India's first public InvIT for road, highway projects in the works

After the success of the National Highways Authority of India’s (NHAI’s) first infrastructure investment trust (InvIT) with foreign institutional investors, the Centre is working on a proposal to launch a fresh InvIT for national highways, where domestic retail investors can hold units of the trust, a senior executive informed Business Standard.

“NHAI is in the process of going for a public InvIT.

"The Securities and Exchange Board of India (Sebi) regulations require five entities to be there for the InvIT — sponsor, investment manager, project special purpose vehicle, project management company, and trust.

"Those would have to be set up afresh,” the executive said.

The move will be a part of Union Minister of Road Transport and Highways Nitin Gadkari’s long-term plan to boost highway infrastructure through investments of common citizens and providing them healthy returns.

A similar attempt was made last year after the NHAI InvIT raised Rs 1,500 crore through bonds, while reserving 25 per cent for retail investors.

The bond had a coupon rate of nearly 8 per cent.

While the plan, at the beginning, was to open the existing InvIT to the public, Sebi regulations in the matter have made the process onerous, and NHAI will go for a fresh trust with completely separate trustees, project managers, investment managers, etc., one of the officials said.

The ministry of road transport and highways did not respond to queries sent by this paper.

In October 2022, NHAI InvIT’s managing director and chief executive officer Suresh Goyal said that the trust was considering going public, but only after the trust had demonstrated a track record of consistent dividend distributions.

The InvIT, which saw a capital infusion of Rs 6,011 crore from two Canadian institutional investors in the first issuance, raised Rs 1,217 crore last year in the second round.

The investments came from the Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan, State Bank of India (SBI), SBI Pension Funds, SBI Mutual Fund, IOCL Employee Provident Fund, L&T Staff Provident Fund, Rajasthan Rajya Vidyut Karamchari Pension Fund, TATA AIG, and Star Union Dai-ichi Life Insurance.

An InvIT is a collective investment scheme similar to a mutual fund, which enables direct investment of money from individuals and institutional investors in infrastructure projects to earn a small portion of the income in return.

While around 20 private sector InvITs are listed on the BSE and the National Stock Exchange, the two InvITs floated by state-owned companies are National Highways Infra Trust and PowerGrid InvIT.

The target for monetisation through InvITs for the ongoing fiscal year (2023-24) is Rs 15,000 crore, which the NHAI will try to achieve through two rounds of fundraising.

With the future of the public InvIT stuck in a regulatory quagmire, the target only includes money raised from institutional investors and debt.