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NHAI to consider public InvIT to widen investor base, include retail buyers

Aiming to raise public funds for its asset monetisation pipeline, the National Highways Authority of India (NHAI) on Monday said it is considering a new infrastructure investment trust (InvIT) open to retail investors. 'NHAI has successfully launched private InvIT and monetised over 2,300 km of highways. NHAI is now considering launching public InvIT to increase the overall investor base, develop a competitive environment in the InvIT market, and mitigate the risk of a limited investor base. Further, public InvIT will also cater to retail investors, thereby providing access to infrastructure assets,' the highway authority said in its Asset Monetisation Strategy Report. Union highways minister Nitin Gadkari has repeatedly said over the past four years that he wants common citizens to benefit from rapid infrastructure expansion by allowing them to invest in highway projects via InvITs. However, officials said the process has turned out to be lengthy and complicated with tough regulations in place. In its report, NHAI did not confirm it will decisively go through with the proposal. InvITs are one of the three primary modes of highway monetisation used by NHAI, under which a trust manages several road assets and investors can benefit from toll revenues by becoming unitholders. As a department, NHAI has contributed significantly to the first National Monetisation Pipeline. It has achieved 71 per cent of NITI Aayog's NMP Road Sector Pipeline from 2021-22 to 2024-25 (Rs 1.15 trillion achieved out of a target of Rs 1.6 trillion). Total monetisation so far stands at Rs 1.4 trillion. The highways ministry is also likely to be given the steepest target of all government departments in the second monetisation pipeline, which will run up to 2029-30. It will likely have to monetise highways worth Rs 3.5 trillion over the next five years. The authority also mentioned an issue that had previously been a bone of contention between the private sector and government – the determination of Initial Estimated Concession Value (IECV). In 2020, the authority stopped declaring IECV of toll-operate-transfer (TOT) bundles, fearing a concentration of bids around the disclosed price. The sector responded that the disclosure of IECV was an important requirement, after which NHAI started disclosing the assumptions made to reach the IECV, but not the amount itself. Now, it plans to make the disclosure model more transparent. 'By aligning investor expectations with the potential performance of the asset, NHAI will aim to minimise risks and enhance the attractiveness of the investment opportunity through monetisation. Currently, NHAI declares macroeconomic factors such as interest rate, inflation, traffic and revenue growth rate, operating and maintenance expenditure, etc. NHAI will regularly review and update these factors to assist potential investors in preparing more realistic estimations,' it said. NHAI already has initiatives underway to increase the number and volume of ToT bundles and InvIT phases. Specifically, NHAI aims to offer three ToT bundles per quarter, including one smaller (Rs 2,000 crore), one medium (Rs 5,000 crore), and one large (Rs 9,000 crore) bundle, and to conduct one or two InvIT phases each year to cater to a broad spectrum of investors. NHAI will also assess market conditions in future and adjust bundle sizes accordingly, it said.