31 May 2013
Vinci Concessions India, the €200-million-turnover Indian arm of the French global giant, aims to expand by entering a sector other companies have been exiting – roads.
This week it told LiveMint.com that it is negotiating with at least one infrastructure firm to acquire its road build-operate-transfer (BOT) concession.
Vinci thinks it can make India’s troubled BOT road projects work, where others have got their fingers burned.
Indian infrastructure developers GMR Infrastructure and GVK Power and Infrastructure are among those that have walked out of their agreements with National Highways Authority of India (NHAI).
At the start of India’s ambitious road-building program, infrastructure companies fought for the BOT concessions, often paying high premiums for them.
But these contracts became burdensome as India’s economy slowed. Road-builders found it hard to get financing as the banks became reluctant to lend, while red tape and disputes over land transfers delayed construction, pushing back the point where the builders might start seeing returns on their investment.
As a result, the NHAI awarded contracts for only around 1,000km of new roads last fiscal year, falling far short of its target to build 9,500km.
But Vinci thinks it can thrive in an environment others have found so difficult.
Traffic jam on road to Rohtang Pass. India’s inadequate road network is holding back growth, while bureaucracy and a finance crunch are holding back construction plans. (Credit: Wikimedia Commons)
"There is nothing wrong with the projects," Vinci’s senior manager for international projects, Thomas Bigueure, told LiveMint. "We have the appetite. Maybe they bid too high. The kind of aggressive bidding that happened is not sustainable. It is a good opportunity to find the right projects."
Vinci Construction Grands Projets entered India in 2010 when it teamed up with Hindustan Construction Co. (HCC), which has built over half of India’s installed nuclear capacity. Â
The pair have been bidding for Indian highway projects, but so far unsuccessfully.
However, their hopes are high.
"We are getting there with our last bid falling short by 10% of the winning bid," Bigueure told LiveMint.
Ten years ago, Goldman Sachs forecast that India would become the third largest economy by 2050.
India has recognised the need for much better transport infrastructure to secure the economic growth necessary to sustain its growing population, and despite project bottlenecks and financial and regulatory hurdles, Vinci clearly wants a piece of the action.
With global revenues of over €38bn, the French construction and concession firm operates 5,500km of roads in France and employs over 160,000 people in about 100 countries.
It also plans to bid for the Goa airport project.