NHAI InvIT: Govt awaits Sebi clearance to replace urban with rural areas

The Infrastructure Investment Trust (InvIT) by the National Highways Authority of India (NHAI), which is expected to hit the market by the end of this fiscal year, is likely to be tweaked to better suit the prospective bidders. The Union government is awaiting approval from market regulator Securities and Exchange Board of India (Sebi) in this regard.

The road stretches in the urban areas, which were part of the earlier InvIT offering, have been removed in the proposal and replaced with the roads in rural areas.

According to a senior road ministry official, “The road stretch in and around Chennai urban area has been removed and a road in the hinterland has been included as the NHAI feels that an urban area road can earn toll revenue and, therefore, has been kept aside from the InvIT projects.”

If a highway falls under the urban area, it has the potential to generate revenue for the NHAI on its own and does not require the support of an InvIT to generate revenue. It is usually kept out of the fundraising exercise.

InvITs work like mutual funds, enabling direct investment of small amounts of money from possible individual or institutional investors in infrastructure to earn a small portion of the income as a return.

In such a model, assets are placed in an InvIT where investors put in money and income generated from such assets is paid as dividend.

The InvIT mechanism is being brought in to generate funds from foreign and domestic institutional investors. Five operational roads have been identified to be transferred to InvIT. Placement memorandum is under progress and issue may take place in March 2021 to raise expected funds to the tune of Rs 5,000 crore, the ministry of road transport and highways said in an official statement.

Overall, the NHAI has identified around 19 projects worth Rs 35,000 crore for fundraising under this route.

An investment manager company — National Highways Infra Investment Managers — has been formed. While B Sriram, retired chairman IDBI and former managing director of State Bank of India, is the chairman of the company, Suresh Goyal, who was earlier with the Macquaries group, is the managing director and chief executive. Member (finance) of NHAI will be the promoter nominee on the board.

It is learnt that the NHAI received good response from investors such as the Canadian pension fund, Life Insurance Corporation, and National Infrastructure Investment Fund (NIIF) for its InvIT.

The Union Cabinet had in December 2019 allowed the NHAI to set up an InvIT. It approved of setting up the trust under the Indian Trust Act, 1882, and in compliance with the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.

It also gave the NHAI the flexibility of holding assets under the trust directly, or through a special purpose vehicle/holding company of the NHAI.

The money raised through such monetisation will be used for further investment in the road sector. Part of the toll revenue will, however, be used for operation and maintenance.