April 20, 2024

Lukmaan IAS

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NHAI’s RECORD-BREAKING InvIT MONETISATION ROUND

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TAG: GS 3: ECONOMY

THE CONTEXT: The National Highways Authority of India (NHAI) has achieved a significant milestone by raising over ₹16,000 crore in its largest-ever InvIT (Infrastructure Investment Trust) monetisation round.

EXPLANATION:

  • This substantial fundraising effort underscores NHAI’s commitment to leveraging private investment to fund the development and maintenance of national highway infrastructure.

Monetisation:

  • NHAI’s Infrastructure Investment Trust, NHIT, has successfully raised funds in its third round of monetisation, securing a total of ₹16,000 crore.
  • This round represents one of the largest transactions in the history of Indian roads, highlighting the scale and significance of NHAI’s fundraising efforts.
  • NHIT raised ₹7,272 crore through unit capital from domestic and international investors, and an additional ₹9,000 crore in debt from Indian lenders.
  • These funds will be utilized to acquire 889 kilometers of national highway stretches, demonstrating NHAI’s strategic approach to financing infrastructure development through a mix of equity and debt.

Investor Participation:

  • The success of NHAI’s InvIT monetisation round is attributed to the participation of a diverse investor base, including both domestic and international investors.
  • Marquee investors from various sectors, such as pension funds, insurance companies, mutual funds, and banks, demonstrated confidence in NHIT’s investment potential by subscribing to its units.
  • Foreign pension funds, including the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan Board, showcased strong interest in NHIT’s offering, subscribing to the upper limit of 25% each.
  • This international participation reflects the attractiveness of Indian infrastructure assets to global investors.

Realised Value and Portfolio Composition:

  • With the completion of the third monetisation round, NHAI’s total realised value from all three rounds stands at ₹26,125 crore.
  • This significant sum underscores the success of NHAI’s monetisation strategy in unlocking value from its portfolio of operating toll roads.
  • NHIT’s portfolio comprises 15 operating toll roads with a combined length of approximately 1,525 kilometers.
  • These toll roads are spread across multiple states in India, including Assam, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Telangana, Uttar Pradesh, and West Bengal.
  • The diversified nature of the portfolio enhances risk mitigation and investment attractiveness.

Government Support and Role of NHIT:

  • Public-Private Partnership (PPP) Model:
    • NHIT exemplifies a successful public-private partnership model, playing a crucial role in supporting the National Monetisation Pipeline.
    • By channelizing private investment into the development of national highway infrastructure, NHIT contributes to the government’s broader objectives of enhancing infrastructure quality and connectivity.
  • Ministry’s Acknowledgment:
    • Secretary at the Ministry of Road Transport & Highways lauds NHIT’s contribution to the National Monetisation Pipeline and its establishment as a leading player in the InvIT space.
    • This recognition highlights the significance of NHIT’s role in mobilizing financial capital for infrastructure development.

InvIT (Infrastructure Investment Trust:

  • Infrastructure Investment Trusts (InvITs) are mutual fund like institutions that enable investments into the infrastructure sector by pooling small sums of money from multitude of individual investors for directly investing in infrastructure so as to return a portion of the income (after deducting expenditures) to unit holders of InvITs, who pooled in the money.
  • For these purposes, Infrastructure is as defined by Ministry of Finance vide its notification dated October 07, 2013 and would include any amendments/additions made thereof.
  • InvITs can invest in infrastructure projects, either directly or through a special purpose vehicle (SPV). In case of Public Private Partnership (PPP) projects, such investments can only be through SPV.
  • InvITs are regulated by the securities market regulator in India- Securities and Exchange Board of India (SEBI).

SOURCE: https://www.livemint.com/industry/infrastructure/nhai-raises-more-than-16-000-crore-in-its-largest-invit-monetisation-round/amp-11710854193042.html

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