Something nice about NICE road
How to earn INR 11,260 per minute ?
Build and operate a toll road asset
Ashok Kheny, second of five siblings of a wealthy family in Bidar, studied and settled in the United States of America. He had visited Bangalore and travelled to Mysore along with his mother. During this travel to Mysore with his mother, the idea of building the road was born.
The state highway linking Bangalore and Mysore was in bad shape and back in Bangalore he complained about the state of the road at a dinner where there were government officials present. They told him that it was common among people who had gone abroad to complain about the infrastructure back home and was questioned “Why don’t you do something about it?"
Two years later, having wound up his businesses in the USA, Kheny was back in India with an ambitious plan for the expressway, link roads and industrial development. This ambitious plan of Kheny was executed with a large amount of politics, bad mouthing and frequent trips to various courts.
The construction and completion of the road faced many objections from Politicians, Social and Environmental activists, land holders among others. The matter became worse when Kheny had to lock horns with the ex-prime minister of India. It is believed that Kheny has fought an odd 550 litigation cases which tried putting brakes to his plans.
NICE road being a toll road asset, created under Build, Own, Operate and Transfer model will be transferred to Government of Karnataka (GoK) at the end of the concession period. There are voices shouting to speed up the transfer of the asset to GoK.
Kheny is either a saint or the devil depending on who you ask. The people who are using the NICE road for their daily commute and people with jobs manning the toll booths have only good things to say whereas the ones who had to part away with their land have only bad things to say.
Babasaheb Kalyani, who currently heads the Kalyani Group which has interests in metal working, steel and auto component making, is first cousin of Kheny. Babasaheb Kalyani supported the project and the Kalyani group through BF Utilities, hold 72.52% shareholding in NICE Ltd.
Many executives of Multinational Companies attended the inaugural of Bangalore leg of the project as it would help a lot of companies - including Infosys, HCL, Biocon - that had their offices in Electronic City on Bangalore’s outskirts. The support for the road was very high among the public and had the ability to make a difference to people who used the Bannergatta – Hosur road for daily commute.
The income from toll collections is recognised on the basis of actual collection as and when vehicle crosses toll plaza. There is no problem of bad-debts being incurred because there is no credit system and the cash is received at the same time.
In the consolidated financial statements for the year FY 2022-23, the revenue from toll operations stood at staggering INR 5,91,83,30,000. If we consider the road was open for throughout the year i.e. 365 days, then the revenue on a per day basis would be INR 1,62,14,603. [ 5,91,83,30,000 / 365 ]
Warren Buffet once said,” In an inflationary world a toll bridge would be a great thing to own if it was unregulated because you have laid out the capital costs, you build the bridge in old dollars, and when there is inflation, you don’t have to keep replacing it – a bridge you only build once.”
I think Kheny would have read this quote of Warren Buffet and during June 2023, the toll rates were hiked by 10% in order to combat inflation. Hence, revenue for the FY 2023-24 would definitely be more than FY 2022-23.
In a year comprising of 365 days, there are 5,25,600 minutes. Considering the revenue from toll operations of INR 591.83 Core during the FY 2023-24, this would work out to revenue of INR 11,260 per minute. [ 5,91,83,30,000 / 5,25,600 ].
Collecting toll from roads are objected worldwide but the revenue form toll collections are necessary to fund the maintenance of the same roads. When a road is well maintained, the rate of accidents decreases, travel time decreases and also enhances the vehicle’s performance.
NICE Road is one of the roads in Bangalore which is well maintained and daily commuters don't object to access the road by paying the toll. In the hustle culture of Bangalore where time is valued more than money, it has becomes a default route to commuters whose offices and business are located near Electronic City.
The fact that NICE Road is able to fork in such huge revenue proves the fact that the road indeed is beneficial for the residents and it was not a project which was implemented to swallow up premium real estate.
When Ashok Kheny was asked to explain why somebody who came from wealth would want to be involved in a protracted fight with politicians and farmers, he replied: “If I decide to do it, I have to do it." This stubborn mindset of his, has allowed Bangaloreians to travel with a swag.
Reference
Page No – 185 of the Annual Report of BF Utilities Ltd for the FY 2022-23
Happy Reading !
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