Mojahedul Islam Nayyer and Thillai Rajan Annamalai
Public-private partnership (PPP) highway projects in India are undertaken at both state and national levels, such that differences exist in how the procuring authorities manage…
Abstract
Purpose
Public-private partnership (PPP) highway projects in India are undertaken at both state and national levels, such that differences exist in how the procuring authorities manage project risk during the development and construction phase under different institutional frameworks. This study assesses the performance implication of the different administrative positionings of the procuring authority.
Design/methodology/approach
A data set of 516 PPP highway projects implemented in India formed the basis of this study. Means comparison, ordinary least squares (OLS) regression and seemingly unrelated regression were used to assess the impact of procuring authority on schedule performance.
Findings
The findings suggest that the state and the national highway projects were no different in achieving financial closure. However, the administrative positioning of the procuring authorities had a significant impact on other schedule performance variables. The construction of the state highway projects started quickly after the financial closure compared to the national highway projects. Moreover, the state highway projects were not only planned to be implemented at a faster rate but they were actually implemented at a faster rate and had a lower time overrun.
Practical implications
Procuring authorities under the state governments, being closer to the project, are better placed to manage project risk than those under the national government.
Originality/value
The administrative distance of the procuring authority from the PPP project and its implication on performance has never been studied.
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Mojahedul Islam Nayyer, Mukkai R. Aravindan and Thillai Rajan Annamalai
Involvement of lenders for PPP highway projects in India starts after the bid award. The post-award development phase of Toll and Annuity PPPs differ significantly in terms of…
Abstract
Purpose
Involvement of lenders for PPP highway projects in India starts after the bid award. The post-award development phase of Toll and Annuity PPPs differ significantly in terms of potential risk assumed by lenders. This study aims to assess the impact of the transparency law on the post-award development phase of Toll and Annuity PPPs.
Design/methodology/approach
A unique dataset of 469 PPP highway projects implemented in India was used to conduct this empirical study. An OLS regression model was developed to assess the impact of the transparency law on the post-award development phase.
Findings
Enacting the transparency law increased the duration of the post-award development phase of Toll projects; however, its impact on Annuity projects was not significant. Moreover, Toll and Annuity projects with a longer post-award development phase had a shorter construction phase. The post-award development phase of the Toll projects was relatively more sensitive to technical, economic and location-specific variables than Annuity projects. Length of road stretch, duration of the concession period and individual income of end-users significantly impacted the duration of this phase of Toll projects.
Practical implications
Transparency law can improve risk mitigation of Toll projects during the post-award development phase.
Originality/value
The impact of transparency law on PPP projects has never been assessed. This study assesses its impact on the two forms of PPPs. It also highlights the determinants of this phase and how they differ for the two forms of PPPs.
Samhita Mangu, Thillai Rajan Annamalai and Akash Deep
The use of public–private partnership (PPP) approaches for developing infrastructure has been well recognized. The allocation of risk between public authority and private sector…
Abstract
Purpose
The use of public–private partnership (PPP) approaches for developing infrastructure has been well recognized. The allocation of risk between public authority and private sector differs among the different types of PPP projects. The objective of the paper is to analyze the factors that influence the type of PPP and the performance of different types of PPP contracts.
Design/methodology/approach
A unique data set of 202 national highway PPP projects from India, comprising 154 toll and 48 annuity projects formed the basis of the study.
Findings
There are significant differences between toll and annuity PPP projects. The former are longer, are implemented in better developed states but are also characterized by higher cost over-runs. The latter are characterized by higher debt–equity ratio.
Practical implications
Mitigating revenue risk can significantly enhance the debt capacity of the projects, thereby reducing the overall cost of capital. To make toll roads attractive for bidders, they have to be developed as longer stretches. Toll projects that are immediately ready for development at the time of award would reduce cost overruns of toll projects and sustain the interest of private developers.
Originality/value
Comparison of toll and annuity PPP road projects has never been done previously. The unique data set used in this study highlights the differences in characterization and performance for both the project types. The study provides evidence support to “intuition” and enables policymakers to choose the right form of PPP to realize their objectives.
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Thillai Rajan Annamalai and Smitha Hari
Developing countries are increasingly looking to private sector investment for infrastructure development. Successful development of private infrastructure projects, however…
Abstract
Purpose
Developing countries are increasingly looking to private sector investment for infrastructure development. Successful development of private infrastructure projects, however, depends on adequate availability of long-term debt to complement private sector equity. As domestic bond markets in many emerging countries are not very deep, availability of long-term debt funding for infrastructure has been limited. Recently, a new form of financial intermediation has emerged in India with the creation of infrastructure debt funds (IDFs) to create capital pools for long-term debt funding. This paper aims to analyse the effectiveness of IDFs for financing infrastructure projects.
Design/methodology/approach
This paper uses a case study approach. The case studies were written using both secondary and primary information. Secondary information was obtained from various sources such as policy papers, websites and other published sources. Primary information was obtained from interviews with the top management of three IDFs. Information obtained from multiple sources was triangulated for consistency and correctness.
