58 3.64% Contingency 17.03 2.10% Working Capital Margin 8.05 0.99% Total Project Cost 812.50 100.00%

a. EPC Contract Cost

CHEL will enter into an EPC contract with MPL for the construction of the Project Highway. The EPC contract would cover the construction of road works, at-grade junctions, lay-byes, toll plazas, and the installation of the toll equipment & other fixed assets. The EPC contract will be awarded at fixed costs of Rs. 720.13 Crore to MPL. The phasing of the EPC costs during the construction period is as under:

FY 2011 FY 2012 FY 2013 FY2014 Total Phasing of EPC Cost 12.50% 32.50% 45.00% 10.00% 100% Amount in Rs Crore 90.02 234.04 324.06 72.01 720.13

The major components of the EPC cost include:

Sl. No. Particulars Amount in Rs Crore1 Major structure 196.58 2 Bitumen base & Surface course 151.09 3 Sub-base and base course 134.88 4 Earth works 123.32 5 Others 114.26 (a) Drainage & Protection Areas 41.17 (b) Safety & Maintenance During Construction 6.72 (c) Roadside Amenities 15.43 (d) Traffic Signs, Road Markings & Road Furniture 35.79 (e) Toll Plaza 12.39 (f) Truck Lay-Bye Building 2.75

Total EPC Cost 720.13



i. Major Structure:

Five (5) ROB’s have been proposed on the whole project road at locations where railway line

crosses the project road along the proposed alignment. There are 100 nos. of culverts passes

through proposed alignment out of which 19 nos. are existing and 81 nos. are new proposed

culverts. The existing bridges constitute 4 minor bridges and 1 major bridge and all of them

requires repair according to the feasibility report. 14 additional new minor bridges and 3 major

bridges will be constructed along the stretch.

ii. Bitumen base & Surface course

The company proposes to source the following raw materials:

Sl. No. Description of Materials Approximate Quantity (in MT)

Proposed Sources

1 Granular Sub-Base (GSB) 1,070,351

MPL – Crusher (Gaya) – 130 Km from Hajipur

2 Aggregate 40mm 287,2723 Aggregate 20mm 419,921 4 Aggregate 10mm 394,173 5 Dust 448,859 6 Sand 144,069 Ganga River – 10 Km from

Site 7 Lime 9,770 Patna - 20 Km 8 Cement 60,220 Satna – 500 Km from Hajipur

(Birla/JP Cement) 9 Emulsion (for PC & TC) 1,800 IOCL – Haldia – 600 km from

Hajipur or from Barauni 10 Bitumen 60/70 16,43711 CRMB 6,21912 HYSD 9,030 TATA/SAIL – Patna – 20 Km

iii. Sub-base and base course

Wet Mix Macadam (WMM) base and granular sub-base along the entire stretch of the road is to be

provided as per the detailed specifications laid out in the CA.

iv. Earth Works The Company will carry out excavation and surface preparation work necessary for construction

of road way and other supporting infrastructures along the Project Highway.

b. Interest during Construction

Interest during construction is projected to be Rs. 37.71 Crores, based on the projected drawdown of the finance facilities.

c. Preliminary & Preoperative Expenses

CHEL will incur Rs 29.58 Crore as preliminary & pre-operative expenses during the construction

period. These expenses include costs incurred on design & engineering, during bidding stage, costs



incurred in the incorporation of the SPV and further expenses proposed to be incurred in

connection with increase in the authorized share capital of SPV, LLC charges, administrative

charges, financial charges and other expenses. These are based on Company’s estimates. A detail

of the same is provided below:

Prelim.& Pre-Operative Expenses Rs. In Crore

Engineering Consultancy Expenses 3.60 Administrative & Establishment Expenses 5.00 Pre-Operative Expenses 1.05 Statutory Charges 5.00 Loan Document Charges 0.50 LLC Charges 0.15 Travel & Conveyance Charges 2.00 Insurance during construction 6.87 Consultancy, Financial Charges & TRA & Trustee Charges

5.41

Total Prelim.& Pre-Operative Expenses 29.58

d. Contingency Provisions

Typically in road projects, the major component of the Project Cost is the EPC contract cost. As

the EPC contract is proposed to be awarded on a fixed price – fixed time basis, a nominal

provision of about Rs 17.03 crore has been provided as contingency to cover any unanticipated

increase in preliminary & pre-operative expenses, consultancy charges and other expenditure.

e. Working Capital Margin

Typically in annuity based projects, the annuity from NHAI will commence on COD and the first

annuity will be payable 6 months from the COD. However, the company will incur expenses on

O&M, administrative costs and interest on term loan during this period. As per normal

calculations, CHEL’s would be eligible to receive around 75% of the receivable from NHAI in the

first year of operation; however, we have assessed the expenses to be incurred by the Company

during this period for the working capital requirement in the first year of operation. The total

Working Capital requirement for the Project in the first year of operations comes out to be

Rs.32.19 Crore. Margin money to be brought for meeting working capital requirement by the

promoters has been estimated at Rs 8.05 Crore (i.e. 25% of projected net working capital

requirement) which is provided for in the Project cost towards meeting these expenses for the

initial 6 months after COD. The balance of Rs 24.14 Crore shall be raised from various working

capital bankers in due course. The rate of interest for the working capital finance has been

assumed at 10.00% p.a.



7. MEANS OF FINANCE The project cost is proposed to be funded by a mix of promoters’ contribution and term loan

(RTL) at a debt: equity ratio of 72:28 as shown below:

Financing Structure Source of Fund Rs. in Crore % of total

Term Loan 585.00 72.0% Promoters Contribution 227.50 28.0% - Unsecured Loans from the

Promoters 188.50 23.20%

- Equity Capital 39.00 4.80% Total Funding 812.50 100.0%

The debt / equity ratio was arrived at on the basis of the debt servicing ability of the Project under various scenarios. Promoters’ Contribution

The Promoters’ would be bringing in Rs 39.00 Crore (4.80% of the Equity requirement) by

subscribing to equity share capital of CHEL and the balance Rs 188.50 Crore would be brought in

the form of interest free unsecured loan. Considering the specific purpose of the SPV, unsecured

loans are proposed to be brought in as Equity to minimize the cost on transferring the surplus

funds to the Sponsors once all the term loans are fully repaid. The phasing of Promoters’

Contribution of Rs. 227.50 Crore is envisaged to occur in the following manner: Figures in Rs Crore FY 2011 FY 2012 FY 2013 FY 2014 Total Phasing of Equity 7.80 8.90 17.73 4.57 39.00 Phasing of Interest Free Unsecured Loan from the Promoters

37.70 43.02 85.70 22.08 188.50

The consolidated estimated cash accruals for the next four years are shown below:

Projected Cash Flow Statement of MPL FY 2011 2012 2013 2014 Total Sources Madhucon Projects Ltd (MPL) & MIL

Net cash accruals (PAT + Depreciation) 108.0 117.0 130.0 140 495.0 Less: Repayment of term loans 48.0 28.0 24.0 24.0 124.0

- Net cash accruals available for investments 60.0 89.0 106.0 116.0 371.0 MPL - QIP, long term loans, CP, etc 100.0 100.0

MIL - Private Placement 400.0 400.0 MIL - IPO

400.0 400.0 Total funds available 560.0 489.0 106.0 116.0 1271.0



FY 2011 2012 2013 2014 Total Requirements

Nama Hotels Pvt Ltd 20.0 62.0 0.0 0.0 82.0 Simhapuri Energy - Phase I 102.0 0.0 0.0 0.0 102.0 Simhapuri Energy - Phase II 201.0 115.0 86.0 0.0 402.0 Chhapra-Hajipur Expressways Ltd. 45.5 51.9 103.4 26.7 227.50 Other projects

100.0 200.0 50.0 350.0 Total equity requirement 368.5 328.9 389.4 76.7 1163.5

MIL proposes to raise about Rs 400 Crore by way of private placement and a further Rs.400 Crore

by way of IPO. MIL has received in-principle commitments for Rs 400 crore placements and is

confident of completing the private placement by July 2010. From the projected cash flow of MPL

mentioned above, it can be seen that the Sponsors are making adequate arrangements to meet its

equity commitments for various projects.

For the IPO of Rs 400 Crore, the company has mandated IDFC-SSKI, SBI Capital Markets

Limited, Edelweiss Securities and ICICI Securities as Book Running Lead Managers (BRLM).

Canara Bank and Motilal Oswal Financial Services Limited have been appointed as co-lead BRLM.

Amarchand Mangaldas are the legal advisors to the management and AZB Partners are the

advisors to the underwriters. Jones Day is the legal advisor for the foreign offering.

The status of the proposed equity issue is provided below:

a. Merchant bankers, legal advisors have been appointed

b. Lender approvals for transfer of shares of infrastructure companies from Madhucon

Projects Limited to Madhucon Infra Limited have been received / under process.

c. Legal counsels have completed vetting.

The IPO issue of MIL will follow after necessary approval from SEBI.

