NHAI gears up to place first set of road projects with InvIT in May

The National Highways Authority of India (NHAI) is gearing up to place its first set of road projects with an infrastructure investment trust (InvIT) in May. Also, institutional investors and private funds will be offered equity in the projects.
 
Finalising an InvIT is a lengthy process. A date-wise action plan would be put in place in order to make the first such offering operational by May this year, a senior NHAI official told Business Standard.
 
“Our first offering will be through private placement. After seeing the performance, we will think of a public offer,” he said. The bouquet of projects to be offered under the proposed InvIT are being finalised.
 
InvIT is a scheme similar to mutual funds that paves the way for investment in infrastructure projects from individuals and institutional investors.
 
On December 11, 2019, the Union Cabinet gave its approval to NHAI to set up an InvIT to monetise highway assets. In January 2020, Union road transport and highways minister Nitin Gadkari unveiled the roadmap for InvIT, through which NHAI would initially raise Rs 15,000-20,000 crore.
 
NHAI InvIT would be the Centre’s first such offering.
 
Government-controlled Power Grid Corporation of India (PGCIL) is in the process of placing some of its transmission projects in an InvIT.
 
NHAI’s offer is part of the central government’s plans to tap alternative sources of financing to boost public spending in the infrastructure sector. This is especially at a time when private sector investment is drying up in the build, operate and transfer (BOT) mode.
 
Under the BOT model, the initial cost is borne by the developer, though at the time of bidding, it can ask for government subsidy.
 
In addition to the InvIT offer, the government is tying up with domestic lenders to raise money for long-gestation projects. The Union highways ministry is working closely with the Reserve Bank of India on this.
 
InvITs offer investors regular yields for investing in infrastructure projects. Two private sector road developers – IRB Infrastructure Developer and MEP Infra – have tapped the InvIT route to raise funds.
 
“Given the magnitude of the Bharatmala programme (Rs 5.35 trillion), NHAI would need adequate funds to complete the projects within the prescribed timelines. As part of this exercise, a workable option is to monetise the completed and operational national highway assets. This will unlock their value and offer attractive schemes to private players to invest in construction of new national highways,” said a government press note in December.
 
NHAI’s InvIT will be a trust established by NHAI under the Indian Trust Act, 1882 and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.
 
The InvIT Trust will hold assets either directly or through a special purpose vehicle or a holding. It will also facilitate a corpus from special institutions and prompt them to stay invested in the infrastructure sector.
 
On December 31, 2019, finance minister Nirmala Sitharaman unveiled the Rs 1 trillion National Infrastructure Pipeline for five years. For this, it will be necessary to have various sources of funding.
 
The infrastructure pipeline consists of 39 per cent projects each by the Centre and states, and 22 per cent by the private sector.
 
As part of the infrastructure vision 2025, the government has envisaged enhanced road connectivity to the remotest areas. It also plans trunk connectivity through expressways, major economic corridors, strategic areas and tourist destinations.