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State-owned National Highways Authority of India (NHAI) plans to raise close to 10,000 crore from the capital market through infrastructure investment trusts (InvITs), two officials familiar with the development said.

The first of the InvITs may open around Diwali to raise 3,000-4,000 crore for the operation and maintenance of completed roads and highways, they said, seeking anonymity.

An additional 5,000-6,000 crore worth of highways are expected to be moved to InvITs by December, paving the way for subsequent market offers to offer retail investors a chance to invest in the highway development programme, one of two officials said, adding that a part of the 10,000 crore fundraising may spill over to the next year.

InvITs raise money from the public to invest in infrastructure projects such as roads and ports and, in return, offer dividends to unitholders. The new initiative is expected to deepen the asset monetization market in the roads sector. So far, all road sector InvITs are private trusts.

Only institutional investors such as insurance companies and pension funds had participated in the first InvIT round of NHAI in October last year.

The officials said NHAI had already sought approval from the Securities and Exchange Board of India (Sebi) to launch the InvIT.

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Questions sent to the spokespeople for the ministry of road transport and highways (MoRTH), the nodal ministry for NHAI, and NHAI remained unanswered till the time of going to press.

But a senior MoRTH official said the plan for a market offer by National Highways Infra Trust, the first InvIT sponsored by NHAI, is at an advanced stage.

The officials said funds could also be raised by selling bonds. Another option is that highway assets worth 5,000- 6,000 crore will be offered by NHAI to a new InvIT, which can be a special purpose vehicle (SPV) of the existing trust.

The proposed market offers may only be for new investors, officials said, while existing institutional investors in the NHAI InvIT, including Canada Pension Plan Investment Board and Ontario Teachers‘ Pension Plan Board, would continue as anchor investors without raising their stake beyond the existing 25% each, which is also the cap for participation from such investors.

A MoRTH official said the first market offer of NHAI InvIT may not see participation from small retail investors, but as the market gets tested for such fundraisings, more such instruments may be offered to small retail investors.

Minister of road transport and highways Nitin Gadkari earlier indicated that he planned to bring retail investors into highways development by offering assured returns of 7-8%. The official said the NHAI projects being moved to InvITs were highly bankable projects with good traffic movement and rising toll collections. This, they said, could provide good returns .

“The plan is to raise money for highway development from the public to widen the investment basket in road InvITs that largely gets money from long-term institutional investors, insurance and pension funds and private equity firms. The public can get assured returns on such investments, helping them to benefit from the country’s infrastructure development programme," Gadkari said on the sidelines of the Mint Mobility Conclave in July.

NHAI has a project bank of 20,000km of completed roads, and there are roads where traffic movement has stabilized over a period of time. NHAI itself is offering these roads in bundles and will be offering projects worth 40,000 crore in the next two financial years.

NHAI launched its InvIT in October with the aim of mopping up 5,100 crore as part of the government’s long-term plans to monetize road assets. The assets included in the InvIT include five toll road assets of 390km, spread across Rajasthan, Gujarat, Telangana and Karnataka, with an enterprise value of 8,000 crore. So far, NHAI has raised about 7,000-8,000 crore through the InvIT route.

Earlier in June, NHAI also offered additional three roads aggregating 247km to the InvIT. The authority is looking at monetizing highway stretches with a combined length of 1,750km in 2022-23 to raise around 20,000 crore.

Leading InvITs registered under Sebi include Brookfield-sponsored India Infrastructure Trust; MEP Infrastructure Investment Trust; IRB InvIT Fund; Tower Infrastructure Trust; IndInfravit, sponsored by L&T Infrastructure Development Projects.

Now all these InvITs would be invited to participate in the bids for NHAI’s operational projects under the new monetization exercise.

Roads form a significant portion of the national monetization pipeline (NMP). Last year, the central government had identified national highway and road assets worth 1.6 trillion to be monetized by 2024-25, of the total monetization target for the same period is 6 trillion.

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