Cube Highways Trust, an Infrastructure Investment Trust (InvIT) for road assets, plans to raise Rs 12,075 crore through debt to pre-pay loans for 17 projects in the country.
Cube InvIT, is proposing to acquire 19 assets, including 18 toll road assets and one annuity road asset, from the sponsor Singapore-based Cube Highways group. The trust, the largest road InvIT in India, will also have the right of first offer (ROFO) for another six assets (ROFO assets).
These road assets are operated and maintained pursuant to concessions granted by the National Highways Authority of India and state government authority. They are owned and operated by the respective project Special Purpose Vehicles (SPVs). These projects are from states including Andhra Pradesh, Rajasthan, West Bengal, Kerala, Uttar Pradesh and Delhi National Capital Region (NCR).
Cube Highways Fund Advisors Private Limited (CHFAPL) will be the investment manager for the InvIT, which has a lot of experience in the infrastructure space. Trust’s plans over the near-term also include raising up to Rs 2,825 crore of debt for the ROFO assets – primarily to prepay the debt at the SPVs.
Rating agency Icra has assigned a Provisional AAA (Stable) rating for loan to be used in transaction. Notwithstanding the proposed debt raising plans including the ROFO assets, the consolidated leverage is likely to remain below 49 per cent.
The rating factors in the diversified profile of the operational road projects of the InvIT with an average track record of over five years for the toll road assets. The toll road assets have demonstrated robust recovery in toll collections, post the pandemic-related disruption, said Rajeshwar Burla, Group Head at ICRA.
Cube InvIT remains exposed to the risks inherent in toll road projects, including those arising from cyclicality in traffic growth, inflation-linked toll rate increase. There is also a risk of political acceptability of rate hikes over the concession period and the likelihood of toll leakages, development or improvement of alternative routes or alternate modes of transportation, Icra said.