Indian Highway Concessions Trust Management Discussions

INDIAN ECONOMY

India continues to be resilient against global headwinds and remain the fastest growing major economy. The uptick in the investment cycle, buoyed by sustained government emphasis on capital expenditure, increased capacity utilization, the robustness of the services sector, and doubledigit credit growth, is bolstering domestic economic activity. The provisional GDP estimates of 8.2% exceeds the estimates of 7.6% highlighting the robust momentum and acceleration in the economy. The remarkable growth is on account of strong domestic consumption and public and private investments.

Outlook

India is poised to uphold its position as the fastest-growing large economy. The key driver of Indias growth lies in its strong thrust in the industrial sectors along with healthy momentum in the infrastructure space. This will drive India to become the 3rd largest economy globally by 2031.

INDIAS INFRASTRUCTURE OVERVIEW

The infrastructure sector plays a vital role in propelling Indias comprehensive development and commands significant attention from the government, which is focused on implementing policies to ensure the timely establishment of world-class infrastructure. Opportunities within this sector have exhibited a steady upward trajectory over recent years, solidifying its position as a pivotal driver in Indias growth story to attain a status of developed nation Viksit Bharat by 2047.

In 2019, the Indian Government launched the National Infrastructure Pipeline (NIP), a comprehensive investment plan to enhance infrastructure across various sectors. This initiative aimed at improving the quality of life for citizens by creating job opportunities, raising living standards, and ensuring equitable access to infrastructure.

In the Financial Year 2024-2025, the Government of India has planned a significant increase in capital expenditure for infrastructure projects. The budget allocation is set at 11.1 lakh crores ($134 billion), marking an 11% increase from the previous fiscal year(Source: Interim Union Budget, 2024-25), which is 3.4% of the GDP This increased investment is part of a consistent upward trend in infrastructure spending, with the government prioritizing enhancements in sectors such as road infrastructure, railways, and housing. This strategic focus on infrastructure development is expected to drive substantial growth in these sectors.

143 lakh crores

Expected infrastructure spending over 2024-2030

(CRISIL https://www.crisii.com/en/home/newsroom/press- reieases/2023/10/indias-infrastructure-spending-to-doubie-to- rs-143-lakh-crore-between-fiscals-2024-and-2030-compared- with-2017-2023.html)

11.1 lakh crores

Investments in infrastructure sector in FY 2024-25

(Source: Interim Union Budget, https://www.iivemint.com/economy/ budget-2024-in-numbers-increased-aiiocation-in-infrastructure-50- year-ioan-for-key-sectors-11706781979507.html)

Infrastructure spending push has been complemented by policy push

To ensure focused infrastructure development till fiscal 2025 Core infrastructure, i.e. roads, railways, airports, ports, urban infrastructure, irrigation, warehouses and telecom, to drive this

Focus on coordination between different infrastructure departments to ensure cohesion and efficiency. Ministry of Road Transport and Highways, Ministry of Railways, and Ministry of Petroleum and Natural Gas reported time savings in operations using Gati Shakti (PIB, 2023)

Focus on improving logistics and soft infrastructure by setting up a Unified Logistics Integrated Platform Integrated 35 logistics portals/ digital systems with ~700 industry players registered as of January 2024 (Ministry of Finance)

INDIAN ROADS AND HIGHWAYS OVERVIEW

A well-developed road infrastructure stands as a cornerstone of progress for any developing nation. With an extensive network spanning 66.71 lakh kilometres, India holds the second position globally, trailing only behind the USA. This extensive road network shoulder the responsibility of accommodating 60% of the countrys freight traffic and catering to approximately 87% of its passenger traffic.

The Government has put strong emphasis on the development of roadways and highways. This is evident from the all-time high capital expenditure of 3.01 lakh crores recorded by The Ministry of Roads Transport and Highways in the year 2023-24. Both the Government and private capex stood at all-time high at 2.64 lakh crores and 34,805 crores, respectively.

(Source: Economic Times, https://economictimes.indiatimes. com/news/economy/infrastructure/road-ministry-capex- surpasses-rs-3 lakh-crore-in-2023-24 articleshow/109172259. cms?from=mdr).

In the Financial Year 2023-24, the construction of National Highways (NH) reached approximately 12,300 km, which averages to 34 km per day. This achievement marks the second highest rate in the nations history, with the highest recorded as 36 km per day achieved in 2020-21.

