Road Asset Monetisation: NHAI Set To Launch Its First InvIT On Friday, Aims To Raise Rs 8,000 Crore

In a big push to government's long-term plan to monetise road assets, the National Highways Authority of India will launch its first Infrastructure Investment Trust (InvIT) on Friday (29 October), reports Economic Times.

The NHAI has submitted the offer documents with the National Stock Exchange (NSE) for the InvIT and aims to raise up to Rs 8,000 crore through it.

According to the offer documents, the issue will be opened on 29 October and closed on 2 November.

Further, the road assets that will be brought under the InvIT has an enterprise value of Rs 8,000 crore, where debt will be Rs 2,000 crore.

The NHAI InvIT will hold five toll road assets of 390 km with an estimated revenue of Rs 500 crore in financial year 2021-22. These road assets are spread across Rajasthan, Gujarat, Telangana and Karnataka.

NHAI’s InvIT, which was originally scheduled for launch in May 2020, had to be temporarily shelved due to after a nationwide lockdown announced in March 2020. The decision to defer the InvIT was due to impact of pandemic related restrictions on road traffic movement and toll collection.

The Union government had approved the proposal of the Ministry of Road Transport and Highways authorising the NHAI to set up InvIT in Dec 2019 to enable monetisation of completed national highways with toll collection record of at least one year.

The frontline investors that are likely to invest into the NHAI InvIT include three top Canadian pension funds and leading Indian insurers such as LIC and HDFC Life.

According to the report, the other likely investors in the InvIT are Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers' Pension Plan (OTTP), besides India’s ICICI Prudential Life Insurance.

Further, the NHAI also plans to expand the size of the its proposed InvIT and is likely to raise as much as Rs 15,000 crore in two rounds.

The NHAI InviT will be the second Infrastructure Investment Trust floated by a public sector company after PowerGrid Corporation of India (PGC) raised about Rs 3,480 crore in April.

InVITs are instruments on the lines of mutual funds, intended to pool small sums of money from various investors, which assures cash flow over a period of time. InvITs are instruments similiar to mutual funds and are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time.

Besides, the infrastructure funds also aims to attract “patient capital to the Indian highway market” as these investors are averse to construction risk and interested in investment in assets that provide long-term stable returns.

NHAI currently addresses its funding requirement through ToT (toll-operate-transfer, partnering NIIF (National Investment and Infrastructure Fund), issuance of bonds to LIC and central budgetary allocations.

Through the InvIT route, NHAI hopes to find another funding route by mobilizing additional resources through capital markets to monetize its completed and operational National Highways projects. NHAI is expected to monetise projects that have a toll collection track record of atleast one year or were NHAI reserves the right to levy toll on the identified highway.

By monetising existing road infrastructure through InvIT route, NHAI can channelise new investments to greenfields projects like BharatmalaPariyojana, the flagship highway development programme of Government of India, that aims to develop 24,800 km of roads for a total investment of Rs. 5,35,000 crore.

InvIT is expected to help NHAI attract patient capital (for say 20-30 years) to the Indian highway market given that investors are averse to construction risk and are interested in investment in assets which provide long-term stable returns.

InvIT could also be attractive to foreign investors especially pension funds, sovereign wealth funds and insurance companies. Regulatory framework build around InvITs offers corporate governance, stable long-term returns because of mandatory distribution rules, lower risks, high quality assets and tax benefits on income distributions.

The Union government’s ambitious ₹100 lakh crores National Infrastructure Pipeline (NIP), which distils the sectoral investment plans and outlines a specific mission to achieve through this investment in the next five years, jas earmarked 19 per cent of the investments or over ₹19 lakh crores was earmarked to be channelised to road sector.

Also Read: Delayed By Pandemic, NHAI’s Maiden Rs 5,100 Crore InvIT Finally Set For Launch In September