New Indian road monetisation proposal evens playing field

The National Highways Authority of India’s own infrastructure investment trust is now required to bid alongside other InvITs and funds for all road projects put forward by the authority.

A new road monetisation proposal from the Indian government aims to increase transparency in the asset valuation of operational road projects put up for auction by the National Highways Authority of India.

Under the proposal, the NHAI’s infrastructure investment trust will be required to participate in the bidding process for all operational highway projects put forward for bids by the authority, despite being a subsidiary of the NHAI.

Known as the National Highway Infrastructure Trust, the NHAI InvIT was established with a portfolio of five operating toll roads under a concession period of 30 years and spanning 390 kilometres across the Indian states of Gujarat, Karnataka, Rajasthan and Telangana. The trust attracted investment from the Ontario Teachers’ Pension Plan Board and Canada Pension Plan Investment Board last year, with each acquiring a 25 percent stake in NHIT for 15 billion rupees ($197 million; €179 million).

A reported 25 billion rupees-worth of highways owned by the NHAI are expected to be put forward this month, in a bidding process open exclusively to InvITs.

Speaking to Infrastructure Investor, Subahoo Chordia, head of infrastructure at Mumbai-based Edelweiss Alternative Asset Advisors, said the new proposal was a welcome step towards a more transparent asset valuation process for India’s roads.

“[The new proposal] brings the NHIT on par with other highway InvITs in India. It brings the platform to the same level for everyone who has got the ability and the capacity to bid for these projects, with no exclusivity given to the NHIT,” Chordia said.

He noted that, prior to the government’s move to include NHIT in the bidding process, there had been some uncertainty among India’s infrastructure investment community as to how the assets given to the authority’s own InvIT would compare to those being put up for auction.

“[Previously] the investor community was confused about how NHAI would select which assets would go to NHIT and which would be available for other [InvITs and funds] to bid for. This announcement has brought clarity that every asset which NHAI will need to monetise has to go through a process of bidding and everyone can participate,” he added.

In addition to creating a more even playing field, he pointed out the move would also increase competition between InvITs in India, ultimately driving down the cost of capital for the government.

“The more competition there is, the better the price that the government will get out of these monetisations,” he said.

“This has improved visibility on the supply of assets for investors and brought every investor onto the same platform. Additionally, it has also given the government an advantage because it can realise much better price discovery in a transparent manner and will lower cost of capital for the government.”