Cabinet authorises NHAI to set up infrastructure investment trust, monetise NH projects

The Union Cabinet, chaired by Prime Minister Narendra Modi, has given its approval to the proposal of Ministry of Road Transport and Highways authorising National Highways Authority of India (NHAI) to set up Infrastructure Investment Trust(s) (InvIT) as per InvIT guidelines issued by Securities and Exchange Board of India (SEBI).

This will enable NHAI to monetise completed National Highways that have a toll collection track record of at least one year and NHAI reserves the right to levy toll on the identified highway, read a statement.

InvIT as an instrument provides greater flexibility to investors and is expected to create opportunities including generation of specialised O & M concessionaires; 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; and retail domestic savings and corpus of special institutions (such as mutual funds, PFRDA, etc.) to be invested in infrastructure sector through InvIT.Using new and innovative financing vehicles has become inevitable for organisations like NHAI that have limited existing sources of funds, the statement read.

The then Finance Minister, in his Budget Speech of year 2018-19, had stated that NHAI may consider organising its road assets into Special Purpose Vehicles and use innovative monetising structures such as toll, operate and transfer model and Infrastructure Investment Trusts (InvlTs).

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

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 Ministry of Finance). InvIT may hold assets either directly or through an SPV or a holding.