Findings
IDFs have emerged as an effective intermediation mechanism for attracting long-term capital by offering a new investment product with appropriate risk-adjusted returns. For the fund seekers, IDFs are able to provide long-term capital at lower rates and higher flexibility. Unlike commercial banks, IDFs are able to add value to the projects apart from funding by periodic monitoring of the projects.
Practical implications
Creating new forms of financial intermediation can help in reducing the financing gap for infrastructure projects, especially in emerging countries.
Originality/value
IDFs have been analysed from a perspective of financial intermediation. The effectiveness of IDFs in bridging the funding shortfall has been evaluated from multiple perspectives.
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Thillai Rajan Annamalai, Bharat Bansal and Josephine Gemson
The purpose of this paper is to understand the trends and contribution of private equity (PE) investors in real estate development in India because the real estate sector in India…
Abstract
Purpose
The purpose of this paper is to understand the trends and contribution of private equity (PE) investors in real estate development in India because the real estate sector in India had witnessed significant investments from PE firms in recent years.
Design/methodology/approach
The study focused on residential segment of real estate development, as it is the largest among all the segments. Two types of analyses have been done in this paper: first was to compare residential projects with PE investment with those that did not have any PE investment. The results were based on an analysis of 453 residential projects. The second was an analysis of only those projects that had PE investment. This paper studied if there were differences in investment patterns between domestic and foreign PE investors, and dedicated and diversified PE investors.
Findings
Projects with PE investment were larger, as compared to projects that did not have any PE investment. The results of this paper also showed that PE firms preferred to invest with developers who had significant experience in undertaking larger-sized projects. PE investments significantly happened in projects that were located in metro cities. While PE firms as a whole preferred to invest in project mode, domestic investors were more inclined to invest in a project structure as compared to foreign PE firms. Though foreign PE firms invested more amounts per deal on average, there was a negative relationship between foreign PE firms and the extent of their shareholding in the investment.
Practical implications
Encouraging PE investment in real estate projects would contribute toward to increasing the transparency in the sector. Strengthening the domestic PE industry would increase investment flow for real estate projects. PE investors who are able to add value to their investments are able to obtain higher shareholding.
Originality/value
Empirical research on Indian real estate industry is scarce because of the lack of transparency and availability of reliable data. This is one of the initial studies on the Indian real estate sector based on a robust dataset.
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Thillai Rajan Annamalai and Ashish Deshmukh
The venture capital and private equity (VCPE) industry in India has grown significantly in recent years. During five‐year period 2004‐2008, the industry growth rate in India was…
Abstract
Purpose
The venture capital and private equity (VCPE) industry in India has grown significantly in recent years. During five‐year period 2004‐2008, the industry growth rate in India was the fastest globally and it rose to occupy the number three slot worldwide in terms of quantum of investments. However, academic research on the Indian VCPE industry has been limited. This paper seeks to fill the gap in research on the recent trends in the Indian VCPE industry.
Design/methodology/approach
Studies on the VCPE transactions have traditionally focused on one of the components of the investment lifecycle, i.e. investments, monitoring, or exit. This study is based on analyzing the investment life cycle in its entirety, from the time of investment by the VCPE fund till the time of exit. The analysis was based on a total of 1,912 VCPE transactions involving 1,503 firms during the years 2004‐2008.
Findings
Most VCPE investments were in late stage financing and took place many years after the incorporation of the investee firm. The industry was also characterized by the short duration of the investments. The type of exit was well predicted by the type of industry, financing stage, region of investment, and type of VCPE fund.
Originality/value
This paper highlights some of the key areas to ensure sustainable growth of the industry. Early stage funding opportunities should be increased to ensure that there is a strong pipeline of investment opportunities for late stage investors. VCPE investments should be seen as long‐term investments and not as “quick flips”. To achieve this, it is important to have a strong domestic VCPE industry which can stay invested in the portfolio company for a longer term.
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Thillai Rajan Annamalai and Nikhil Jain
Privately financed infrastructure projects commonly use a project finance structure. Project finance is expected to facilitate investment flow in risky environments. The objective…
Abstract
Purpose
Privately financed infrastructure projects commonly use a project finance structure. Project finance is expected to facilitate investment flow in risky environments. The objective of this paper examines the link between the use of project finance and investments in risky environments.
Design/methodology/approach
Project Finance International database has been used as the data source for this study. 3,372 transactions from power, oil and gas, transportation, telecommunication, and water supply sectors have been considered means analysis and multi-variate regression models have been used in the analysis.
Findings
The average project cost in a developing country was higher than that of developed countries. Gearing ratio, however, was higher in the developed countries. This indicated that the projects had a lower level of inherent risk, which enabled them to get funded at high gearing levels. The proportion of foreign banks in the syndicate was higher in the developing countries, which indicated that the use of project finance has helped to attract investment from foreign investors.
Practical implications
Practitioners and project development companies in the developing countries should actively consider using project financing technique for achieving financial closure of large infrastructure projects. Simultaneously, policy makers should create appropriate supporting institutional framework (regulatory, legal, contractual arrangements) that supports the use of project finance.
Originality/value
As far as the authors know, this study uses a dataset that has not been used in the previous studies. The results of this paper strengthen the understanding of project financing.
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Boeing Laishram, Ganesh Devkar, Yongjian Ke and Ahmed Abdel Aziz