Term Loan from Banks/FIs/Multilateral Funding Agencies

Term Loan amounting to Rs. 585.00 Crore is proposed to be raised from banks and FIs. The main

terms of the Facility are as under

Facility : Term Loan

Facility Size : Rs. 585.00 Crores with LC sub-limit of upto 75% of the

Term Loan component

Purpose : Part-financing the total cost of the Project

Interest Rate : 1.75% below SBAR, present effective rate of 10.00%

p.a. payable monthly



Moratorium : 0.50 years

Repayment : 9.50 years

Security : As per Annexure 2

An indicative term sheet for the proposed Facility is enclosed at Annexure 2.



8. NATIONAL HIGHWAY AUTHORITY OF INDIA

8.1 Background

National Highways Authority of India (NHAI) was constituted by an Act of Parliament, namely

the National Highways Authority of India Act, 1988, to develop, maintain and manage the

National Highways vested or entrusted to it by the Central Government. It became operational in

February, 1995. NHAI is an autonomous organization wholly owned by Government of India

(GoI) under the Ministry of Shipping, Road Transport and Highways (MoSRT&H). The road

sector has been identified as one of the key infrastructural bottlenecks impeding economic growth

in India. In order to address this issue, GOI initiated the comprehensive National Highways

Development Programme (NHDP) in 1999. NHAI has been given the mandate to implement the

NHDP.

The mission of NHAI is to meet the nation’s need of development and maintenance of national

highways network to world standards within the strategic policy framework set by GoI and thus

promote economic well being. GoI vests the management of NHAI with a board of members

comprising the Chairman, five full time members and four part time members.

Indian road network of 33 lakh Km is around second largest in the world and it consists of 70,548

km of National Highways, 1, 31,899 Km of State Highways, 200 Km of Expressways, 4, 67,763

Km of Major District Roads and 26, 50,000 Km of Rural and Other roads In India, about 65% of

freight and 80% passenger traffic is carried by the roads. National Highways constitute only about

2% of the road network but carry about 40% of the total road traffic. Number of vehicles has

been growing at an average pace of 10.16% per annum over the last five years.

8.2 Operations of NHAI

The primary mandate of NHAI is time and cost bound implementation of the National Highways

Development Programme (NHDP) through a host of funding options including from external

multilateral agencies like World Bank, Asian Development Bank, JBIC etc. The main functions of

NHAI are as follows:

• Survey, develop, maintain and manage highways vested in, or entrusted to it;

• Regulate and control the plying of vehicles on the highways vested in, or entrusted to, it

for the proper management thereof;

• Develop and provide consultancy and construction services in India and abroad and carry

on research activities in relation to the development, maintenance and management of

highways or any facilities thereat;



• Provide such facilities and amenities for the users of the highways vested in, or entrusted

to, it as are, in the opinion of the Authority, necessary for the smooth flow of traffic on

such highways;

• Form one or more companies under the Companies Act, 1956 ( 1 of 1956) to further the

efficient discharge of the functions imposed on it by this Act;

• Advise the Central Government on matters relating to highways; and

• Collect fees on behalf of the Central Government for services or benefits rendered under

section 7 of the National Highways Act, 1956 ( 48 of 1956) , as amended from time to

time, and such other fees on behalf of the State Governments on such terms and

conditions as may be specified by such State Government.

NHAI is implementing the NHDP in the following modes of delivery:

(a) BOT (Toll)

(b) BOT (Annuity)

(c) Special Purpose Vehicle (SPV)

(d) EPC

BOT (Toll) Model

In a BOT (Toll) Model, the concessionaire (private sector) is required to meet the

upfront/construction cost and the expenditure on annual maintenance. The Concessionaire

recovers the entire upfront/construction cost along with the interest and a return on investment

out of the future toll collection. The viability of the project greatly depends on the traffic (i.e. toll).

However, with a view to bridge the gap between the investment required and the gains arising out

of it, i.e., to increase the viability of the projects, capital grant is also provided (up to a maximum

of 40% of the project cost has been provided under NHDP).

BOT (Annuity) Model

Annuity projects have been conceived by NHAI as an alternative to the traditional toll based BOT

projects to catalyse private sector participation in large NH projects. Under the BOT (Annuity)

Model, the Concessionaire (private sector) is required to meet the entire upfront/construction cost

(no grant is paid by the client) and the expenditure on annual maintenance. The Concessionaire

recovers the entire investment and a pre-determined cost of return out of the annuities payable by

the client every year. The selection is made based on the least annuity quoted by the bidders (the

concession period being fixed). The client (Government/NHAI) retains the risk with respect to

traffic (toll), since the client collects the toll.



Special Purpose Vehicle (SPV) Model

Under SPV Model, NHAI forms Special Purpose Vehicle (SPV) for funding road projects. SPVs

are separate legal entities formed under the Companies Act, 1956. It involves very less cash

support from the NHAI in the form of equity/debt; rest of the funds come from Ports/Financial

Institutions/beneficiary organisations in the form of equities/debt. The amount spent on

development of roads/highways is to be recovered in prescribed concession period by way of

collection of toll fee by SPV.

EPC Model

In an EPC Model, NHAI invites the bids from the Contractors for the construction of the

required Highway. NHAI provides the entire technical specifications and the payment terms in the

bid documents. The bidding parameter under the EPC model is the lowest construction cost

bidded by the Contractors. After completion of the construction, NHAI retains the right to toll

the completed stretch.

8.3 Finance Mechanisms

NHAI proposes to finance its projects by a host of financing mechanisms. Some of them are as

follows:-

Revenue from Cess

This consists of cess on every litre of diesel and petrol sold in the country. It is proposed that

earmarking of cess may be done for viability gap funding relating to the approved programme of

BOT (Toll) projects. The earmarking would be done annually by the Planning Commission in

consultation with MoSRT&H and Finance Ministry, along with fixing of the borrowing limits of

NHAI. The remaining cess revenue may continue to be used for ongoing expenditures including

construction contracts, annuity repayments, land acquisitions, DPR preparation etc. Surplus from Toll Revenues

The other major source of revenue for NHAI is the collection of tolls on the stretches of GQ and

NHDP-II, which were already four laned under EPC/Annuity Models. These funds are expected

to be utilised by NHAI for funding its capital and revenue expenditures. Additional Budgetary Support

As the NHDP-I, NHDP-II and NHDP-III did not envisage any budgetary support other than

cess and external assistance and the fact that the cess revenues would be doubled next year

onwards, NHAI does not propose any additional budgetary support for funding its future NHDP



programmes except for Special Accelerated Road Development Programme for North East

(SARDP-NE).

Market Borrowings

The shortfall between the inflows from all sources and the projected outflows, including the

payment of annuity, is proposed to be met out of Market Borrowings. Market Borrowings would

have to be raised against suitable forms of support or back stopping by the Finance Ministry. This

may include a commitment that cess revenues at a pre-determined level would be made available

to NHAI and may be suitably assigned for debt service. Given the size and tenure of borrowings,

it would be necessary for the Ministry of Finance to provide the requisite comfort to lenders so

that NHAI is able to raise the projected borrowings.

Negative Grant from the Private Sector

This is another source of funds for NHAI. It may be mentioned that in some of the BOT (Toll)

projects, the bidder has quoted the negative grant payable to NHAI.

8.4 Financial Profile of NHAI

NHAI has a strong financial position because of the support it receives from the GoI for

implementing its projects. The support includes allocation of Cess on fuels, earmarking of

budgetary resources and flexibility to raise funds through Capital Gains Bonds. In order to

support the funds required for NHDP, the government levies a cess of Rs 2 on every liter of

petrol/diesel sold.This allocation of cess on fuel which constituted 59.3% of NHAI’s capital

employed as on March 31,2009 has been increased by 23% to Rs. 85.78 billion in 2009-10.Cess

funds are used by NHAI for repayment of principal and interest of market borrowings, payment

of viability gap funds and payment of Annuity (in BOT Annuity Projects). NHAI also receives

budgetary support from the GoI. It received Rs. 1.59 billion in 2008-09 and RS. 5.59 billion in

2007-2008. The allocation varies based on yearly requirements. GoI also extends financial support

in the form of multilateral agency loans for the road sector. NHAI receives 80% of these funds as

grant. In 2008-09, Rs. 15.13 billion was received as grant and Rs. 3.79 billion as loan.

NHAI is one of the two bodies authorised to float bonds that qualify for Capital Gains

Exemption, this gives the authority an opportunity to tap the debt market of the country. The

response to the debt issues of NHAI has always been overwhelming. These issues have a

reaffirmed AAA rating from CRISIL.

To reduce NHAI’s financial exposure and also to bring in private participation, NHAI has been

awaring projects on BOT basis. Though some projects thus awarded require viability gap funding,



there are some projects on certain commercially viable stretches through which NHAI is getting

negative grant. NHAI had received a negative grant of Rs. 13.53 billion till March 31,2009.As on

March 31, 2009, NHAI has a networth of Rs. 51,696 Crore, against this NHAI has a total debt of

Rs. 5544 Crore.

