NHAI InvIT may tap mkts for ₹7,000 cr
4 min read . Updated: 14 Feb 2023, 11:23 PM IST
PremiumThe breakup of the ₹7,000 crore fundraising has still not been worked out but it may largely be private placement of units of InvIT as well bond and bank loans.
NEW DELHI : National Highways Infrastructure Trust (NHIT), an autonomous government body sponsored by highway developer NHAI, plans to raise around ₹7,000 crore through a mix of debt and equity including non-convertible debentures (NCD) next month, two people aware of the development said.
According to them, the fundraise —the third round —will be done in phases spread over a few days in March and will seek to tap both domestic and global investors. The proposed NCD issue would also be offered to retail investors with assured returns of close to 8%.
“The InvIT is not inviting retail investors in the equity issue in the third round, and this would be considered later after the roads projects mature, providing steady revenue streams with increasing traffic, giving an attractive investment opportunity to investors," said. one the persons quoted above.
Questions sent to National Highways Infra Investment Managers, the wholly owned entity of NHAI and investment manager for National Highways Infra Trust (NHIT or NHAI InvIT) remained unanswered till the time of going to press. Phone calls and messages left with Suresh Goyal, MD and CEO of NHIT also remained unanswered.
The persons quoted above said the fundraise may have equal debt and equity components with debt coming both from bank loans and NCD issue.
The equity issue, comprising fresh units of the InvIT, may be offered to institutional investors only and could see participation from both domestic and foreign institutions, including large pension funds.
The breakup of the ₹7,000 crore fundraising has still not been worked out but it may largely be private placement of units of InvIT as well bond and bank loans.
NHIT is looking to keep the debt component low so its size may be smaller. One of the persons said that with limited time at hand, coming out with another NCD issue to raise debt fund from the market would be difficult.
The third round of fund raising is being done to acquire a bouquet of five road projects of close to 250 km length which is already generating an annual toll revenue of ₹600 crore.
InvITs are instruments, on the lines of mutual funds, that pool money from investors and invest in assets that provide steady cash flows over time. InvITs typically enable infrastructure developers to monetize assets under a single entity (trust structure).
Such infrastructure trusts are popular among investors, especially in the case of long-term revenue-generating assets, such as toll roads, as they help provide stable and long-term yields.
NHAI launched its InvIT in October 2021, intending to mop up ₹5,100 crore as part of the government’s long-term plans to monetize road assets.
The InvIT acquired five toll road assets of 390km, spread across Rajasthan, Gujarat, Telangana and Karnataka initially. In June last year, NHAI offered an additional three roads aggregating 247km to its InvIT.
The road assets brought under the InvIT had an enterprise value of ₹8,000 crore. So far, NHAI has raised ₹10,000-11,000 crore via the InvIT route in two funding rounds. The annual returns from road assets under two rounds is around ₹850 crore.
In the first round, money was raised largely from institutional investors, pension funds and global equity investment firms, including CPP Investments and Ontario Teachers’ Pension Fund. In the second round, NHIT raised around ₹3,800 crore through a follow-on market offer for institutional investors and an NCD issue which got listed on 28 October.
NHAI is looking at monetizing highway stretches with a combined length of 1,750km in 2022-23 to raise around ₹20,000 crore. A lot of these assets will fall with NHIT. In fact, after the first round of NHIT fundraising NHAI has indicated that it will overreact roads worth 1,500 km to NHIT over a three-year period.
Also, NHAI has a project bank of 20,000km of completed roads, and there are roads where traffic movement has stabilized over time. NHAI is offering these roads in bundles and will offer projects worth ₹40,000 crore in the next two financial years.
Roads form a significant portion of the national monetization pipeline. In 2021, the central government had identified national highway and road assets worth ₹1.6 trillion to be monetized by 2024-25 of the total monetization target for the same period is ₹6 trillion.