Govt likely to ask anchor investors to hold 25% in monetised roads

The road ministry and the NHAI have finalised the proposal after some investors approached them to allow them a board seat on the SPV concerned

The Union government is likely to go with a model that requires anchor investors in road monetisation projects to hold 25 per cent equity and be on the management board of the special purpose vehicle (SPV) floated to run the project.

The Union Ministry of Road Transport and Highways and the National Highways Authority of India (NHAI) have finalised the proposal after some investors approached them to allow them a board seat on the SPV concerned.

“They wanted a board seat, we have no problem with that if they bring in 25 per cent equity along,” a senior road ministry official told Business Standard.

Global investors including the Canadian Pension Fund, the Abu Dhabi Investment Authority, and also the National Investment and Infrastructure Fund (NIIF) have shown an interest in India’s infrastructure sector.

“While the proposal per se may not be outlandish, softer aspects like maintaining neutrality and access to all investors and the ability of the original investor to continue maintaining this threshold investment are the aspects that needs to be kept in mind,” said Jagannarayan Padmanabhan, director and practice leader, transport, and logistics.

However, some experts said the proposal would be workable only for public-funded infrastructure investment trusts (InvITs) and not toll-operate-transfer (ToT) or private InvITs.

The new condition might have been approved keeping in mind the InvIT model but the NHAI is yet to bring out its first such offer.

The authority is planning to offer 19 projects, worth Rs 35,000 crore, under the InvIT model, which is a platform to monetise roads over the next three-five years. The initial bundle of road projects selected for the InvIT provides better prospects because they are part of national corridors.

Under the InvIT model, the assets are placed in an InvIT in which investors put in money and the income generated from such assets is paid as dividend.

In the case of a TOT project, the completed project is handed over to the highest bidder, which operates and maintains it for a stipulated time period. Barring the first TOT bundle, which was bagged by Macquaire and Ashoka Buildcon, the subsequent offers did not receive a good response.

The Union government, therefore, tweaked certain criteria for such projects to make them attractive for potential investors. According to officials, the latest offer received a good initial response from investors, following which the government continued with road monetisation through the TOT route.

The NHAI will offer 1,500 km, coming within the fold of 32 projects, under the TOT model this financial year as it chalks out a fresh monetisation plan. Keeping in mind the impact of the second wave of the pandemic, the projects on offer will be decided on a case-by-case basis.

The NHAI’s InvIT is yet to take off because of the pandemic and a nationwide lockdown that came with it on March 25 last year. It was supposed to launch its first InvIT in May 2020.