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

The much-delayed Infrastructure Investment Trust (InVIT) plan floated by the National Highway Authority of India (NHAI) is likely to hit the markets in September, The Financial Express reported.

NHAI plans to mop up a total of Rs 5,100 crore though the InvIT.

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.

In April 2021, NHAI finally filed draft papers with market regulator agency SEBI, for floating an InVIT to raise Rs. 5,100 crore through fresh issue. In June, SEBI approved the InvIT proposal.

NHAI’s InvIT follows the successful launch of Rs 7,700 crore InvIT by India’s largest power transmission company, state-owned Power Grid Corporation of India (PGCIL) on April 29.

While PowerGrid is planning an IPO of its InvIT, NHAI’s InvIT is likely to opt for a private placement route.

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.

NIP sets a target to add 50 per cent total length to the existing National Highways, with 12x more Expressways constructed. Given that the Bharatmala project has already identified some ambitious projects, the target looks attainable.