11.3.1 Credit Rating

CRISIL had carried out rating of NHAI for its Rs 80.0 billion long term borrowing programme

and Rs. 55.93 billion Taxable Bond Programme and has assigned the following rating to NHAI:

Program Rating

Rs. 80 billion Long Term Borrowing Programme AAA/Stable (Assigned) Rs. 55.93 billion Taxable Bond Programme AAA/Stable (Reaffirmed)



9. APPROVALS AND CLEARANCES

The status of approvals and clearances as given by the company are as follows:

Sl. No.

Clearances/Permissions Concerned Department Responsibility Approval Status

1. Environmental Clearance MOEF NHAI Obtained 2. Tree Cutting Approval Regional Forest Department EPC

Contractor

MPL is taking necessary steps to obtain the required approvals.

3. Exception of Customs duty on Major Plants and Machinery

MoF/Customs EPC Contractor

4. Wireless System DoT EPC Contractor

5 Extraction of boulders from Quarry

Directorate of State Mines Department

EPC Contractor

6. Borrow Earth Permit Village Panchayat/ State Government

EPC Contractor

7. Permission for installation of Crusher, Batching Plant, Hot Mix Plant, Asphalt Plant, etc.

Village Panchayats/SPCB EPC Contractor

8. Explosive Licenses for storing explosives and diesel

Explosive Controller EPC Contractor

9. Electrical Supply Connections and Diesel Gen Set

Bihar State Electricity Board EPC Contractor

10. License for setting up Batching Plant

Inspector of Factories & Other Competent Authority

EPC Contractor

11. NOC for Batching Plant and Hot Mix Plant

SPCB EPC Contractor

12. Water Mains and Sewerage Lines

Local Authorities EPC Contractor

13. Water Usage/Drawing water from river/reservoir

Irrigation Department EPC Contractor

14. Construction Power Bihar State Electricity Board EPC Contractor

15. Environmental protection and conservation (for crusher etc)

State Pollution Control Board EPC Contractor to initiate at appropriate time



10. FINANCIAL PROJECTIONS

10.1 Assumptions a) Project Schedule

Milestones Date

Appointed Date January 1, 2011 Construction Start Date January 1, 2011 Construction End Date May, 2013 Commercial Operations (COD) June 1, 2013 Concession End Date November, 2025 Scheduled Commercial Operations (SPCD) May, 2013 First Annuity Payment from COD November, 2013

b) Capital Structure

Capital Structure Rs. in Crore % Equity 39.00 4.80% Interest Free Loan 188.50 23.20% Senior Debt 585.00 72.00% Total Project Cost 812.50 100.00% D/E 2.57

c) Term Loan

Facility Rs 585.00 crore ROI 10.00%Moratorium 0.50 years Repayment Period 9.50 years Door to Door 12.50 years Tail Period 2.50 years Drawdown Schedules Date

Draw down Start January, 2011 Repayment Start December, 2013 Repayment End December, 2022

d) Revenue Assumptions

Annuity Amount (per year) Rs 130.86 crore Mode of Payment Semi-Annual Concession Period 12.50 years No of Installments 25 First annuity billing date 1-June-13 Credit Period for Annuity 6 months



e) Operations and Maintenance Assumptions

The following are considered as the basis for the future O&M costs and are summarized in

the table below:

Components From the base year of FY 2011

Administration Expense Rs. 2.00 Crore p.a. with annual escalation of 5% p.a.

Routine Maintenance Expense Rs. 5 Lakhs per Km with annual escalation of 5% p.a.

Insurance Expense

Rs. 1.08 Crore (i.e. 0.15% of EPC Cost) with yearly escalation

of 5% p.a.

f) Major Maintenance Expenses

The Major maintenance (MM) is scheduled to be carried out every 5 years commencing from

FY 2019. It is estimated at Rs.15 lakhs per km with half yearly escalation of 5% starting from

FY 2011. A major maintenance reserve account (MMRA) creation is also planned for the

same.

g) Assumptions on Depreciation, Tax and Interest Rate

Other financial and economic assumptions used in the financial projections are set out below.

i. Taxation

The following categories of taxation have been adopted to be applicable:

• Corporate tax rate of 32.90% (inclusive of surcharge & cess) on the net business

income of the Concessionaire;

• Dividend Distribution of Tax of 16.6%(inclusive of surcharge & cess) on dividend

payouts made to the equity holders;

• Minimum Alternate Tax (MAT) has been assumed at 19.9% (inclusive of surcharge & cess); and

ii. Depreciation under Income Tax Act has been assumed as under:

Item Rate (WDV) Construction Works 15.00%

Major Maintenance 100.00%

iii. Depreciation as per Companies Act

Item Rate (SLM) Construction Work 8.00%

Major Maintenance 100.00 %



iv. Interest Rate on the Finance Facilities

The interest rate for the Term Loan has been assumed at 10.00% p.a.

The interest rate for the Working Capital Loan has been assumed at 10.00% p.a.

The Company would be availing the LC option for which the charges are assumed at 0.40%

p.a.

Return on 50% of average cash balance has been assumed at 5.00% p.a.

v. Working Capital Requirement

Margin Money = 25% of the Working Capital Requirement

Working Capital Loan = 75% of the Working Capital Requirement



10.2 Financial Projections 10.2.1 Projected Profit & Loss Statement

(in Rs Crore) Profitability Statement

FYE 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Operating FY Count 1 2 3 4 5 6 7 8 9 10 11 12 13 Revenue Income 109.05 130.86 130.86 130.86 130.86 130.86 130.86 130.86 130.86 130.86 130.86 130.86 87.24

Expenditure Routine Maintenance Expense 3.11 3.91 4.11 4.32 4.54 4.77 5.01 5.26 5.53 5.81 6.10 6.41 4.46 Insurance 1.03 1.30 1.37 1.44 1.51 1.58 1.66 1.75 1.84 1.93 2.03 2.13 1.48 Administrative Expenses 1.91 2.41 2.53 2.66 2.79 2.93 3.08 3.24 3.40 3.57 3.75 3.94 2.75 Total Expenditure 6.06 7.62 8.01 8.41 8.84 9.28 9.75 10.25 10.77 11.31 11.88 12.49 8.69

Operating Profit 102.99 123.24 122.85 122.45 122.02 121.58 121.11 120.61 120.09 119.55 118.98 118.37 78.55

Amortization 4.93 5.92 5.92 5.92 5.92 0.99 - - - - - - - Depreciation 51.66 61.99 61.99 61.99 61.99 69.23 84.07 61.99 61.99 61.99 71.26 90.25 41.33 Interest on Term Loan 47.59 53.09 48.55 43.80 38.55 32.58 25.96 18.58 10.90 3.11 - - -

Interest on WCL 2.01 2.41 2.41 2.41 2.41 2.41 2.41 2.41 2.41 2.41 2.41 2.41 1.21 Interest on 50% of Avg. Cash Balance 0.29 1.11 2.38 3.73 4.69 5.35 6.26 7.36 8.54 9.54 11.03 12.73 9.79

Profit Before Tax (PBT) (2.91) 0.93 6.36 12.06 17.85 21.72 14.92 44.99 53.33 61.57 56.34 38.44 45.81

Current Tax - 0.22 1.27 2.40 3.56 4.33 2.97 8.97 10.63 12.27 11.23 7.66 9.13 Profit After Tax (PAT) (2.91) 0.71 5.09 9.66 14.29 17.39 11.95 36.02 42.70 49.30 45.11 30.78 36.68

Major Maintenance Reserve Opening Balance - - - - 2.90 14.62 26.35 29.32 29.32 33.02 48.03 63.04 66.84 Transfer to MRR - - - 2.90 11.73 11.73 2.97 - 3.71 15.01 15.01 3.80 - Closing Balance - - - 2.90 14.62 26.35 29.32 29.32 33.02 48.03 63.04 66.84 66.84 Retained Earnings (RE) (2.91) 0.71 5.09 6.76 2.56 5.66 8.98 36.02 39.00 34.29 30.10 26.98 36.68



10.2.2 Projected Cash Flow Statement of CHEL

(in Rs Crore) Cash Flow Statement

FYE Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25 Mar-26

Cash Flow From Operating Activities

PAT - - - (2.91) 0.71 5.09 9.66 14.29 17.39 11.95 36.02 42.70 49.30 45.11 30.78 36.68 Add: Depreciation - - - 51.66 61.99 61.99 61.99 61.99 69.23 84.07 61.99 61.99 61.99 71.26 90.25 41.33 Add: Amortization - - - 4.93 5.92 5.92 5.92 5.92 0.99 - - - - - - - (Increase)/Decrease in Receivables from NHAI - - - (43.62) - - - - - - - - - - - 43.62

Net Cash from Operations - - - 10.05 68.62 73.00 77.56 82.20 87.60 96.02 98.01 104.69 111.29 116.37 121.03 121.62

