NHAI’s InvIT plans

Subject :Economy

Section: Monetary policy

In News: National Highways Authority of India to raise ₹9,000 crore via the National Highways Infra Trust (NHIT).

Key Points:

National Highways Infra Trust (NHIT), the investment trust sponsored by the National Highways Authority of India, plans to raise as much as ₹9,000 crore after Diwali through a mix of debt and equity.
The infrastructure investment trust’s (InvIT’s) third round of fundraising, involving the monetization of six 250 km highway stretches, will be conducted in phases, targeting domestic and global investors.
Additionally, a proposed non-convertible debentures (NCD) issue, the size of which would be similar to last year’s ₹1,500 crore, would also be offered to retail investors with assured returns of close to 8%.
Later in March, NHIT plans another fundraising to raise ₹5,000-6,000 crore in the fourth phase of asset monetization. These funds will be allocated to six highway stretches spanning 635 km, which have been identified by NHAI for the InvIT. These highways are generating around ₹400 crore in annual revenue.
The InvIT is not inviting retail investors in the equity issue in the third round, and this would be considered later after the road projects mature, providing steady revenue streams with increasing traffic, giving an attractive investment opportunity to investors.

What are InvITs?

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).
NHAI launched its InvIT, the National Highways Infra Trust (NHIT) 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 390 km, spread across Rajasthan, Gujarat, Telangana and Karnataka initially.
The road assets brought under the InvIT had an enterprise value of over ₹8,000 crore. So far, NHAI has raised ₹10,000-11,000 crore via the InvIT route in two rounds. The annual returns from road assets under two rounds are more than ₹850 crore.

NHAI InvIT (National Highways Infra Trust):

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 targets for the same period is ₹6 trillion.
In total, NHAI aims to generate up to ₹45,000 crore through monetization in FY24, utilising various funding models, including InvITs and the securitization of road assets constructed by NHAI’s special purpose vehicles.
Of the annual target, ₹30,000 crore will be through the toll-operate-transfer mode and securitization of toll revenues, while the remaining ₹15,000 crore will be through InvITs.

National Monetisation Pipeline (NMP)

The Union Budget 2021-22 envisioned preparation of a “National Monetisation Pipeline” (NMP) to provide a direction to the monetisation initiative and visibility of investors.
NITI Aayog was tasked with creation of the National Monetisation Pipeline (NMP) for brownfield core infrastructure assets. The current NMP has been created to be for a period of 4 years from FY2022 to FY2025.
The NMP has been prepared based on inputs and consultations from the respective line ministries and departments along with an assessment of the total asset base available.
The NMP is meant to serve as an essential roadmap for the Asset monetisation of various brownfield infrastructure assets across roads, railways, shipping, aviation, power, telecom, oil & gas, and warehousing sectors.
Asset monetisation, based on the philosophy of ‘Creation through Monetisation’, will tap institutional investment and long term patient capital into stable mature assets in turn generating financial resources for new infrastructure.
This will enable asset creation, economic growth, generating employment opportunities and better prospects for the country’s youth.
The Government as part of a multi-layer institutional mechanism for overall implementation and monitoring of the Asset Monetization programme, has constituted an empowered Core Group of Secretaries on Asset Monetization (CGAM) under the chairmanship of the Cabinet Secretary.