NHAI starts process of raising Rs 25,000 cr via medium-term notes

In line with government’s push for capital funding, the National Highways Authority of India (NHAI) has begun the process of raising funds through medium-term notes worth Rs 25,000 crore over the next five years to be listed either on the London Stock Exchange (LSE) or the Stock Exchange of Singapore. The authority is expected to soon receive sovereign ratings from international agencies Moody’s and Standard & Poor’s.

The authority plans to utilise the proceeds from the medium-term note (MTN), which usually matures in 5-10 years, for primarily financing EPC (engineering-procurement-construction) projects that it undertakes.

“Sovereign ratings from international agencies would ensure fund-raising at a lower interest rate for us,” an NHAI official said. 

The interest rate post the sovereign rating is expected to be 20-30 basis points lower than what was paid by the NHAI earlier and the first tranche of Rs 7,000 crore of the total Rs 25,000 crore is likely to be raised this year, followed by similar tranches in subsequent years.

A provision to raise Rs 59,300 crore for the NHAI was made in the 2017-18 Union Budget, a surge from the previous borrowing allocation of Rs 50,000 crore (2016-17) for the authority.

During the last financial year (2016-17), the NHAI raised Rs 33,118 crore through a mix of instruments, including bonds, for funding its various road projects and so far in the current financial year (till August), it has raised Rs 19,880 crore, which includes Rs 3,000 crore fundraising via masala bonds on the LSE.

Masala bonds are rupee-denominated instruments through which Indian entities can raise funds by accessing overseas capital markets while bond investors face the currency risk. They were issued initially by the International Finance Corporation (IFC), a member of the World Bank group, in 2014 to raise money for private sector infrastructure projects in India. These bonds are listed in the international market, and offered and settled in US dollars.

The Union government has set a target of 6,000 km of road construction and 10,000 km of project award for the NHAI during 2017-18. 

“We would be raising funds as and when required,” NHAI Chairman Deepak Kumar told reporters at the authority’s headquarters here while launching the NHAI’s revamped website and a project monitoring mobile application.

Recently, Road Transport Minister Nitin Gadkari hinted that an initial public offering by the NHAI was in the works and it needed approval from the Ministry of Finance. The funds would be utilised for future highway projects.