The Coimbatore Bypass Road Project


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Case Details:

Case Code : FINC010
Case Length : 5 Pages
Period : 1997-2001
Pub. Date : 2002
Teaching Note : Available
Organization : L&T
Industry : Construction - Building Materials & Equipment, Financial Services
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Financing of the Project

In the 1970s, the Tamilnadu government planned the Coimbatore bypass road to ease the traffic congestion in Coimbatore and the NH-47 between Salem and Cochin.

However, due to paucity of funds, the project had to be dropped. In 1995, the Government of India (GoI) liberalized its policies and opened up the road sector for private investments. In September 1995, the GoI through its Ministry of Surface Transport (MoST)5 invited tenders from the private sector to finance and implement the construction, operation and maintenance of the Coimbatore bypass road project on BOT (build, operate and transfer) scheme.

As the project was not viable on its own, the GoI after studying the various options, widened the scope by including the construction of an additional two-lane bridge on river Noyal on the NH-47.

A concession agreement for the integrated project of bypass and a bridge at Athupalam on NH-47 was signed on October 3, 1997 between the MoST, the government of Tamilnadu and L&T.

L&T set up a special purpose vehicle (SPV) - L&T Transportation Infrastructure Ltd. (LTTIL), to implement the project. L&T held 100% equity in LTTIL. LTTIL implemented the project on BOT basis, with the revenue accruing directly to it. The project was constructed by L&T-ECC (Engineering Construction Corporation) group, the largest construction organization in India. L&T-Ramboll Consulting Engineers, a joint venture between L&T and Ramboll of Denmark, was employed for quality control supervision and review of the critical pavement design. The project was financed by share capital of Rs 416 mn and term loan of Rs 620 mn, with a debt-equity ratio of 1.5:1...

Excerpts >>

5] MoST decides the policies regarding the transportation sector, while National Highways Authority of India (NHAI) implements these policies.

 

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