NHAI concluded its largest InvIT monetization, raising over INR 16,000 crore in 'Round 3', marking a significant milestone in India's road sector. National Highways Infra Trust (NHIT) secured INR 7,272 crore from investors and INR 9,000 crore in debt to acquire 889 km of national highways. Strong demand came from domestic and international investors, including pension funds and insurance companies. The total realized value of all three rounds of InvIT stands at INR 26,125 crore, comprising fifteen toll roads across nine states. The government also revised concession terms for BOT projects to attract private investment, aiming to invite bids for INR 2.1 trillion of highway projects.
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The National Highways Authority of India (NHAI) successfully concluded the monetization of 889 kilometers of national highways, raising INR 16,000 crore in the third round of road monetization through the National Highways Infra Trust (NHIT), the largest such endeavor by NHAI. NHIT raised unit capital of INR 7,272 crore from domestic and international investors and secured debt of INR 9,000 crore from Indian lenders to acquire the highway stretches.
The investment was met with strong demand from existing and new investors, including foreign pension funds like the Canada Pension Plan Investment Board and domestic pension/provident funds, insurance companies, mutual funds, and banks. NHAI also subscribed to 15% of the units. With this round, the total realized value of all three rounds of InvIT stands at INR 26,125 crore, covering a diversified portfolio of fifteen operating toll roads spanning nine states with concession periods ranging between 20 to 30 years. NHIT, set up in 2021 to support the government's National Monetization Pipeline, has cumulatively raised around INR 12,000 crore through the first two rounds of monetization.
The capital raised by NHAI will fund the acquisition of national highway stretches, with a base concession fee of INR 15,625 crore and additional concessional fees of INR 75 crore.
To attract private risk capital into highway construction, the government revised concession terms for build operate transfer (BOT) projects. Changes include liberal construction support, facility to borrow from non-bank lenders, and enhanced compensation. The government aims to invite bids for INR 2.1 trillion of highway projects under this model. The changes aim to provide greater comfort to bidders under pure-play public-private partnership projects.
The revised model concession agreement (MCA) defines breach of contract terms and compensation payable. It also allows for equity and construction support up to 40% of the total project cost under the BOT model. The performance guarantee requirement has been reduced to 3% of the Estimated Project Cost, and Non-Banking Finance Companies (NBFC) are now allowed as senior lenders. The MCA also addresses loss of toll revenue and provides for project buy-back by the authority in certain circumstances. Refinancing of debt by concessionaires is also allowed, facilitating infrastructure financing.
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