NHAI to Set Up InvIT; forms search panel for Investment Manager Board

The NHAI is in the process of setting up an Infrastructure Investment Trust (InvIT) to facilitate investment in the highways sector, the government said.

This will be the first InvIT to be sponsored by any government entity in the country. A search committee has been set up for appointment of chairman and two independent directors for its Investment Manager Board.

InvITs are instruments on the pattern of mutual funds and are designed to pool small sums of money from a number of investors to invest in assets that generate cash flows over a period of time.

"As part of the structure, a new company is being set up to act as the Investment Manager to the proposed InvIT. As NHAI InvIT shall be the first InvIT to be sponsored by any government or semi government entity in the country, it is important to have a professional management structure for the investment manager," the Ministry of Road Transport and Highways said in a statement.

In order to select the best talent from the market for appointment of two independent directors and one chairman for the Investment Manager Board, a search-cum-selection committee has been formed, it said.

National Highways Authority of India (NHAI) Chairman Sukhbir Singh Sandhu is the convenor of the committee. Other members include Deepak Parekh, chairman, Housing Development Finance Corporation; Girish Chandra Chaturvedi, chairman, ICICI Bank; and Sanjay Mitra, ex-secretary, Ministry of Road Transport and Highways.

"The idea is to set up a competent entity of experts that can professionally run the Infrastructure Trust to mobilise resources from the market for monetizing completed highway projects of NHAI," the statement said.

This will enable NHAI to monetise completed national highways that have a toll collection track record of at least one year. NHAI reserves the right to levy toll on the identified highway, it said.

The Cabinet, chaired by Prime Minister Narendra Modi, had last year in December given its approval to the proposal of the Ministry of Road Transport and Highways, authorising NHAI to set up an InvIT as per guidelines issued by Sebi.

InvIT as an instrument provides greater flexibility to investors and is expected to attract patient capital (for say 20-30 years) to the Indian highway market, as these investors are averse to construction risk and are interested in investment in assets which provide long-term stable returns, as per the government.

It will also facilitate retail domestic savings and corpus of special institutions (such as mutual funds, and PFRDA) to be invested in infrastructure sector through InvIT.

Roads and highways are the lifeline of the economy, connecting remote and far-flung areas and ensuring efficient transportation on regional as well as pan-India basis.

Development of national highways has a multiplier effect in terms of facilitating trade and enhancing the overall economic development of a region, the government had said.

In October 2017, the Centre launched the Bharatmala Pariyojana, which is the flagship highway development programme of the Government of India for development of 24,800 kms of roads for a total investment of Rs 5,35,000 crore.

Given the magnitude of Bharatmala program, NHAI would need adequate funds to complete the projects within the prescribed timelines.

"As a part of this exercise, a workable option is to monetise the completed and operational NH assets to unlock their value and offer attractive schemes to private players to invest in construction of national highways," the government had said.

It had stressed that using new and innovative financing vehicles has become inevitable for organisations like NHAI that have limited existing sources of funds.

Budget 2018-19 had said that NHAI may consider organising its road assets into Special Purpose Vehicles (SPVs) and use innovative monetising structures such as Toll, Operate and Transfer model and InvlTs.

Based on the learning and experience, NHAI has been actively working on setting up an InvIT to monetise its completed and operational national highways projects with the objective of mobilizing additional resources through capital markets.

NHAI's InvIT will be a trust established by NHAI under the Indian Trust Act, 1882 and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.

The InvIT Trust will be formed with an objective of investment, primarily in infrastructure projects (as defined by the Ministry of Finance). The InvIT may hold assets either directly or through an SPV or a holding.