Exited NHAI contract after more than 200 days wait: GMR

GMR Infrastructure has terminated its contract with National Highways Authority of India (NHAI) for building the Kishangarh-Udaipur-Ahmedabad highway.

Arun Bhagat, EVP and Group Head - Corporate Communications, GMR Group told CNBC-TV18, this decision is well thought of and the company waited for more than 200 days before exiting it. As mentioned in the NHAI contact, GMR was supposed to get environmental clearance for this project within a year, he added.

Its subsidiary GMR Kishangarh-Udaipur-Ahmedabad Expressway won this project in September, 2011. It had entered an agreement with NHAI for six laning of this highway.

This is GMR's second exit from a project after it was forced to leave the Male Airport modernisation on opposition from the ruling party in Maldives late last year.

Meanwhile, CNBC-TV18 learns from sources that NHAI will be moving the Supreme Court against the Environment Ministry this week for delayed clearances, which resulted in both GMR Infra and GVK pulling out of projects.

At 13:38 hrs GMR Infrastructure was quoting at Rs 20.15, down Rs 0.40, or 1.95%.

Below is a verbatim transcript of the interview:

Q: Can you first confirm whether indeed the GMR subsidiary has gone ahead and terminated the concession agreement regarding the Udaipur-Ahmedabad Expressway project?

A: That is right. If you want me to say yes, it is confirmed.

Q: What are the reasons for the termination?

A: The reasons are pretty much the same as we had indicated in our letter of intent (LoI). There were certain environment clearances, which were pending. Some bit of land acquisition, which was still to happen and some of the conditions precedent that NHAI was supposed to do had not been done.

Q: What were those?

A: For example, the notification of the toll. We waited for more than 200-250 days on an average and then took the decision.

Q: What is the starting point that you are counting this 250 days from, which day in 2011?

A: From September when we finally got the project on our plate.

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Q: When you sign such a contract, is it in the contract itself that you will get the clearances by a certain date?

A: It is normally in the contract itself and so it was. Therefore we started doing our part of the deal, which is we will get the financial close done. Normally, all these things have to be in place before financial close. We did give a bit of a leeway on that and waited long enough for NHAI to get the clearances.

Q: What did the contract say, how many days they were supposed to take for environmental clearance?

A: It was to be completed within a year. However, it is 16 months now.

Q: Can NHAI re-tender this order now that it has been terminated from your end?

A: I would not be able to comment on that.

Q: Do you face any financial reversals, have you to forfeit anything now that you have walked out of the contract?

A: No. We do not foresee that happening at all. That is the reason that the honourable High Court was pleased to grant a stay on the encashment of the performance guarantees. In fact, if at all, we are the losers because we had mobilised more than 300 people, opened up offices and spent a fair bit of money.

Q: What were the expenses that you had already incurred?

A: As I said, 300 people were ready. We had opened our offices. So, we would want to recover those mobilisation expenses, which were there.

Q: Are there any legal implications that GMR Group would have? We understand that NHAI might move to the Supreme Court (SC) against the Environment Ministry this week itself? Anything that you are hearing on that account?

A: Nothing more than what I have seen on the channels since today morning. There have been comments in the press about this impasse. People are noticing it now because more than one developer is affected.

Q: What is this performance guarantee issue that you were talking about? Who was wanting to encash the performance guarantee?

A: Normally, there is 6 percent of the total value. In our case, it is about Rs 270 odd crore that if we default, contractually NHAI can encash. So still the default is not on our part. I do not foresee that happening.

Q: Did you draw any money from any of your bankers?

A: Not yet. We had sort of mustered all the money from our side i.e. all the equity that was required in phase I. Also we have achieved the financial close for a Rs 7,700 crore project in rather difficult circumstances.

Q: Are there any other projects for which you are awaiting from NHAI similar clearances?

A: No.