Cash Flow from Financing Activities Equity 7.80 8.90 17.73 4.57 - - - - - - - - - - - - Add: inc/(dec) Term Loan - 106.45 301.50 141.95 (40.95) (46.80) (49.72) (55.57) (62.89) (70.20) (76.05) (78.97) (68.74) - - - Add: inc/(dec) WCL - - - 24.14 - - - - - - - - - - - (24.14) Add: inc/(dec) Unsecured loan 37.70 43.02 85.70 22.09 - - - - - - - - - (75.40) (75.40) (37.70) Net Cash Fin Activities 45.50 158.36 404.93 192.75 (40.95) (46.80) (49.72) (55.57) (62.89) (70.20) (76.05) (78.97) (68.74) (75.40) (75.40) (61.84)

Cash Flow from Investing Activities Capex Expenditure 45.50 158.36 404.93 195.66 - - - - 14.48 14.84 - - - 18.53 19.00 - Net Cash from Investment 45.50 158.36 404.93 195.66 - - - - 14.48 14.84 - - - 18.53 19.00 - Net Cash Flows - - - 7.15 27.67 26.20 27.84 26.62 10.24 10.98 21.96 25.72 42.55 22.44 26.63 59.78 Opening Cash & Bank Balance - - - - 7.15 34.82 61.02 85.96 100.86 113.85 136.69 158.66 180.67 208.21 234.17 275.99 Add/ (Deductions) - - - 7.15 27.67 26.20 27.84 26.62 10.24 10.98 21.96 25.72 42.55 22.44 26.63 59.78 Cash Available for MM Invest - - - 7.15 34.82 61.02 88.86 112.58 111.09 124.82 158.66 184.37 223.22 230.65 260.80 335.77 Transfer to MM Investment - - - - - - 2.90 11.73 (2.75) (11.87) - 3.71 15.01 (3.52) (15.20) - Closing Cash & Bank Balance

- - - 7.15 34.82 61.02 85.96 100.86 113.85 136.69 158.66 180.67 208.21 234.17 275.99 335.77



10.2.3 Projected Balance Sheet

(in Rs Crore) Balance Sheet FYE Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25 Mar-26

Sources of Funds Promoters Equity 7.80 16.70 34.43 39.00 39.00 39.00 39.00 39.00 39.00 39.00 39.00 39.00 39.00 39.00 39.00 39.00 Reserves & Surplus - - - (2.91) (2.20) 2.89 9.66 12.22 17.88 26.86 62.89 101.88 136.18 166.28 193.25 229.93 Major Maintenance Reserve - - - - - - 2.90 14.62 26.35 29.32 29.32 33.02 48.03 63.04 66.84 66.84

Unsecured Debt 37.70 80.72 166.41 188.50 188.50 188.50 188.50 188.50 188.50 188.50 188.50 188.50 188.50 113.10 37.70 0.00 Term Loan - 106.45 407.95 549.90 508.95 462.15 412.42 356.85 293.96 223.76 147.71 68.74 (0.00) (0.00) (0.00) (0.00) WC Loan - - - 24.14 24.14 24.14 24.14 24.14 24.14 24.14 24.14 24.14 24.14 24.14 24.14 (0.00) Total Sources 45.50 203.86 608.79 798.63 758.39 716.69 676.62 635.34 589.84 531.59 491.56 455.29 435.85 405.57 360.94 335.77 Application of Funds

Gross Block - - - 774.87 774.87 774.87 774.87 774.87 789.34 804.18 804.18 804.18 804.18 822.71 841.71 841.71 Less: Acc. Depreciation - - - 51.66 113.65 175.64 237.63 299.62 368.84 452.91 514.90 576.89 638.88 710.13 800.38 841.71

Net Block - - - 723.21 661.22 599.23 537.24 475.25 420.50 351.27 289.28 227.29 165.30 112.58 41.33 - CWIP 41.91 194.02 584.99 - - - - - - - - - - - - - Preliminary Expenses not written off 3.59 9.84 23.80 24.65 18.74 12.82 6.90 0.99 (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)

Cash & Bank Balance - - - 7.15 34.82 61.02 85.96 100.86 113.85 136.69 158.66 180.67 208.21 234.17 275.99 335.77 Receivables from NHAI - - - 43.62 43.62 43.62 43.62 43.62 43.62 43.62 43.62 43.62 43.62 43.62 43.62 -

Major Maintenance Investment - - - - - - 2.90 14.62 11.87 - - 3.71 18.72 15.20 - -

Total Uses 45.50 203.86 608.79 798.63 758.39 716.69 676.62 635.34 589.84 531.59 491.56 455.29 435.85 405.56 360.94 335.77



10.2.4 DSCR Calculations

(in Rs Crore)

DSCR Calculation FYE Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23PAT (2.91) 0.71 5.09 9.66 14.29 17.39 11.95 36.02 42.70 49.30 Add: Depreciation 51.66 61.99 61.99 61.99 61.99 69.23 84.07 61.99 61.99 61.99 Add: Amortization 4.93 5.92 5.92 5.92 5.92 0.99 - - - - Add: Term Loan Interest 47.59 53.09 48.55 43.80 38.55 32.58 25.96 18.58 10.90 3.11 Net Cash Accruals for debt servicing 101.27 121.72 121.55 121.36 120.74 120.19 121.98 116.59 115.59 114.40 Debt Obligation Term Loan Repayment 35.10 40.95 46.80 49.72 55.57 62.89 70.20 76.05 78.97 68.74 Term Loan Interest 47.59 53.09 48.55 43.80 38.55 32.58 25.96 18.58 10.90 3.11 Total Debt Obligation 82.69 94.04 95.35 93.52 94.12 95.47 96.16 94.63 89.88 71.85 DSCR 1.22 1.29 1.27 1.30 1.28 1.26 1.27 1.23 1.29 1.59 Minimum DSCR 1.22 Average DSCR 1.29

Considering that the receivable on successful completion of the project are defined and from NHAI, a GoI undertaking rated AAA by

CRISIL, the average DSCR is considered comfortable.



10.2.5 IRR Calculations

(In Rs Crore)

HY ended Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18

Cash Inflows

PAT - - - - - (1.63) (1.29) (0.17) 0.88 1.99 3.10 4.25 5.41 6.56 7.73

Add: Amortization - - - - - 1.97 2.96 2.96 2.96 2.96 2.96 2.96 2.96 2.96 2.96

Add: Depreciation - - - - - 20.66 30.99 30.99 30.99 30.99 30.99 30.99 30.99 30.99 30.99

Add: Term Loan - - - - - 19.50 28.09 27.06 26.04 24.86 23.70 22.52 21.28 19.96 18.58

Net Transfer to MMI - - - - - - - - - - - - 2.90 5.86 5.86

Total Cash Inflows - - - - - 40.51 60.76 60.84 60.87 60.80 60.75 60.72 63.54 66.34 66.13

Cash Outflows

Capex Expenditure 97.46 54.46 195.90 218.68 150.69 120.30 - - - - - - - - - Less: IDC & other expenses 0.04 1.09 3.39 9.05 16.28 40.88 - - - - - - - - -

Repayment of WC Loan - - - - - - - - - - - - - - -

Total Cash Outflows 97.42 53.37 192.51 209.63 134.42 79.42 - - - - - - - - -

Net Cash Flows (97.41) (53.37) (192.51) (209.62) (134.42) (38.91) 60.76 60.84 60.87 60.80 60.75 60.72 63.54 66.34 66.13



(In Rs Crore) Project IRR Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 Mar-22 Sep-22 Mar-23 Sep-23 Mar-24 Sep-24 Mar-25 Sep-25 Mar-26

Cash Inflows

PAT 10.55 6.84 2.31 9.64 17.20 18.83 20.51 22.20 23.88 25.42 26.19 18.92 11.53 19.24 27.15 9.53 Add: Amortization 0.99 - - - - - - - - - - - - - - -

Add: Depreciation 30.99 38.23 45.65 38.41 30.99 30.99 30.99 30.99 30.99 30.99 30.99 40.26 49.76 40.49 30.99 10.33

Add: Term Loan 17.08 15.51 13.86 12.11 10.24 8.35 6.43 4.47 2.41 0.70 - - - - - - Net Transfer to MMI 5.86 (8.61) (11.87) - - - - 3.71 7.51 7.51 7.51 (11.03) (15.20) - - -

Total Cash Inflows

65.47 51.97 49.95 60.16 58.43 58.17 57.94 61.36 64.79 64.62 64.69 48.15 46.09 59.74 58.14 19.86

Cash Outflows

Capex Expenditure

- - - - - - - - - - - - -

Less: IDC & other expenses - - - - - - - - - - - - -

Repayment of WC Loan - - - - - - - - - - - - - - - 24.14

Total Cash Outflows

- - - - - - - - - - - - - - - 24.14

Net Cash Flows

65.47 51.97 49.95 60.16 58.43 58.17 57.94 61.36 64.79 64.62 64.69 48.15 46.09 59.74 58.14 (4.28)

IRR = 10.35%



10.2.6 Sensitivity Analysis

A sensitivity analysis of the company’s financial position for the proposed loan duration has

been carried out to ascertain the effect of the following scenarios on the major financial

parameters of the company as a whole.

