Sadbhav Infrastructure Projects is a road developer that builds highways for the Indian government and gets paid either by collecting tolls or through fixed, government-backed annuity cheques - a model that turns multi-year construction projects into long-duration payment streams. It was created in 2007 as a subsidiary of the engineering firm Sadbhav Engineering Limited to bid for these public-private road concessions, and it operates each project inside its own ring-fenced Special Purpose Vehicle, or SPV. The recurring approach is to win a concession, construct the road, operate it for two decades or more, and then either sell the mature asset to a trust or a buyer to release capital for the next project - a build, operate and monetise cycle. # Business segments Two engines at different stages - a portfolio of toll-road concessions that generate cash from traffic, and a younger set of hybrid-annuity projects where the government shares the cost and pays a fixed return - both run with the same in-house maintenance capability. ## 1. Build-Operate-Transfer toll roads: the original cash engine **These are long-term road concessions where the company finances and builds the highway, then earns its return by collecting tolls from vehicles for up to 25 years before handing the asset back to the government.** - **Paid by the passing vehicle** - revenue comes from toll collection and user fees at plazas along the road, with toll rates adjusted periodically in line with the Wholesale Price Index as written into the concession agreement. - **The moat is financial heft** - the BOT segment demands higher competencies including financial strength to fund construction upfront, which creates entry barriers and limits the number of competitors who can bid. - **A portfolio reshaped by exits** - the company once held nine operational toll roads, but in FY20 it sold eight of them to IndInfravit Trust, an infrastructure investment trust, receiving a mix of cash and units in the trust while staying on as a project manager. It later sold most of those trust units to a Canadian pension fund affiliate for INR 441 Crores, retaining only a 3% stake. - **Force majeure broke two concessions** - two Haryana toll roads, Rohtak-Panipat and Rohtak-Hissar, had to terminate their concession agreements after farmers’ protests forcibly suspended toll collection from December 2020, and the subsidiaries have lodged claims against the highways authority for termination payments and compensation. ## 2. Hybrid Annuity Model projects: the government-backed growth engine **In these newer contracts, the government pays 40% of the project cost during construction and the developer receives fixed, predictable annuity payments over the concession period - a structure that reduces both the upfront financial burden and the traffic risk.** - **The government shares the bill** - NHAI contributes a portion of the project cost, so the developer puts in less equity and debt than in a pure toll-road concession, creating what the company calls a balanced risk-reward ratio. - **Annuity, not traffic, drives revenue** - once a stretch of road is certified complete, the company becomes entitled to receive fixed annuity payments from NHAI regardless of how many vehicles use it, along with separate operations and maintenance payments. - **Built fast, monetised selectively** - the company assembled a portfolio of nine HAM projects, and by August 2021 three had achieved provisional completion and begun generating annuity income, including a six-lane bypass in Udaipur and a four-lane section in Uttar Pradesh. - **Sold, not just held** - two completed HAM subsidiaries, one in Bhavnagar and one in Una, were sold to Kalthia Group at an aggregate consideration of INR 1750 million, demonstrating the same build-and-monetise discipline applied to the BOT portfolio. - **Some hit trouble** - lenders have exercised their right to substitute the concessionaire on a few HAM projects, and one subsidiary’s auditor flagged concerns about its ability to continue as a going concern after its net worth was fully eroded. # Operations and maintenance capability **The company runs its own maintenance, tolling and project-management teams in-house rather than outsourcing - a capability that serves every concession and also generates fee income from third-party assets.** - **Kept in-house by design** - most critical work during the operating period is done by the company’s own technical teams, with only a minimal portion sub-contracted, and a dedicated workshop team handles equipment repairs and maintenance. - **Audited for leakage** - toll management and collection systems are subjected to regular third-party audits to identify gaps and improve operational performance, so cash collection is systematically checked. - **Paid to manage assets it no longer owns** - after selling eight roads to IndInfravit Trust, SIPL continued as one of the project managers for the trust, earning fees for operating assets it had built and then sold. - **Local supply chains** - sand and aggregates are bought from nearby sources to cut transport costs, and local contractors are engaged for site services like housekeeping and security, with local youth hired for toll-plaza roles. # Group structure and partners **SIPL is a separately listed subsidiary of Sadbhav Engineering Limited, which owns roughly 70% of its shares, and it conducts every road project inside a dedicated SPV - a structure that isolates each concession’s debt and makes individual assets saleable.** - **A parent that builds what SIPL bids** - Sadbhav Engineering Limited is a listed EPC contractor in roads and other infrastructure, and it provides construction services to the SPVs that SIPL controls, along with corporate guarantees that back SIPL’s listed debentures. - **The merger that never happened** - a scheme to amalgamate SIPL into its parent was approved by the SIPL board in October 2019 and by shareholders in early 2021, but after the NCLT application stalled, the board withdrew the scheme in October 2022, leaving SIPL as an independent listed entity. - **Each road is a company** - the business is structured through wholly-owned subsidiary SPVs, each holding a single concession agreement with NHAI or a state authority, so lenders have recourse only to that project’s cash flows and assets. - **Debt funded by global investors** - in 2021 the company raised ₹700 crores through a debenture trust deed from investors led by Allianz Global Investors and AMP Capital, with repayment linked to the monetisation of its SPV portfolio over a four-to-five-year window.