Assets under management (AUM) of infrastructure investment trusts (InvITs) in the road sector are poised to surge Rs 3.2 lakh crore by end of 2025-26 from Rs 1.9 lakh crore in September this year, according to a report by Crisil Ratings.
“The existing InVITs already have an acquisition pipeline of Rs 55,000-60,000 crore of assets over the next one year. Additionally, monetisation of assets by the National Highways Authority of India and road developers is expected to add another Rs 50,000-55,000 crore to AUM. And two, new InvITs floated, with estimated AUM of Rs 20,000-25,000 crore,” Deputy Chief Ratings Officer, CRISIL Ratings Manish Gupta said.
The AUM growth will also bring diversification in terms of both geographies as well as concession type. Geographical diversification is an important characteristic of road InvITs as it enables them to tap into demand from a wide range of sources including diverse industries, urban conglomerates, tourist destinations and ports.
The expected asset addition will further diversify existing portfolios, thereby reducing volatility associated with local disruptions, particularly for toll assets, which currently account for over 85% of AUM of road InvITs, Crisil said.
The share of toll roads is expected to decline to 75% as road InvITs acquire hybrid annuity model (HAM) assets from engineering, procurement and construction (EPC) companies to further diversify their portfolios.
“Road EPC companies have completed many HAM assets over the last few fiscals, translating into an estimated value of monetizable assets at Rs 1.3 lakh crore. Moreover, this asset class has built a track record of generating stable and timely cash flows over the years. Addition of HAM assets can offer stability to InvIT cash flows as they are unaffected by traffic volatility and there are inherent inflation and interest-rate hedges in these assets,” Director, CRISIL Ratings Anand Kulkarni said.