Scenario Description

Scenario 1 Increase in interest rate by 0.5%

Scenario 2 Increase in operating cost by 5% The summary of the sensitivity analysis is provided hereunder

Scenario Project IRR Min. DSCR Avg. DSCR Base Case 10.35% 1.22 1.29 Change in Interest Rate 10.31% 1.19 1.27 Change in Operating Expenses 10.28% 1.22 1.29

As may be seen from the above, the company is able to withstand the operations at various

sensitivity levels and its debt servicing coverage capacity is satisfactory. In the view of the

above, the company is expected to withstand above sensitivities satisfactorily.



11. RISK ANALYSIS & SWOT ANALYSIS

11.1 Risk Analysis

The risks perceived during the existing operations period of the Project and risk mitigation

measures are as below:

Construction Risk Risk Factor Allocated to Risk Mitigation Measures

Construction and Completion risk

EPC Contractor ♦ Road construction methodologies and technologies are simple, proven and standardized.

♦ MPL is an established player in the road sector with successful track record in implementing road projects of over 700 km in length. The project will be implemented on fixed cost & fixed time basis.

♦ Suitable Liquidated Damages would be incorporated in the EPC Contract to ensure timely completion.

♦ 80% of the land will be made available by NHAI before the Appointed Date. The balance 20% is proposed to be made available within 90 days of the Appointed Date.

Thus, the construction and completion risk is considered low.

Cost Over-run EPC Contractor

/ Sponsors ♦ The EPC contract is proposed to be awarded on fixed

price fixed time basis, which accounts for around 88.63% of the total project cost. Further, a contingency provision of Rs 17.03 crore to cover the impact of any unforeseen factors.

♦ MPL/MIL will provide undertaking for cost overrun if any.

The risk of delay due to cost over-run is considered low.

Land Acquisition and timely availability of land

NHAI ♦ As per the draft CA, NHAI has to provide land as per the following schedule: • 80% of the required land – On or before the

Appointed Date (on or before Financial Close) failing which NHAI has to pay Rs.50 per day for every 1,000 square metres or part thereof, commencing from the 91st day of the Appointed Date

• All the remaining land – Within 90 days from the Appointed Date failing which NHAI has to pay 0.1% of the Performance Security for each day’s delay subject to a maximum of 20% of the Performance Security



♦ Also, as per the draft CA, the Concessionaire can request for a Provisional Certificate after completing 75% of the total length of the Project Highway. Provisional Certificate allows the Project Highway to enter into commercial service and allows the Concessionaire to collect the Annuity Fee for the completed stretch.

From the above provisions of the draft CA, it can be seen that NHAI undertakes to provide at least 80% of the land on or before Financial Close. Moreover, NHAI is committed to hand over the balance 20% land within 90 days of the Appointed Date.

Low Risk

Obtaining statutory clearances and approvals

CHEL ♦ NHAI is required to procure all applicable permits relating to environmental protection & conservation of the site. All permits and approvals under applicable laws and permits need to be obtained by CHEL.

♦ NHAI has already obtained environmental clearance from MoEF.

Low Risk.

Funding Risk

CHEL ♦ The Promoters’ would be bringing in Rs 41.80 Crore by subscribing to equity share capital of CHEL and the balance Rs 192.28 Crore would be brought in the form of interest free unsecured loan. The Sponsor(s) are making adequate arrangements to meet their equity commitments for various projects. The Company proposes to raise about Rs 400 Crore by way of private placement and a further Rs.400 Crore by way of IPO. The Company is confident of completing the private placement by July 2010. Madhucon Group is one of the reputed infrastructure development companies and has the resources to bring in the entire equity required for the project.

♦ Further, the Sponsor proposes to bring in 25% of its equity contribution upfront, before approaching the lenders for the first debt drawal.

The Project Sponsor(s) shall furnish a shortfall undertaking (to bring in additional funds in a form & manner satisfactory to the RTL Lenders) for cases of any cost overrun and /or gap in means of financing. Low Risk

Concessionaire Event of Default

CHEL Pre COD

♦ The Concessionaire Events of Default are mentioned in clause 6.1.15 (i) of this PIM. In case of termination of the CA due to Concessionaire Event of Default during the construction period, NHAI will not make



any termination payments to the lenders. The Sponsor will provide an undertaking to meet any shortfall in the repayment of the lenders’ dues, owing to termination of the Concession Agreement due to a Concessionaire event of default during the construction period.

Low Risk

Operations Period Risk Factor Allocated To Risk Mitigation Measures

Revenue Risk CHEL/NHAI ♦ Being an Annuity project, the CA provides for periodic payments of annuity by NHAI.

NHAI is a GoI undertaking and is rated AAA by CRISIL indicating highest safety in meeting its financial obligations. Therefore, the revenue risk is minimal.

O&M risks CHEL/MIL/

MPL

♦ The CA specifies the O&M standards, specification and the manner in which the concessionaire would carry out O&M of the facility. Moreover, IE and GoB are entrusted to supervise and monitor the facility throughout the concession period.

♦ The Operations & Maintenance (O&M) responsibility is proposed to be entrusted to MIL/MPL based on their experience and skills. MPL has experience in executing O&M works.

Low Risk

Force Majeure Risks

CHEL/NHAI Allocation of costs arising out of Force Majeure • Upon occurrence of any Force Majeure Event

prior to the Appointed Date, NHAI and the Concessionaire shall bear their respective costs.

• Upon occurrence of a Force Majeure Event after the Appointed Date, the costs incurred and attributable to such event and directly relating to the Project shall be allocated and paid as follows:

a. In a Non-Political Event, the Parties shall bear their respective Force Majeure Costs; b. In an Indirect Political Event, all Force Majeure Costs attributable to such Indirect Political Event, and not exceeding the Insurance Cover for such Indirect Political Event, shall be borne by the Concessionaire, and to the extent Force Majeure Costs exceed such Insurance Cover, one half of such excess amount shall be reimbursed by the Authority to the Concessionaire; and c. upon occurrence of a Political Event, all Force Majeure Costs attributable to such Political Event shall be reimbursed by the Authority to the Concessionaire.



Termination payments under FM

♦ For non-political FM events, an amount equal to 90% of the Book value of physical Project Assets less Insurance Cover

♦ For indirect-political FM events, NHAI will pay an amount equal to the discounted value of future Annuity payments, the discounting factor applied being the then SBI PLR – (minus) 3%.

♦ For political Force Majeure events, NHAI will pay an amount equal to the discounted value of future Annuity payments, the discounting factor applied being the then SBI PLR -(minus) 3%

♦ During the implementation and operations period, CHEL is required to take comprehensive insurance package for all insurable events or any other insurance required by the lenders.

♦ All the termination payments due to FME would be made through the Escrow Account.

The CA provides for suitable payments in the event of termination. The risk is considered acceptable.

Concessionaire Event of Default

CHEL ♦ In case of termination of the CA due to Concessionaire Event of Default during the operations period, NHAI would pay a termination amount equal to discounted value of future Annuity payments, the discounting factor applied being the then SBI PLR + 3% less Insurance Cover; provided that if any insurance claims forming part of the Insurance Cover are not admitted and paid, then 80% of such unpaid claims shall be deducted from the termination payment so assessed.

MPL is experienced in implementing road projects. The risk of Concessionaire Event of Default is considered Low.

NHAI Event of Default

NHAI ♦ In case of termination of the CA due to NHAI Event of Default during the operations period, the termination payment payable by NHAI would be an amount equal to the discounted value of future Annuity payments; the discounting factor applied being the then SBI PLR -3%.

Low Risk



11.2 SWOT Analysis

Strengths

♦ The Project is an outcome of the conscious recognition by NHAI to improve the road

transport network in the country. The Project is thus, assured of political and

administrative support, which is important for projects of this nature. The Project has the

support of GoB, NHAI and GoI.

♦ Being an Annuity project, the revenue risk is minimal.

♦ The Project is being sponsored by Madhucon Projects Limited (MPL), an experienced

construction company having successfully completed road projects of over 700 Km

length.

♦ The EPC contract is proposed to be on a fixed price, fixed time basis with provisions for

Liquidated Damages. Moreover, the Sponsors will provide undertakings for cost overrun

support.

♦ Given the assured revenues by way of Annuities from NHAI, an average DSCR of 1.29 is

considered comfortable.

Weaknesses

♦ NHAI is not liable to pay any termination payment, on account of Concessionaire Event

of Default, during the Construction Period.

MPL, the EPC Contractor for the Project will enter into fixed-price fixed-time contracts with CHEL.

MPL has specialized in road construction for over 2 decades and they are specialized in major highway

projects.

The nature of the EPC contract will be such that the execution risk of the construction work is directly

linked to the ability of the EPC Contractor to continually and consistently meet their contractual

commitments under the EPC contract. This, in turn, is a function of the business and financial risks

associated with the operations of the EPC Contractor.

Moreover, the Sponsor will provide an undertaking to meet any shortfall in the repayment of the lenders’

dues, owing to termination of the Concession Agreement due to a Concessionaire event of default during the

construction period.

