The faster pace of development of highways in FY25 alongside increased revenues 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.

In FY24 road InvITs controlled over 10,000 km of road length and this is expected to cross 22,500 km by FY28, according to SBI Caps.

“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,” said Vinay Kumar G, Vice President & Sector Head - Corporate Ratings at ICRA.

There are over half a dozen road InvITs already in operation while more are in the pipeline. At the moment, PE firm Actis-backed NXT Infra Trust and Roadstar Infra Pvt Ltd’s (a subsidiary of IL&FS Transportation Networks) InvIT is awaiting regulatory approval.

In the current fiscal year, the awarding of road projects by the Ministry of Road Transport and Highways is expected to be better than the 8,551 km seen last year, while execution is expected to be 5-8 per cent higher at 12,500-13,000 km according to Kumar.

Fastag revenues spiked in FY24 to ₹65,000 crore and it is expected to reach ₹77,000 crore in the current fiscal and to cross ₹1 lakh crore annually by FY28, SBI Caps estimated. On Sunday, National Highways Authority of India announced a 5 per cent hike in toll rates, giving a further boost to revenue visibility.

Patient capital

The road sector, due to the long-term concession periods and elongated payback periods requires patient capital with a long-term investment horizon, pointed out Kumar. He added that key investors in InvITs were pension funds and sovereign funds who invested for the long term.

Canada’s CDPQ and CPPIB are pension funds that have taken stakes in road InvITs in India.

Anything which generates revenue is InvIT-able, said Prateek Jhawar, Head, Infrastructure & Real Assets at Avendus. He added that more InvITs were in the pipeline, especially with a new monetisation programme of NHAI’s assets expected.

ICRA recently 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; this could translate into ₹38,000-43,000 crore funding opportunity.

“We expect InvITs will continue to acquire operational road assets and grow their asset base further in the coming years,” said Kumar.

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