Union Cabinet approves NHAI’s request to set up an InvIT

Union Cabinet approves NHAI’s request to set up an InvIT

The National Highways Authority of India (NHAI) has received the Union Cabinet’s approval for setting up an InvIT – permitting the body to monetise it’s completed national highways and therefore, fulfil its funding requirements, reports reveal.

With this move, investors will be offered a SPV, which is a bundle consisting of highway projects, under InvIT. It is also estimated that the SPV will be traded on the stock market and all returns will be linked to the InvIT’s performance on the capital market.

As reported, the benefits of InvITs include the flexibility it offers along with the potential to attract investors; it also creates specialised O&M concessionaires and has the ability to pull patient capital for around 30 years to the highways market.

The approval to set up the trust is crucial for agencies such as NHAI that rely on a steady flow of funds to ensure that all projects are completed on time – it gives a leeway from the limited funds these agencies bank on.

Commenting on the setting up of InvITs, Rajeshwar Burla, Vice President, Associate Head-Corporate Ratings, ICRA, says, “There has been a lot of debate in recent times about the need for NHAI to focus on asset monetisation and tap alternate funding avenues, viz, TOT and InvITs given the huge funding requirement for the ongoing Bharatmala Pariyojana programme. NHAI’s borrowings are expected to more than double by FY2022 to fund the Bharatmala Pariyojana programme. In this context, the recent CCEA decision authorising NHAI to set up InvIT is a positive.” He adds, “With this approval, NHAI’s InvIT – the first from a central public-sector enterprise – could hit the market by the second half of 2020. NHAI has around 11,000 km of national highways, which are public funded with an annual toll collection of around Rs 70.90 billion (in FY2019), which can be monetised through the InvIT route.” He goes on to share that InvIT offers good opportunities to long-term institutional investors including pension, insurance and sovereign funds that are bullish on long-term growth story of India and are keen on acquiring operational and mature toll road assets, which are devoid of execution risks.

Going by reports, the approved InvIT will be set up by NHAI in accordance with the Indian Trust Act, 1882, and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.

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