Highways InvIT to be open for retail investors, says Nitin Gadkari

Govt to approach capital markets next month to raise funds for four road projects: Gadkari

The Union Minister of Road Transport and Highways Nitin Gadkari on Tuesday said the Centre will be approaching capital markets next month and seek retail investments in highway projects.

“We will soon be listing an infrastructure investment trust (InvIT) on the stock market,” the minister said, adding a caveat — it’s an experimental approach, which is why there will be a cap on retail investment.

InvITs are instruments on the pattern of mutual funds, designed to pool money from investors and invest in assets that will provide cash flows over a period of time.

The central government had previously approached the Securities and Exchange Board of India (Sebi) to open the InvIT of state-owned National Highways Authority of India (NHAI) to retail investors. This is the first time a minister has offered a defined timeline for the exercise.

The first InvIT round of NHAI saw participation from institutional investors, insurance companies, pension funds, and infrastructure investors.

“There are a lot of Sebi restrictions. Right now, we are taking four projects, with the caveat there will be an investment cap of Rs 10 lakh. We will assure investors 7-8 per cent return,” said Gadkari.

NHAI launched its first InvIT in October last year worth Rs 8,000 crore by monetising five road projects, totalling 400 kilometres. The share of institutional investors in the first InvIT was close to Rs 6,100 crore.

Sources close to the InvIT exercise have previously said that the response in the recent past has been tepid compared to the frenzy last year.

Owing to several market and geopolitical factors, NHAI had also reportedly delayed its second InvIT.

The government is prioritising retail investments in highway infrastructure, followed by domestic investors and foreign investors, the minister added. He said NHAI will now look to extensively monetise highway projects through InvIT and toll-operate-transfer, and also look for ways to make these projects accessible to retail investors.

With competition returning to the construction sector, the minister said the government is finally looking at monetisation through the build-operate-transfer (BoT) mode.

During the pandemic, the construction sector saw acute financial crunch. As a result, the number of players for big-ticket projects had decreased initially. The Centre had also initiated various relief measures, such as increase in the frequency of payments to contractors, waivers in penalties on delays, and removal of compulsory requirements of earnest money deposit and performance security deposit.

The lack of competition had made the financial landscape unviable for the government to monetise via BoT due to risk of cartelisation.

Gadkari also said that the Centre’s flagship Bharatmala Pariyojana for highways — approved at a cost of over Rs 5 trillion — will most likely be completed (both Phases 1 and 2) at over Rs 20 trillion. The current estimates peg the first phase to be completed at Rs 10 trillion — roughly double the initial sanctioned cost.

With this level of cost escalation, experts say a push in monetisation will be key to funding Bharatmala since the Centre can only allocate limited resources from its own coffers.

National highway projects are the biggest contributors to the government’s ambitious Rs 6-trillion national monetisation pipeline, accounting for Rs 1.6 trillion.

With the second-highest contributor — the Indian Railways — repeatedly underperforming in its monetisation endeavour, the Centre’s hopes will be pinned on highways to raise its targeted amount.

A WELL-TRAVELLED ROAD

• Nitin Gadkari said he has set a target to take the national highway network length to 200,000 km by 2024
• The total length of national highways in the country has increased from about 91,287 km in April 2014 to about 140,937 km at the end of November 2021