In a bid to draw investors, the National Highways Authority of India (NHAI) and the Ministry of Road Transport and Highways (MoRTH) have highlighted investment opportunities across roads, wayside amenities, and Multi Modal Logistics Parks (MMLPs). At a recent meeting, the NHAI highlighted that projects worth Rs 7 trn were likely to be awarded over the next 2-3 years. These include: (1) remaining projects of Bharatmala worth around Rs 5-6 trn; (2) setting up of 35 MMLPs worth Rs 500 bn; (3) setting up of wayside amenities (Rs 30 bn); (4) intermodal stations (Rs 80 bn); (5) ropeways (Rs 150 bn) and (6) an optical fibre network (`30 bn). In the road sector, the Centre also plans to award BOT projects worth Rs 200 bn over the next 2-3 years.
Commenting on the roadmap outlined by the government in a recent report, Kotak Institutional Equities has said that while the investment opportunities bode well for the road sector and the NHAI’s target of road awards is in line with its estimates for completing the Bharatmala programme, annual ordering beyond 4,500-5,000 km would have to be supported by a sharp increase in monetisation and government support. Also, higher Hybrid Annuity Model (HAM) project awards would require more private participation, calling for investor friendly initiatives such as changes in MCAs etc., as were taken in the past, it has said.
Monetisation targets higher than past achievements
However, the monetisation targets set by the government through the TOT and InvIT routes are much higher than what has been achieved in the past, the report has said, estimating monetisation proceeds of Rs 120 bn by FY2023. The highway ministry intends to raise
400 bn via TOT bundles for 5,500 km of road projects and200 bn via InvIT, as against an amount of Rs 170 bn raised in the past three years for 1,400 km via the TOT model and Rs 60 bn via the InvIT route during FY2022. MoRTH also intends to raise `600 bn via SPV financing for greenfield expressways by FY2024. The NHAI was able to raise around Rs 250 bn for the Delhi-Mumbai expressway via SPV financing and would look to employ similar self-sustaining models for other expressways as toll revenues are ring-fenced to service SPV debt.
RFID and other initiatives lend comfort
On the positive side, there has been a sharp improvement in toll collection at toll plazas, driven by higher radio frequency identification (RFID), which has reached around 97% level. With an improvement in transparency, this lends comfort to NHAI on the monetisation of such road stretches. The report has estimated toll revenues of Rs 380 bn by FY2023.
Targetting MMLPs to improve logistics
The government plans to set up 35 MMLPs at a total project cost of Rs 500 bn, developing them under the DBFOT model. Bids have already been invited for Chennai and Nagpur MMLPs and are expected for Bangalore and Indore in the next 2-3 months. The government has invited suggestions from private sector players to make the programme more investor friendly.
Annual road ordering
While improved RFID penetration has helped increase toll collections sharply, debt repayment liability and higher cost of Bharatmala would keep the annual ordering level in the 4,500-5,000 km range, with an increase from these levels having to be backed by increased monetisation and government support, the report said.