More road projects, higher toll revenue boost the introduction of InvITs
- The faster pace of development of highways in FY25 alongside increased revenue from tolls and toll hikes are
- attracting road developers,
- private equity and pension funds to float road infrastructure investment trusts,
- assets under which are expected to more than double in the next three years creating a ₹1 lakh crore incremental lending opportunity.
- Infrastructure Investment Trusts (InvITs) controlled more than 10,000 km of road length in 2024 and this is expected to cross 22,500 km by FY28.
Major buyers
- InvITs have emerged as one of the major buyers of operational road assets in India in recent years, and it has also facilitated the unlocking of capital for road developers once their road projects become operational.
- There are more than half a dozen road InvITs already in operation while more are in the pipeline.
- The awarding of road projects by the Ministry of Road Transport and Highways is expected to be better than last year, and is expected to be 5-8% higher at 12,500-13,000 km.
- Fastag revenue is expected to reach ₹77,000 crore in the current fiscal year and to surpass ₹1 lakh crore annually by FY28.
- National Highways Authority of India announced a 5% raise in toll rates, giving further boost to revenue visibility.
Patient
- The road sector requires patient capital with a long-term investment horizon.
- Key investors in InvITs were pension funds and sovereign funds who invested for the long term.
- More InvITs were in the pipeline, especially with a new monetisation programme of NHAI’s assets.
- It is estimated that NHAI’s asset monetisation in FY25 could fetch it up to ₹60,000 crore from the sale of 33 road assets through toll-operate-transfer and InvIT mode;
- We expect InvITs will continue to acquire operational road assets and grow their asset base further in the coming years.
Prelims Takeaway:
- InvIT
- Fast Tag