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Outlook

The Government in its interim budget 2024-25 has outlayed 2,78,000 crores towards road transport and highways. Over the last two years the Government has been allocating a similar budget for road transport which is a 940% jump from 25,872 crores per year budgeted over 2009-14.

(Source: Business Standard https://www.business-standard. com/economy/news/budgetary-allocation-to-road-ministry- jumps-to-rs-2-7-trillion-in-2023-24-123122000714_1.html)

Under the Vision 2047 initiative, the objective is to expand the length of national highways to over 200,000 kilometres from the current 146,000

kilometres. This includes a significant increase in access-controlled highways, which are set to rise to 50,000 kilometres from the current 4,000 kilometres within the next 13 years. This expansion is crucial as it will significantly contribute to Indias journey towards becoming a developed nation by 2047 under Viksit Bharat

(Source: Economic Times https://economictimes.indiatimes. com/industry/transportation/roadways/over-2-lakh-km- national-highways-to-be-built-by-2037-length-of-high- speed-roads-to-rise-10x/articleshow/108052591.cms

NATIONAL MONETIZATION PIPELINE

The National Monetization Pipeline (NMP) outlines a total monetization potential of 6 lakh crores over FY 2022-25 by leasing core assets owned by the Central government in sectors such as roads, railways, power, oil and gas pipelines, telecom and civil aviation, among others.

The Ministry of Road Transport and Highways (MoRTH) has successfully generated an impressive sum of 40,314 crores through diverse asset monetization channels, exceeding the previously established target. The Ministry has monetized through three routes: 15,968 crores (4 toll-operate transfer bundles), 15,700 (Infrastructure Investment Trust or InVIT) and 8,646 crores (securitization).

For the year 2024-25 MoRTh envisages monetizing assets worth 60,000 crores. With a significant portion of the endeavour will be derived from the flagship toll-operate- transfer (TOT) highways, approximately one-third of this funding is expected to originate from the NHAI InvIT and private InvITs, which may directly undertake road projects for the first time this year.

(Source: LiveMint: https://www.livemint.com/news/india/morth-looks- at-record-60-000-crore-monetization-in-fy25-n7i30929i2469.html)

OPPORTUNITIES

The Bharatmala Pariyojana serves as a comprehensive initiative within the highways sector, aimed at enhancing the efficiency of both freight and passenger movement throughout India. It focuses on addressing critical infrastructure gaps by implementing various activities like development of economic corridors, inter-corridors, and feeder routes, as well as initiatives to improve national corridor efficiency, border and international connectivity roads, coastal and port connectivity roads, and the construction of green-field expressways.

In October 2017, the Government sanctioned Phase-I of the Bharatmala Pariyojana, encompassing a total length of approximately 34,800 kilometres. This figure includes around 10,000 kilometres of residual stretches from the National Highways Development Project (NHDP). The estimated budget allocated for Phase-I is approximately 5.35 trillion.

Bharatmala Pariyojana envisages 60% projects on HAM,

10% projects on Build Operate Transfer (BOT) Toll model and 30% projects on EPC model respectively. Almost 34,800 km of National Highway length was planned for development under Phase-I of Bharatmala Pariyojana. As of December, 2023, 26,418 km (i.e., 76% of 34,800 km) have been awarded for construction with completion of about 15,549 km.

Electronic FASTag

The Official Electronic Toll system for India called the FASTag system, has achieved a remarkable penetration rate of around 98% as of November, 2023, with around 8 crores users.

The total revenue generated from FASTag toll collections on national highways for the Financial year 2023-24, only upto first 10 months (ending January 2024), amounted to 53,289 crores. This is showcases an upward trajectory against full year collection of 54,155 crores in the Financial Year 202223

The volume of FASTag transactions remained robust, totalling 3.1 billion during the initial 10 months of the Financial Year 2023-24. This compares to 3.4 billion transactions recorded throughout the entire Financial Year 2022-23.

(Source: https://www.freepressjournal.in/business/the-fastag-era-toll- collection-surpasses-50000-crore-in-just-10-months-of-fy24)

OUTLOOK

The outlook on Indian road infrastructure is optimistic and promising, with significant investments and development initiatives underway to enhance the countrys transportation network and connectivity. With flagship projects like Bharatmala Pariyojana and the Governments increased allocation to the Road Transport Ministry and the NHAI, reflects a strong commitment to infrastructure development, with plans to construct economic corridors, inter-corridors, and feeder routes to facilitate smoother freight movement and lower

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TRUST OVERVIEW

The Indian Highway Concessions Trust, established by its Sponsor - Maple Highways Pte Limited on November 06, 2019, is an irrevocable trust registered under the Indian Trusts Act, 1882. It is also recognized by the Securities and Exchange Board of India (SEBI) as an infrastructure investment trust (InvIT) under the InvIT Regulations, with registration number IN/InvIT/19-20/0013. The Trust was settled with an initial sum of 10,000 and it does not possess any beneficial interest in the Initial Settlement.

