FCC

Union Cabinet approves NHAI?s request to set up an infrastructure investment trust

2019-12-12

As reported, the National Highways Authority of India (NHAI) received the Union Cabinet?s approval for setting up an infrastructure investment trust (InvIT) ? permitting the body to monetise its completed national highways and therefore, fulfil its funding requirements.

With this move, investors will be offered a special purpose vehicle (SPV) which is a bundle consisting of highway projects ? under InvIT. It is then estimated that the SPV will be traded on the stock market and all returns will be linked to the InvIT?s performance on the capital market.

As per reports, the benefits of InvITs include the flexibility it offers along with the potential to attract investors; it also creates specialized O&M concessionaires and has the ability to pull patient capital for around 30 years to the highways market.

The approval to set up the trust is crucial for agencies like NHAI since they rely on a steady flow of funds to ensure that all projects are completed on time ? it gives a leeway from the limited funds they bank on.

Additionally, There has been a lot of debate in recent times about the need for the National Highways Authority of India (NHAI) to focus on asset monetisation and tap alternate funding avenues, such as toll-operate-transfer (TOT) and infrastructure investment trusts (InvITs), given the huge funding requirement for Bharatmala. Reportedly, the authority has been allotted a total of Rs 366.91 billion as budgetary support and has been directed to raise Rs 750 billion from the market in the current financial year.

In tune to the following demand, NHAI has been actively trying to establish an InvIT so as to fulfil its goal of, reportedly, mobilizing additional resources through capital markets.

The approved InvIT will be set up by NHAI in accordance with the Indian Trust Act, 1882 and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.