Patel Engineering loses deposit on NHAI bid; no ban

The National Highways Authority of India (NHAI) has forfeited Patel Engineering's security deposit of about Rs 13 crore after the construction firm withdrew from a project citing an error in its own estimation, a top official said on Monday.

However, NHAI has not blacklisted the Mumbai-based firm from bidding for new highway projects, Managing Director Rupen Patel told Reuters in an interview, which send its shares up by over 3% on BSE. He was responding to earlier media reports that said the company was banned by NHAI for five years for reneging on the contract. "After the bids were opened, we realised that the difference was very large... we realised that we had underestimated. Now, we went across to the client and said there has been an error on our part, and we would not like to accept the LoI (Letter of Intent)..." On Jan 10, Patel Engineering had bid for widening of 11-km-stretch on National Highway-6 between Dhankuni and Kharagpur in West Bengal. The contract has a provision to not accept the LoI, Patel said adding the company has bid for two other NHAI projects. On Friday, the firm had informed BSE that it had requested NHAI to withdraw its bid, following which the bid was reopened. NHAI officials were not immediately available for comment. The firm has bid for two more NHAI projects, he said. Patel also said he expects to emerge as the lowest bidder in a couple of projects, but did not elaborate. There were also reports that the firm might face increased income tax liability. Patel said the liability is legally contested by the firm, and might be concluded in two-three years. "There might be a tax liability at some point of time... it might be close to Rs 60 crore, may be much lower," he said. "It (the liability) will not come in this year or next year, as it will go to litigation." Order book growth Patel Engineering's order book postion by the end of this fiscal would be about Rs 10,000 crore, which was below the company's expectations, he said. "That has been same through out the industry," he said, adding the order book growth would be much higher in FY12. The company's Teesta and Parbati hydroelectric projects were hit by floods, which is a "one-time hit" and the company expects to recuperate by the end of the year, he said. Patel Engineering, which had tied up with privately-held Turkish firm Limak Yatirim in August, will jointly bid for NHAI projects in the country. The companies will also bid for hydropower projects worldwide, he said. Shares of Patel Engineering pared the gains and provisionally closed 2.06% up at Rs 141.00 in a Mumbai market that ended up 1.55%.