♦ In case the Concessionaire achieves COD after to the Scheduled four laning Date then it

shall be liable for reduction in its first Annuity for delayed completion of the Project. Such

Reduction shall be effected on the first Annuity payment on the first Annuity Payment

Date. The Reduction for such delayed completion shall be the product of Average Daily



Annuity and the number of days by which the COD exceeded the Scheduled Four Laning

Date.

MPL is an established player in road construction. The EPC contract is a fixed cost and fixed

time contract. Moreover, MPL / MIL shall provide an undertaking for timely completion and

also for necessary infusion of funds in case of any delay.

Opportunity

♦ Early completion of the Project can help the Company gain by way of Bonus payments

from NHAI.



12. CONCLUSION

Madhucon Projects Limited (MPL), the flagship company of the Madhucon Group, was awarded

the LoA by NHAI for implementing the project for Four- laning of Chhapra to Hajipur section of

NH-19 from km 143.200 to km 207.200 in the state of Bihar under NHDP Phase III on Design,

Build, Finance, Operate, Transfer (DBFOT) Annuity basis. The LoA was issued by NHAI on May

13, 2010. As required by NHAI, CHEL was incorporated as an SPV of the Madhucon Group to

undertake the implementation of the Project. As per the LoA, the Concession Period is 15 years,

including 2.5 years of construction and 12.5 years of payment of annuity. On completion, the

project will receive an annuity of Rs 130.86 crore in semi-annual instalments of Rs 65.43 crore.

The total cost of the Project, estimated at Rs.812.50 Crore, is proposed to be funded through a

mix of Term Loans and Equity in the ratio of 72:28. Equity will consist of Rs 39.00 Crore of

equity capital and Rs 188.50 Crore of interest free unsecured loan from the Promoters. The equity

for the project would be contributed by MIL/MPL. MIL is proposing to raise Rs.400 Crore

through a private placement and another Rs 400 Crore from IPO. The other Project highlights are

as under:

The promoters of CHEL would be utilising its technical expertise and manpower for

implementing and operating the Project

The Project would set up through an fixed time fixed cost EPC contract, which would be

finalised by July, 2010.

Being an Annuity project, the revenue risk is minimal.

On an assessment of the project parameters, it is recommended that CHEL:–

Execute the necessary contracts with NHAI in a time bound manner

Take appropriate steps for receipt of necessary approvals for implementing the project.

Follow-up with NHAI to ensure timely right of way / acquisition of balance 20% land by

NHAI

Based on the appraisal exercise, it may be concluded that –

Considering the cash flows estimated for the project based on the assumptions, the Company

is expected to meet its debt serving obligations towards the project;

At the given assumptions, the overall financial, liquidity and profitability parameters of the

project are considered reasonable and satisfactory.



Subject to the above analysis and the impact of the various scenarios as envisaged, under the

sensitivity analysis, the capital expenditure program of CHEL for the project is viewed as

economically viable.

SBI Capital Markets Ltd.

June, 2010



13. ANNEXURE

Annexure 1: Letter of Award



Annexure 2 – Indicative Term Sheet 1. Project The Project involves four-laning of Chhapra-Hajipur section of NH-19 from

Km 143.200 to Km 207.200 in the state of Bihar under NHDP III on Design, Build, Finance, Operate and Transfer (DBFOT) Annuity basis under the Concession agreement with The National Highways Authority of India (NHAI) for a period of 15 years. The total length of the road involved in the Project is 65.014 kilometers.

2. Purpose Part financing the capital cost of the Project 3. Project

Sponsor(s) Madhucon Projects Limited and Madhucon Infra Limited

4. Borrower / Concessionaire

Chhapra Hajipur Expressways Limited (‘CHEL’ or “Borrower”)

5. Appointed Date

The date on which Financial Close is achieved or an earlier date that the Parties may by mutual consent determine, and shall be deemed to be the date of commencement of the Concession Period (assumed to be January 1, 2011).

6. SPCD Scheduled Project Commissioning Date shall be the 910th day from the Appointed Date and shall be the scheduled date for completion of the Project. The SPCD is assumed to be May 31, 2013 being the 29th month from the Appointed Date.

7. Commercial Operation Date (COD)

The COD shall be the date on which the Project receives the Completion Certificate or the Provisional Certificate from NHAI

8. Construction Period

Means the period beginning from the Appointed Date and ending on the COD

9. Notice to Proceed to EPC Contractor

January 01, 2011 (Appointed Date)

10. Financial Close The date on which all Conditions Precedent to the initial availability of funds under the Financing Documents are fulfilled.

11. Base Case Financial Plan

The Base Case Financial plan has been prepared by SBICAP and is available in the Information Memorandum.

12. Project Cost & Means of Finance

The Capital Cost for the Project is estimated to be Rs. 812.50 Crore ("Total Project Cost"). The Total Project Cost is proposed to be funded as provided below: Equity Capital from Sponsor(s) – Rs 39.00 Crore (A) Interest free unsecured loan from Sponsor(s) – Rs 188.50 Crore (B) ((A) and (B) shall together constitute the Equity for the Project Cost and for computation of financial ratios such as debt equity ratio, TOL / TNW, etc) Term Loan – Rs 585.00 Crore

13. Facility Term Loan aggregating to Rs. 585.00 Crore and capex LC of upto 75% of the Term Loan Facility as a sub-limit of RTL. The providers of the RTL would be referred to as Term Loan Lenders (“Lenders”).

14. Availability From the date of first disbursement till 6 months after SPCD or COD,



whichever is earlier15. Upfront Equity

/ interest free unsecured loans

20% of the Equity will be brought in upfront by the Project Sponsor(s) before disbursement of RTL.

16. Drawdown Schedules

Anticipated Drawdown Schedules for RTL will be provided by the Borrower and vetted by the Lenders’ Independent Engineer (LIE), at least 30 days before the first drawdown and thereafter at the beginning of each year. The actual drawdown amount will be communicated by the Borrower 30 days prior to the Debt drawdown dates.

17. Upfront Fee / Processing Fee

The Borrower shall pay a onetime up-front fee at the rate of 0.20% of the RTL amount, plus applicable service tax thereon, payable on or before the date of execution of the Financing Documents.

18. Commitment Fee

The Borrower shall pay a commitment fee of 1.20% for drawings not made beyond 90 days in variance with the draw down schedule. Quarterly Drawdown Schedules can be amended or replaced with thirty (30) days notice prior to the commencement of relevant quarter, without attracting any commitment fee. The fees will be calculated on the basis of drawings not made and the number of days deviated from the scheduled dates.

19. Reference Rate or State Bank Advance Rate

The Reference Rate shall be the State Bank Advance Rate which is at 11.75% p.a. at present.

20. Reset Date The first Reset Date shall be on COD and annually thereafter.

21. Interest Rate 175 bps below State Bank Advance Rate (SBAR), present effective rate of 10.00% p.a. (floating) payable monthly. The Lenders will have the option to reset the spread on the Reset Date.

The interest as above, shall be payable by the Borrower in arrears on the 1st of each month (each an Interest Payment Date). Such interest shall become payable from the first Interest Payment Date falling after the date of first disbursement.

The Borrower shall pay interest rate surcharge or any charge, levy or fee at such rate as may be levied or demanded from the Borrower or required to be levied, demanded or collected by the Lenders from the Borrower from time to time by Reserve Bank of India or any other authority pertaining to or in respect of the RTL. The Lenders reserve the right to realign or change the Applicable Interest Rate at appropriate time pursuant to introduction of base rate policy by RBI or any modification or replacement thereof.

22. Prepayment The Borrower shall have the right to prepay, in part or full, the outstanding RTL, which shall go towards prepayment of all the remaining installments in inverse order of maturity. In this event, the Borrower shall be liable to pay a pre-payment premium @ 1% of the pre-paid amount.

Notwithstanding the above, no pre-payment premium will be payable for prepayments under the following circumstances: • Prepayment of loan at the instance of Lenders with 30 days prior written

notice to the Lenders.



• Prepayment made within 60 days after the Interest Spread Reset Date with prior written notice to the Lenders.

• Prepayment of loan from securitization of future receivables, with 60 days prior notice. However, in case of raising loans / NCDs from securitization, existing Consortium shall have the first right to participate in such a Facility.

• Prepayment under cash sweep facility

23. Additional Interest

Additional interest of 1.00% p.a. will be charged from the date of first draw down till the creation of security, if the loan is disbursed pending creation of mortgage and security is not created within 3 months from the date of the first draw down.

24. Liquidated Damages

In the event of default in payment of interest and/or installments of principal amount on due dates, the Borrower shall pay additional interest @ 2% p.a. on the defaulted amount for the period of such default.

