NHAI InvIT targets ₹7,500 Crore through InvIT issuance

4 Mar 2024 , 12:58 PM

According to news reports, the National Highways Infra Trust, an infrastructure investment trust (InvIT) supported by the National Highways Authority of India (NHAI), intends to raise as much as ₹7,500 Crore through a new issue of InvIT units in order to finance the purchase of new roads from its sponsor.

Infrastructure Investment Trusts (InvITs) are trusts that oversee income-producing infrastructure assets, providing investors with a stable return and a liquid investment option.

The money being generated will assist in the purchase of road assets in the states of Madhya Pradesh, West Bengal, Uttar Pradesh, Assam, and Karnataka, totaling around ₹15,600 Crore.

According to the reports, NHAI is collaborating on the planned fundraise with investment banks SBI Capital Markets, Axis Capital, and ICICI Securities. The fundraiser is anticipated to conclude by the middle of the month.

NHAI, which owns about 18% of the InvIT, intends to commit a sponsor investment of ₹1,400–1,500 Crore. According to the reports, both new and current investors will provide the remaining funds.

The majority of the funding is anticipated to come from CPP Investments and Ontario Teachers’ Pension Plan (OTPP), two current InvIT shareholders that together own around 50% of the company.

According to the reports, about ₹2,000 Crore is anticipated to be funded from domestic institutional investors, including family offices, corporate treasuries, mutual funds, and insurance companies.

Currently, the InvIT has 636 km of road assets that it obtained from NHAI through two packages. A firm presentation states that the enterprise value of the portfolio is ₹11,711.8 Crore.

In order to generate revenue for the construction of new highways and to market its sizable asset portfolio, NHAI established its roadways InvIT in 2021. Through its InvIT, it was able to raise ₹6,011 Crore, with 25% of the capital coming from anchor investors Ontario Teachers and CPP Investments, two Canadian pension funds.

Five road projects totaling 389 km and an enterprise value of ₹8,011 Crore were handed by NHAI to the InvIT in the first phase. With a toll income of more than ₹460 Crore in FY21, these highways were situated in the states of Gujarat, Rajasthan, Maharashtra, Karnataka, Andhra Pradesh, and Telangana.

The NHAI InvIT purchased three road assets totaling around 247 km in the second tranche, for an enterprise value of ₹3,787 Crore.

To monetarily support its operations, NHAI employs strategies like toll securitization, the InvIT, and the outright selling of toll concessions under the toll-operate-transfer (ToT) model.

An increasingly common way for investors to own operational infrastructure assets is through InvITs. One of the most valued assets is a highway.

In recent years, road InvITs have been established by construction businesses like Oriental Infrastructure and IRB Infrastructure Developers, as well as private equity investors like KKR and Actis.

On January 16, KKR announced that it was sponsoring the Highways Infrastructure Trust and that it was purchasing twelve road projects from PNC Infratech and PNC Infra Holdings for an enterprise value of ₹9,005.7 Crore.

For feedback and suggestions, write to us at [e-mail]