NHAI to seek leeway on norms for public issue

The National Highways Authority of India (NHAI) will seek exemption from the Securities and Exchange Board of India (Sebi) on some of the norms to be followed before the public issue for Rs 10,000 crore tax-free infrastructure bonds.

A senior NHAI official said they were not required to follow clauses like filing the completed prospectus before the Registrar of Companies and financial statement of the last five years because they are not a company but a government authority. “Merchant bankers are working on looking for clauses that we do not have to fulfil. The process will be completed by next week. Once that is complete, we will write a letter to Sebi seeking exemptions,” the official added.

This is the first time NHAI will come out with public issue after the government allowed it to raise Rs 10,000 crore for the roads sector. Earlier, the highways authority used to borrow money from the market for short-term through 54EC bonds.

The highways authority plans to come up with the public issue by mid-November. NHAI had earlier planned to go for private placement in order to raise funds faster but later decided to go in for the public issue due to the prevailing interest rate scenario.

The approved interest rate for private placement was 100 basis points less than the G-sec rate and 50 basis points less than G-sec rate for the public, making the private placement less lucrative. The official explained they require money immediately but could not go for private placement. “The private placement would not have attracted much interest, hence, we decided to go for public issue.”

Raising funds is a part of NHAI’s financial plan to raise Rs 63,000 crore in the next 20 years. The highways authority will use this to make the payment for its build, operate and transfer (annuity) projects and viability gap funding.

Annuity is a model of road building. In this model, the developer builds the road and the government pays it in instalments. The government has a huge annuity liability of Rs 24,386 crore for 41 projects forcing the government to look towards other model like Engineering Procurement and Contract (EPC). Consultations are on between the government agencies on making a model concession agreement for EPC projects.

Viability gap funding is the payment made by the government to make a project financially viable. NHAI has announced to award 59 projects covering 7,994 km with a total cost of around Rs 60,000 crore. But in the current financial year, it does not plan to borrow any money apart from Rs 10,000 crore from the market.