25. Moratorium and Repayment

The moratorium shall be for a period of 2 quarters from COD and the Term Loan will be repaid in 19 semi-annual installments commencing from March, 2014. The proposed repayment schedule for the RTL is as under: (in Rs Crore)

HY Beginning HY % HY Beginning HY % Annual Repayment

Sep-13 0.00% Mar-14 6.00% 35.10 Sep-14 3.00% Mar-15 4.00% 40.95 Sep-15 4.00% Mar-16 4.00% 46.80 Sep-16 4.00% Mar-17 4.50% 49.72 Sep-17 4.50% Mar-18 5.00% 55.57 Sep-18 5.25% Mar-19 5.50% 62.89 Sep-19 5.75% Mar-20 6.25% 70.20 Sep-20 6.50% Mar-21 6.50% 76.05 Sep-21 6.50% Mar-22 7.00% 78.97 Sep-22 7.00% Mar-23 4.75% 68.74 Total 46.50% 53.50% 585.00

26. Cash Sweep

Facility In case DSCR is equal to or more than 1.20 (calculated on a year on year basis), 40% of additional cash flow after meeting other normal obligations including repayment of stipulated installments, MMR requirements, etc will be swept for prepaying Term Loan, in the inverse order of repayment. Such repayment under the Cash Sweep facility shall not carry any prepayment charges.

27. Escrow Account

The Project Escrow Account will be maintained with the lead bank. All cash inflows (including those from the Project) shall be deposited in the Escrow Account and all proceeds to be utilized / applied in a manner and priority as stipulated by the Lenders, as per the Escrow Agreement.



28. Security Stipulations

The Security will be created in favour of the Security Trustee/ Agent, for the benefit of the Lenders. • A first charge on the Borrower’s bank accounts including, without

limitation, the Escrow Account and each of the other accounts required to be opened by the Borrower under any Project Document or Contract, together with the funds lying credited to these accounts (including the operating cashflow and annuity deposited therein) to the extent the funds are applied in the priority set out in the Escrow Agreement.

• A first mortgage and charge over all the Borrower’s properties and assets, both present and future, excluding the Project Assets (as defined in Concession Agreement);

• A first charge on all intangible assets of the Borrower including but not limited to the goodwill, undertaking and uncalled capital of the Borrower;

• Pledge of shares aggregating to 51% of the paid-up equity capital of the Borrower, Provided that any enforcement of the pledge over shares shall be subject to prior approval of NHAI as provided for in the Concession Agreement

• A first charge by way of assignment or creation of Security Interest on (i) all the rights, titles, interests, benefits, claims and demands

whatsoever of the Borrower under the Concession Agreement to the extent covered by and in accordance with the Substitution Agreement,

(ii) all the rights, titles, interest, benefits, of the Borrower in licenses, permits, approvals, consents

(iii) all the rights, titles, interests, benefits, claims and demands whatsoever of the Borrower in the insurance contracts/policies procured by the Borrower or procured by any of its contractors favoring the Borrower for the Project

(iv) all the rights, titles, interests, benefits, claims and demands whatsoever of the Borrower in any guarantees, liquidated damages, letter of credit or performance bond that may be provided by any counter-party under any Project Contract in favor of the Borrower.

(v) Assignment of rights, interest and obligations of the Concessionaire to or in favor of the Lender’s Representative as nominee and for the benefit of the Senior Lenders, to the extent covered in accordance with the Substitution Agreement as security for financing provided by Senior Lenders under the Financing Agreements.

I. Sponsor Undertakings • The Project Sponsor(s) shall furnish an Undertaking to cover the shortfall

in the repayment of Term Loan in the event of termination of the Concession Agreement due to Concessionaire event of default during the construction period.

• The Project Sponsor(s) shall furnish a shortfall undertaking (to bring in additional funds in a form & manner satisfactory to the Lenders) for cases of any cost overrun and /or gap in means of financing.

• The Project Sponsor(s) shall furnish an undertaking to complete the Project as envisaged in the Base Case Financial Plan. The undertaking



shall also be for making good any financial loss due to delays that are not approved by NHAI.

• Any additional equity infusion in to the Project shall also be subject to pledge of shares aggregating to 51% of such enhanced paid-up equity capital of the Borrower, provided that any enforcement of the pledge shall be subject to prior approval of NHAI as per the Concession Agreement.

• Any conversion of interest free unsecured loans brought in by Promoters / Sponsor(s)/ Others shall be subject to the security clause pertaining to Pledge of 51% of equity capital to Lenders. The Promoters to undertake to pledge such additional equity within 15 days of allotment of such additional shares.

Substitution Agreement: The Borrower shall enter into a Substitution Agreement with the Lenders. The Lenders’ Representative on behalf of Lenders may exercise the right to substitute the Concessionaire pursuant to such Agreement. Tripartite Agreement: The Borrower shall enter into a tripartite agreement to the lenders’ satisfaction with the Security Trustee and each party to the Project Documents confirming continuation of such party’s obligations under the relevant Project Document with the nominated company in case of substitution. The Term Loan Lenders and Working Capital Lenders will, to the extent permitted under the CA, and subject to any terms and conditions contained herein, share in the Security on a pari- passu basis amongst themselves.

29. Reserve Accounts

• Major Maintenance Reserve (MMR): An amount equivalent to the projected Major Maintenance expenses shall be built up from the Project cash flows as per the following profile:

(Rs.in. crore) FY ending Mar 31 2015 2016 2017 2018 2019 2020MMRA - - 2.90 14.62 11.87 - FY ending Mar 31 2021 2022 2023 2024 2025 2026

MMRA - 3.71 18.72 15.20 - -

30. Legal Expenses

Actual legal expenses incurred by the Lenders for documentation, filing of charges, etc to be borne by the borrower. The Company shall pay / reimburse all the expenses incurred/to be incurred by the Bank in respect of, creation of security, obtention of legal and or any other consultant (s) services.

31. Insurance The Borrower will arrange for comprehensive insurance policy (ies) to the satisfaction of the Lenders. The insurance contracts shall stipulate that the payment by the insurer under the insurance contract shall be paid or directed to be paid into the Escrow Account. For the purpose, services of Lender’s Insurance Advisor may be retained at the cost of the SPV in consultation with other Lenders.



32. Financial Covenants

A penalty of 1% p.a. shall be payable by the Borrower to the Lenders in case there is an adverse deviation of more than 10% from the levels agreed upon with the Lenders in respect of any one of the following:

i. TOL/TNW at 2.75 times ii. Interest Coverage Ratio at 1.75 times {(PBDIT – Tax / Interest)}

The measurement of deviation shall be once in a year with reference to the last annual audited statement of accounts. Such interest shall be charged for the period during which the deviation continues subject to a minimum of one year. In case of continuous default/decline in performance levels, the lenders may stipulate any other conditions as deemed necessary in consultation with the borrowers. No dividend shall be paid till the position is rectified to the satisfaction of lenders.

33. Management Control

The Sponsor shall undertake to maintain, during currency of loans, management control over CHEL which includes ability/right of the Sponsor to appoint majority of the Directors on the Board and to direct the management or policy decisions.

34. Pre-Documentation Conditions

Prior to documentation , the following to be complied with: a) Entered into the Concession Agreement with NHAI

b) The Borrower shall open a Escrow Account to the satisfaction of the Lenders through which all the project cash flows would flow

c) The Company shall appoint Lenders’ Legal Counsel (LLC) and any other consultant(s) as may be necessary as per scope of work to be decided by the Lenders. The cost of such consultant(s) shall be borne by the Borrower.

d) Provide Sponsor undertakings as mentioned under Clause 28 (I) of this Term Sheet.

35. Pre-disbursement Conditions

The following conditions must be met to the satisfaction of the Lenders for the first drawdown of the RTL: a) Certification by an independent chartered accountant that 20% of the

total Sponsor’s Equity /interest free unsecured loans Contribution has been brought in for the Project;

b) Entered into a Fixed Time – Fixed Cost contract with the EPC contractor for Project Implementation as per the milestones provided in the Concession Agreement, with adequate penalties / Liquidated Damages for delays. Such EPC contract to be reviewed by LIE/LLC and issues raised, if any, shall be resolved to the satisfaction of the Lenders. The EPC contracts would be examined by LLC & LIE, inter-alia, from the point of view of provision of liquidated damages.

c) Receipt by Lenders of satisfactory evidence that all material clearances, authorizations, permits, approvals and clearances as required for commencement of construction of the Project have been obtained by the Borrower;

d) Appointment of Lenders’ Independent Engineer ("LIE"), and Lenders’ Insurance Advisor ("LIA") in consultation with the Lenders and satisfactory resolution of all issues raised by them. The cost for the same will be borne by the Borrower, subject to any letters or agreements being issued or entered into in relation to such appointment



with the consent of the Borrower. e) Increase of authorized share capital, if necessary as per the means of

finance. f) The Concessionaire shall have obtained Right of Way of 80% of the

total area of the site from NHAI required and necessary for the Project g) Amendments to Project Contracts/Documents specified by the

Lenders, if any, shall have been carried out h) Execution of Substitution Agreement and Escrow Agreement. i) The Lenders shall have received from the Lenders’ Insurance Advisor a

certificate that all insurance coverage required under the terms and conditions of the Project Documents and as advised by the Lenders’ Insurance Advisor for the Construction Period have been obtained, are adequate and are in full force and effect.

j) The Borrower shall have satisfied the Lenders regarding fulfillment by all the contracted parties of all the conditions precedent to the Concession Agreement, the financing agreements and any other contract and agreement deemed essential for construction and operation of the Project.

k) Creation of Security as provided for in clause 28. Receipt of satisfactory report from the LLC on the same.

