Success Story of Indian Highway Infrastructure & Initiatives to Monetize

Toll collection through FASTag crossed Rs. 100 crores marks earlier this year, with over 64.5 lakh daily transactions in the month of February. The numbers and mechanism of digital collection is truly transformative. It speaks something phenomenal about the breadth of transformation NHAI has gone through. Transformation of Indian Highway Infrastructure also highlights the way, in which the visionary leadership of Shri Nitin Gadkari and Shri Narendra Modi is architecting the Infra growth. Their leadership has been successful in breaking bureaucratic Red-Tapism, establishing the transparent systems, defining process and fixing accountability.

Recently NHAI filed prospectus with SEBI for raising approx. Rs 5100 Crores through InvIT route, to be known as National Highway Infra Trust. NHAI assets qualifies as one of the best in the country for attracting long term capital from the global pension funds, sovereign funds and large private equity players. An average of Rs 100 Crores collection, pegs annualised collection of approx. Rs 36, 500 Crores. In a very generic term, this means that at an annualised yield of 6%, the monetizable value of assets comes around Rs 6 Lakhs Crores.

Adoption of the business trust route for monetising the asset, will be an efficient and innovative way for attracting liquidity for further development, without transferring the ownership of the assets from the Government. Under this route the Government will transfer the bundle of assets to a Infrastructure trust (InvIT), while continuing to be sponsor of the trust (in line with the minimum holding requirement of the SEBI). The rights and obligation of the trust will be transferred to the investors for a specified period e.g. toll collection rights for 30 years, along with obligation e.g. maintenance of the asset, servicing of related debt etc).  The Benefit for the sponsor (in this case NHAI), is that they will get one-time capital receipt for meeting the liquidity requirement. Once the period, specified under the InvIT agreement gets over, the assets under the trust will ultimately return to the Government along with the right to collect the receipt.

Further DME Developers Ltd. (DMEL), the Special Purpose Vehicle (SPV), executing the Delhi Mumbai Expressway project has received AAA Rating from rating agencies. NHAI has planned to develop a project centric sustainable and self-liquidating approach to raise finances. Delhi- Mumbai Expressway is a flagship project under ambitious ‘Bharatmala Pariyojna’. The project is being executed under various sub-projects. Estimated cost of the greenfield project is around Rs.87,500 crore including land acquisition cost of approx. Rs. 20,600 crores. DMEL’s role will raise borrowings and servicing the debt. Annuity payments to DMEL will be made to enable timely payment of debts. NHAI plans to form similar SPVs for other projects for strengthening NHAI Balance Sheet and enhance its capability to execute large scale infrastructure projects. NHAI is one of the fastest highway developers in the World. Highways are the backbone and growth engines for the economy. According to 2018-19 Annual Report of NHAI, highways constitutes little over 2% of the total road network but caters to 40% of the traffic. We need to remember that, the context of financial acumen and prudence for avoiding the stress on the Balance Sheet becomes remarkable especially when we are in times, where Government is exiting the business due to inefficiencies and lack of Capital. NHAI performance is an exemplary case study on the quality, commitment and execution abilities of leadership of Mr Gadkari, which in making difference in the life’s of the people and placing India’s infrastructure assets at par with the Global best. A true democratic to his core, his personal charisma, ability to bond across political spectrum, breaking the bureaucratic curtains, futuristic thinking and ability to link the development with the markets are some of the key attributes behind shaping the Infrastructure landscape in the Country.

Related articles