Canadian pension fund, LIC and NIIF keen to invest in NHAI InvIT

Canadian pension fund, Life Insurance Corporation (LIC) and National Infrastructure Investment Fund (NIIF) are among a host of investors that have shown interest in the infrastructure investment trust (InvIT) to be floated by the National Highways Authority of India (NHAI). The authority will be privately placing units of the InvIT for raising money.

It is learnt that over two dozen global and domestic investors evinced interest in the InvIT during a meeting last week. This is the first InvIT to be sponsored by the Centre. An investment manager company – National Highways Infra Investment Managers Pvt Ltd – has been formed. B Sriram, retired chairman of IDBI and former managing director of State Bank of India is the chairman of the company. Suresh Goyal, who was earlier with the Macquaries group, is the managing director and chief executive. Member (finance) of NHAI will be the promoter nominee on the board.

The Union government, in September, also gave approval to Power Grid Corporation to form an InvIT for monetisation of power transmission lines put on tariff-based bidding. 

NHAI plans to put at least two-three projects worth Rs 5,000-6,000 crore under the InvIT by March-end. It has identified around 19 projects worth Rs 35,000 crore for fundraising under this route. “InvIT offers a greater tax advantage compared to the toll-operate-transfer (TOT) model and so investors are keen on it,” said an official. 

InvITs work like mutual funds, enabling direct investment of small amounts of money from possible individual or institutional investors in infrastructure to earn a small portion of the income as a return.

In such a model, assets are placed in an InvIT where investors put in money and income generated from such assets is paid as dividend.

This InvIT is NHAI’s second asset monetisation model, following the earlier model of placing projects under TOT. A joint venture of Macquarie and Ashoka Buildcon had bagged the first batch of TOT projects in 2018, after paying an upfront fee of Rs 9,680 crore for nine national highway stretches.

The Union Cabinet, had in December 2019, allowed NHAI to set up an InvIT. It approved setting up the trust under the Indian Trust Act, 1882, and in compliance with the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.

It also gave NHAI the flexibility of holding the assets under a trust directly, or through a special purpose vehicle or a holding company.

Projects that had attracted toll for at least a year will be placed under the InvIT.

The funds raised through this mode will be used for further investments in the roads sector. Part of the toll revenue will, however, be used for operation and maintenance.