36. Conditions Precedent to all Disbursements

The following conditions must be met to the satisfaction of the Lenders for any drawdown of the RTL: 1. No Event of Default or Potential Event of Default shall have occurred

and be continuing; 2. The representations and warranties which are to be repeated are

correct in all material respects; 3. The Borrower has provided details of the Project cost to be financed

by the relevant drawdown periodically, and the LIE has certified that (i) the proposed drawdown is in accordance with the original implementation schedule approved by it and (ii) the physical progress of the Project and the cost incurred thereon till date are as originally envisaged.

4. The Lenders shall have received certificate from an independent chartered accountant certifying the contributions made to ensure that the debt:equity ratio is at the envisaged level.

5. Evidence that all Equity required to be contributed by the Sponsor (at the relevant time) into the Borrower has been contributed; and

6. All material permits, approvals and consents required by the Borrower at that point of time have been received and continue to be effective.



37. Other Conditions

a) The Company shall agree to modify its Memorandum of Association and Articles of Association, for enhancement of the authorized share capital and borrowing power as per the envisaged financing plan, if required, and incorporate any other changes if required by the Lenders.

b) All Project Agreements shall contain a provision as per clause 4.1 of the Substitution Agreement.

c) CHEL to undertake that the completion cost shall not exceed Rs 812.50 Crore.

d) The Borrower shall agree that the preliminary and pre-operative expenses shall be allowed as part of the project cost only to the extent that they are certified by the Statutory Auditor as relating to the proposed project and as accepted by Lenders.

e) The Borrower shall :

• Undertake to furnish to the Lenders such information and data as may be required by them or any agency appointed by the Lenders to ensure that the physical progress as well as expenditure incurred on the project are as per the schedule.

• Enter into an O&M contract from the COD till the end of the Concession Period.

• prepare a schedule for award of contracts matching with the implementation schedule for the Project (to be reviewed by LIE).

• obtain all statutory and non-statutory clearances required during implementation and for operation of the Project.

• Make suitable arrangements for project management during implementation and operation of the Project.

• Finalize the insurance package and submit the same for review by the Lenders Insurance Advisor/ Lenders and submit the certificate regarding adequacy of insurance.

• Agree that the Lenders reserve the right to appoint any independent /concurrent auditors for the review of the Project as deemed fit during the currency of the loan.

• Agree that its receivables shall not be escrowed to any party other than the Lenders.

• Agree that during the currency of the Facility accorded by the Lenders, any loans to the Project Sponsor from funds of the Borrower shall be made only after fulfillment of Restricted Payment Covenants.

• Agree that in the event of the Borrower committing default in the payment of principal and/or interest on due dates, the Lenders shall have an unqualified right to disclose the name of the Borrower and its directors to the Reserve Bank of India / Credit Information Bureau of India Ltd. The Borrower shall give its consent to the Lenders / RBI / CIBIL to publish its name and the name of its directors as defaulters in such manner and through such medium as the Lenders in their absolute discretion may think fit.

f) The Lenders will have the right to examine the books of accounts of the

Borrower and to have the Project Assets inspected from time to time by



officers of the Bank and /or outside consultants and the expenses incurred thereon will be borne by the Borrower.

g) The Borrower shall advise the Lenders' Agent of any changes, proposed in the share holding pattern and consent of the Lenders' Agent, which shall not be unreasonably withheld, shall be communicated to the Borrower.

h) The Borrower shall have agreed that the Lenders shall have the right to review the cost of the Project any time during the implementation of the Project and also before the final disbursements of the Facility.

i) The Borrower shall have agreed to maintain the MMR and shall have procured from the Project Sponsor the stipulated undertakings / guarantees / letter of comfort to the satisfaction of the Lenders.

j) Monies brought in by principal shareholders/directors for part funding the project shall not carry any interest thereon and will not be allowed to be withdrawn during the currency of the Facility.

k) The Borrower shall have agreed that the Lenders shall be entitled to appoint nominee director(s) on the Board of Directors of the Borrower during the currency of Facility in case of an Event of Default.

l) During the currency of the Facility, the Borrower shall not, without prior approval of the Lenders in writing:

• Effect any change in its capital structure; • Formulate any scheme of amalgamation or reconstruction; • Undertake any new project or expansion scheme, • Enter into borrowing arrangements (fund based or non fund based),

either secured or unsecured, with any other bank, financial institution, company or otherwise, except for those arranged as part of means of finance for the present Project;

• Undertake guarantee obligations on behalf of any other company. • The Borrower should not create, without prior written consent of the

Lenders, charges on any or all its properties or assets during the currency of the Facility.

m) The Borrower will keep the Lenders informed of the happening of any event likely to have a substantial effect on its revenues and profits along with the remedial steps proposed to be taken by the Borrower.

n) The Borrower shall get its credit facilities rated by an accredited credit rating agency in accordance to the Lenders requirement within 6 months of execution of the CLA.

o) Not make any amendments/modifications to or initiate termination proceedings or grant any waiver under any of the Project Agreements

p) Ensure that the equipment installed / proposed to be installed are adequate and appropriate to the pollution control requirements and that all conditions mentioned in the environmental clearances granted by the appropriate authorities are fulfilled.

q) Restricted payments will be permitted only when the following conditions are fulfilled: (‘Restricted Payments Covenants’):



i. No event of default or Potential event of default has occurred and

is continuing; ii. MMR is maintained to the required amount and iii. DSCR should not be less than 1.10 times for the immediate

previous year (for which Restricted Payments are proposed to be made)

Restricted Payments means all dividends, and other distributions of the Borrower (in cash, property or obligations) on, or other payments or distributions on account of the purchase, redemption, retirement or other acquisition of, any share capital of the Borrower or any warrants or options thereof or any payment by the Borrower of interest, principal or other sum in relation to any unsecured loan, Shareholders’ Loan etc.

38. Rights on Event of Default

The Lenders reserve the right to call up the loan upon the happening of any of the under noted or other events, considered likely to jeopardize the interests of the Lenders:

a) Delay in payment of any other amounts payable under the financing documents remaining unpaid for 60 days beyond the respective due date

b) event of default under Project Agreements; c) breach of other obligations or default in the performance or observance

of the financial covenants under Financing Documents; d) misrepresentation; e) cross-default to lenders; f) insolvency g) Execution or distress being enforced or levied against the whole or any

part of the Borrower’s property. h) The Borrower ceasing or threatening to cease to carry on its business. i) A receiver being appointed in respect of the whole or any part of the

property of the Borrower. j) The occurrence of any event or circumstance which is prejudicial to or

imperils or depreciates or is likely to prejudice, impair, imperil or depreciate the security given by the Borrower

k) revocation of consents; and environmental matters; l) breach of Shareholder/Sponsor Undertakings. m) The occurrence of any event or circumstance, which would or is likely

to prejudicially or adversely affect in any manner the capacity of the Borrower to repay the loan.



39. Miscellaneous The Borrower is required: a) to furnish to the Lenders every year three copies of audited/ printed

balance sheet and profit & loss account statements of the Borrower immediately on these being published/ signed by the auditors, along with the usual renewal particulars.

b) to submit to the Lenders a quarterly progress report on the implementation of the Project or whenever desired by the Lenders.

The Borrower shall also have to comply with customary covenants such as Representation & Warranties of the Borrower, Conditions Precedent to the effectiveness of the loan and conditions precedent to each disbursement, Affirmative Covenants by the Borrower, Negative Covenants, Additional Covenants, Information Covenants, Events of Default by the Borrower and the Consequences of Events of Default, RBI disclosure norms etc., as applicable

40. Environment related covenants

The Company shall, at all times during the currency of the assistance, comply with the environmental, health, safety and social (EHSS) requirements specified below:

1. Ensure compliance with provisions of all applicable legislation, and clearances issued there under, and maintenance of documents to be able to demonstrate compliance with the same.

2. Ensure compliance with all conditions stipulated in the State and Central environmental clearances obtained by the company for the project.

3. Provide the requisite information and provide access to lenders or a consultant appointed by lenders to carry out a periodic Environment & Social Monitoring and Review (ESMR) of the project.

4. Forward copies of any relevant Internal or consultant’s reports or annual/ other periodical reports on the environmental and social status and performance of the operations.

Ensure compliance with specified recommendations made by consultants as per ESMR.

Letter of Credit (one time) – Inland A Facility Letter of Credit (one time) –Inland (sub-limit of term loan facility)B Amount Rs 452.00 Crore C Purpose To be opened in favour of EPC Contractor for payment of bills and

receivables D Security As per security provided to term loan facility E Margin The company should have infused equity as required for release of term

loan, and as per stipulated debt equity ratio F Tenor Sight basis (As per RBI/Bank guidelines) G Type Inland H Charges 0.35% p.a. payable quarterly in advanceI Other terms

and conditions (i) It will be one time facility and will not be reinstated after payments of bills under LCs. (ii) The Bank will note lien on the term loan, to the extent of LC commitments. (iii) Other conditions will be same as for term loan.