To manage the Trusts operations, Maple Infra InvIT Investment Manager Private Limited has been appointed as the Investment Manager and Maple Highway Project Management Private Limited has been appointed as the Project Manager.

Shree Jagannath Expressways Private Limited (SJEPL)

Shree Jagannath Expressways Private Limited (SJEPL) is a special purpose vehicle incorporated on June 15, 2010. SJEPL operates a 67-kilometres, six-lane expressway that connects Bhubaneshwar, the state capital of Odisha, with Chandikhole on NH-16 with one toll plaza.

This expressway is a part of the Golden Quadrilateral route, which spans from linking Indias major cities of Delhi, Mumbai, Chennai, and Kolkata. This route traverses through the urban centers of Bhubaneswar and Cuttack, both significant economic hubs in Odisha. Notably, Bhubaneswar serves as the capital of the state, accentuating the highways role in fostering regional economic activity and connectivity.

Additionally, the expressway cater to steady passenger traffic, connecting cities and providing access to popular tourist destinations like Puri, Konark, and Chilika Lake, offering visitor a glimpse of historical sites, pristine beaches, and diverse wildlife.

NCR Eastern Peripheral Expressway Private Limited

NCR Eastern Peripheral Expressway Private Limited (NCREPE) is the Special Purpose Vehicle (SPV) responsible for managing the Eastern Peripheral Expressway (EPE). The EPE is a 6-lane expressway connecting Kundli to Palwal via Ghaziabad, spanning 135 km.

This solar-powered expressway was constructed in a record time of 500 days, significantly reducing vehicular pollution in Delhi by 27% and decongesting the city. The EPE is an access-controlled expressway with features like cement concrete roads, a speed limit of 120 km/hr,

world-class toll plazas, fountains, replica monuments, 2.5 lakh median plantations, drip irrigation systems, and major bridges.

Inaugurated on May 27, 2018, by the Prime Minister, the EPE is a green, smart, safe, and efficient route for commuter in the National Capital Region (NCR). Indian Highway Concessions Trust (IHCT) secured the concession for managing this asset for a 20-year period. The EPE serves as an evacuation route for various industrial and infrastructure activities in the region and is crucial for the proposed Jewar Airport at Noida.

Asset Features

RISK MANAGEMENT

The Trust Groups activities expose it to a variety of financial risks, including market risk, credit risk, and liquidity risk. The Trust Groups primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Trust Groups risk management assessment, policies, and processes are established to identify and analyze the risks faced by the company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same.

INTERNAL CONTROL SYSTEM

The Trust Group has established an internal control system to ensure that all future related party transactions comply with the InvIT Regulations and applicable accounting standards. The Investment Manager ensures compliance with any additional guidelines issued by SEBI and other relevant regulatory, statutory, or governmental authorities.

CAUTIONARY STATEMENT

The terms Indian Highway Concessions Trust and the Trust are used interchangeably and refer to Indian Highway Concessions Trust and its Project SPVs as applicable.

This annual report includes certain statements about the future and may include projections. These forward-looking statements are generally identified by words such as aim, anticipate, believe, expect, estimate, intend, objective, plan, project, will, will continue, will pursue, seek to, or similar expressions. Likewise, statements describing strategies, objectives, plans, or goals are also considered forward-looking statements.

All forward-looking statements are subject to risks, uncertainties, and assumptions. Actual results may differ significantly from the suggestions made by these forwardlooking statements or projections due to various risks and uncertainties. These risks and uncertainties include, but are not limited to, regulatory changes affecting the infrastructure sector in India and the Trusts ability to adapt to them, successful implementation of the Trusts strategy and objectives, growth and expansion plans, technological changes, market risks faced by the Trust, general economic and political conditions in India that may impact the Trusts business and investments, monetary and fiscal policies, inflation, deflation, unexpected turbulence in interest rates, foreign exchange rates, equity prices, or other rates and prices, performance of financial markets in India and globally, changes in domestic laws, regulations, taxes, and competition in the infrastructure sector.