Asset monetisation: NHAI’s first InvIT in April, aims to mop up Rs 6,000 crore

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Published: February 11, 2020 12:09:16 PM

In the Budget for 2020-21, NHAI has been given budgetary support of Rs 42,500 crore, down from Rs 36,391 crore (revised estimate) for 2019-20.

NHAI has a mandate to develop 34,800 km (including 10,000-km residual NHDP stretches) highway projects.

The National Highways Authority of India (NHAI) will likely launch its first Infrastructure Investment Trust (InvIT) by early 2020-21, with a plan to mop up Rs 6,000 crore via this route. The authority, which has the huge task of accelerating the pace of highway construction while private investments in the sector continue to be at a low ebb, is of the view that InvITs, along with the reasonably successful toll operate transfer (TOT) model, will enable it to monetise its operational assets in a big way to find non-debt resources.

“We are targeting to launch the first InvIT by the end of April. We are yet to decide on how many assets will be vested with the trust. However, the initial target is to raise around Rs 5,000-6,000 crore. We will keep on adding assets,” an official source said.

The Cabinet had in December authorised NHAI to launch InvITs to enable it to monetise national highways that have a toll collection track record of at least one year. The proposed trust may hold assets either directly or through an SPV.

Rating agency Icra’s assistant vice-president Abhishek Gupta said that given the critical role being played by NHAI in the infrastructure sector, its plan to use the InvIT route would be a positive for its cash flows as well as the road sector as a whole. Further, InvIT can provide a ready platform for future monetisation of road projects, he added.

The launch of InvIT by NHAI is also expected to prompt retail investors and institutions such as mutual funds and PFRDA to invest in the sector. NHAI’s debt-servicing ability will improve as a result.  Essentially, InvITs, akin to mutual funds, will help mobilise funds from various classes of investors, who seek to stay invested for relatively long periods and expect dividend income during the investment period.

NHAI has a mandate to develop 34,800 km (including 10,000-km residual NHDP stretches) highway projects under the first phase of Bharatmala Pariyojana, with an estimated outlay of `5.35 lakh crore. A total of 255 road projects with an aggregate length of about 10,699 km have been approved till October 2019 under the phase with estimated total cost of Rs 2.65 lakh crore.

NHAI also needs additional funds as it is increasingly awarding projects though the engineering, procurement and construction (EPC) route, where it is to bear all the expenses. It is in dire need of funds to finance its burgeoning debt which reached at Rs 1.8 lakh crore by the end of March 2019. Analysts estimate NHAI’s borrowings to go up to Rs 3.31 lakh crore by FY23.

In the Budget for 2020-21, NHAI has been given budgetary support of Rs 42,500 crore, down from Rs 36,391 crore (revised estimate) for 2019-20. It has also been granted the nod to raise Rs 65,000 crore from the market, down from Rs 75,000 crore in 2019-20. Asset monetisation, which has been pegged at Rs 10,250 crore for 2020-21, is critical for NHAI to meet its construction targets.

In the Budget for 2020-21, NHAI has been allowed to monetise a dozen highway bundles with a length of 6,000 km for monetisation. Experts say such monetisation exercise, including through InvITs, securitisation of toll receipts and TOT routes, could fetch around Rs 60,000 crore.

Crisil pointed out that InvITs have received only subdued response from the market so far. The rating agency attributed this to lack of understanding of the market participants on the products and expected returns.

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