Govt drops plan to directly sponsor roads sector InvITs

The plan now is to bring retail investment through non-government and private sector InvITs, for which the market regulator’s approval is awaited, one of the two government officials said.

The government had earlier considered a plan to launch multiple road and highway InvITs in the public sector to raise money from small investors, with assured returns backed by sovereign guarantees.

However, the long gestation period of highway projects and their fluctuating revenue streams have prompted a rethink: rather than giving assured returns on these financial instruments, the Centre will leave it to the market to determine returns, the officials said.

“Government will not directly sponsor any more public InvITs. The NHAI InvIT, which was launched last year, is now an independent trust and not a public sector undertaking. So, even they can convert the private nature of their InvITs into public once Securities and Exchange Board of India (Sebi) clearance is available for road and highways sector investment trusts to go public and tap funds from retail investors,” one of the two officials said on condition of anonymity as he is not authorized to speak to reporters.

A query sent to the ministry remained unanswered.

The change in plans means MoRTH will no longer sponsor new public InvITs. However, all private InvITs could tap funds from retail investors. Leading InvITs registered under Sebi include Brookfield-sponsored India Infrastructure Trust, MEP Infrastructure Investment Trust, IRB InvIT Fund, Tower Infrastructure Trust, and IndInfravit, sponsored by L&T Infrastructure Development Projects.

Infrastructure trusts, or InvITs, are collective investment vehicles which enable direct investments from individual and institutional investors in infrastructure projects, which earn them a small portion of the income in returns.

InvITs allow developers to monetize their assets by pooling multiple infrastructure assets under a single entity (trust structure).

Such infrastructure trusts are popular among investors, especially in the case of long-term revenue-generating assets such as toll roads.

In an attempt to bring public money into infrastructure development, the minister of road transport and highways, Nitin Gadkari, had earlier indicated plans to launch around 10 road and highway InvITs to raise money from small investors—with returns backed by sovereign guarantees —and make small investors part of India’s highway development programme.

Public InvITs have so far eluded the road sector, and the new initiative is expected to deepen the asset monetization market in the highway sector. So far, all road sector InvITs have been private trusts.

Roads form a significant portion of the national monetization pipeline, with national highway and road assets worth ₹1.6 trillion identified to be monetized by 2024-25, out of the target of ₹6 trillion.

This makes the exercise of exploring assets for monetization all the more important for the MoRTH.

The National Highway Authority of India has a project bank of 20,000 km of completed roads. NHAI is offering these roads in bundles and will be offering projects worth ₹40,000 crore in the next two financial years.

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