NHAI plans to expand InvIT size to Rs 15,000 crore -

NHAI plans to expand InvIT size to Rs 15,000 crore

State-owned National Highways Authority of India (NHAI) plans to increase the size of its proposed infrastructure investment trust (InvIT) and is expected to raise as much as ₹15,000 crore in two rounds. As part of the monetisation programme announced by the government, NHAI plans to sell about 32 more operational road assets spanning 1,500 km as well as upcoming TOT (toll-operate-transfer) projects.

Out of the 32 roads, about 20 totalling 1,000 km will be brought under the proposed private-listed InvIT in the second round, said two people aware of the development.

The InvIT is likely to hit the market by next month, having obtained approval from the Securities and Exchange Board of India (Sebi) in May. The trust, with about five operational road assets of 390 km, is pegged to raise ₹5,100 crore in the first round.

NHAI is already engaged in talks with sovereign and pension funds to sell about 85% of the units in the InvIT. “There is a good response from the institutional investors who are happy to make a good chunk of investment in the NHAI InvIT, hence we plan to increase the size,” said one of the persons cited above. An NHAI spokesperson declined to comment.

NHAI has a sizable inventory of income-generating assets that can be opened up to investors for raising resources, NHAI chairman Sukhbir Singh Sandhu told ET last year. “In the matter of resource generation for the ongoing projects of NHAI, including a major initiative like the Bharatmala programme, asset recycling is important,” he had said. “Whether it be InvIT or TOT, both are facets of this strategy of asset recycling.”

India is one of the few nations offering long-term concessions of 25-30 years, said Prateek Jhawar, executive director and head, infra and real assets, investment banking, Avendus Capital.


Tax breaks and other sops

“An InvIT sponsored by NHAI — an AAA-rated entity, nodal agency for highways — is certain to have good interest from investors.”

Tax breaks and other sops offered to pension funds and sovereign investors are another reason for increased interest in such assets.

“We expect a few other high-quality players to come with their yield product offering in the next one-two years,” Jhawar said.

NHAI’s plan to launch its InvIT by May got delayed after the sharp fall in toll collections due to lockdowns amid the second Covid wave. Toll collections fell by around 10% in April from March and are likely to fall 25-30% in May due to travel and other restrictions, according to rating agency ICRA. They will improve from June onward, it said.

Infrastructure trusts, or InvITs, are popular among investors in long-term revenue-generating assets such as toll roads and power-transmission projects. Since the operating infrastructure assets provide stable and long-term yields under the InvIT structure, global investors remain aggressive on trusts floated by domestic entities.

“India has emerged as a core market for long-term institutional investors,” Jhawar said. “We will continue to see increased interest in the Indian yield assets segment as the country is expected to see high growth over the next couple of decades and hence provides a good opportunity for stable, long-term investments.”

Leading InvITs registered under Sebi include Digital Fibre Infrastructure Trust (DFIT), a trust that holds all the fibre assets of Reliance Industries; India Grid Trust (Sterlite Power Grid Ventures); Brookfield sponsored India Infrastructure Trust; MEP Infrastructure Investment Trust; IRB InvIT Fund; Tower Infrastructure Trust; IndInfravit, sponsored by L&T Infrastructure Development Projects; and Delhi-based infrastructure firm Oriental Structural Engineering (OSE).

Indian assets offer good risk-adjusted returns compared with developed markets and also help in diversification of portfolio for large pension and sovereign funds, Jhawar said.

According to a recent report by India Ratings & Research, another ₹25,000-40,000 crore of probable assets are expected to hit the InvIT market in the next six to eight months as it has emerged as a viable option for de-leveraging the balance sheet.

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