Moving through the gears

Towards the end of May, Morgan Stanley Infrastructure Partners (MSIP) cemented its place as a leading player in the build-out of India’s modern highways with the official announcement of a $400 million joint venture with Spanish developer Isolux Corsan, into which both parties have invested $200 million.

The partnership, which had been mooted for some time, already has some $1.6 billion of Indian highway projects under construction – three build-operate-transfer contracts awarded as part of the $50 billion National Highways of India (NHAI) roads refurbishment scheme, one of the world’s largest public-private partnership (PPP) programmes.

A big part of the reason why investors like MSIP are so confident in prospects is India’s rapid growth rate and rising personal wealth levels. “An 8 percent growth rate means more affluence and people spending more money on more things,” said Guatam Bhandari, managing director at MSIP and head of the fund’s Asian operations, in Infrastructure Investor’s recently published India Country Briefing.   
He added: “When you look at the sales of new vehicles in India, in terms of new cars you’re seeing a compound annual growth rate of 20 percent-plus and, for new trucks, it’s around 8 to 9 percent, which is very healthy. In the US, UK and some other parts of the developed world, by way of comparison, new car sales are flat to negative.”

Furthermore, there appears to be a widespread acceptance on the part of users of Indian roads that toll payments are necessary in exchange for upgrades. The largely tolled National Highways, while comprising just two percent of total road length in India, account for 40 percent of the country’s total traffic.