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The National Highways Authority of India (NHAI) will be the flag-bearer of the government's asset monetisation programme with a plan to raise about Rs 30-40,000 crore through monetisation of its operational stretches over the next two years.

The company officials indicated that the disruptions in wake of pandemic delayed some of its asset monetisation plan, but with traffic fast returning to near normal levels now, about Rs 10,000 crore of road assets would be monetised by NHAI in the current year (FY 22) and the exercise would kick up pace next year with doubling or tripling of the numbers in the next few years.

With the country in firm grip of the second wave of Covid pandemic in the months of April and May, and subsequent restrictions on mobility and partial lockdown, tolling at national highways nose-dived. In a report released earlier, rating agency ICRA had estimated that sequentially tolling had fallen by about 10 per cent in April and close to 30 per cent in May. Thereafter, there has been marked improvement in traffic on highways reaching 90 per cent of pre-Covid levels and has crossed that level too now.

An NHAI official said that the entity is in touch with a clutch of investors and soon bids would be invited for taking the operational NHAI project under the toll-operate-transfer (TOT) model.

Under the TOT model, highway projects which have been operational for at least two years, and which have been generating a steady stream of revenue, are to be leased out to large-cap investors for carrying out O&M (operation and maintenance) operations in consideration of the highest bid upfront concession fee. The investor recovers investment through tolls collected for a stretch over a period of concession spreading over 20-30 years. Once the cost with agreed return is achieved, the road returns back to NHAI.

"The national monetisation pipeline announced by the government has identified the road sector having the maximum potential for such exercise at Rs 1,60,000 crore over the next four financial years. This would be achievable given the tested model already available in the sector. Besides, InvIT model would also be used to pool resources and monetise projects," said a road sector expert asking not to be named.

NHAI has planned an InvIT, the second one promoted by a public sector entity after power transmission utility PGCIL, but it has seen multiple deferments over the Covid disruptions. But a Rs 5,100 crore InvIT is now likely next month.

The InvIT trust will acquire 100 per cent of the equity shares of the project SPV from the sponsor NHAI. It is expected that NHAI may raise further funds, around Rs 5,000 crore, by transferring more assets to the InvIT later in the year.

But TOT may remain the most active model for monetisation. So far NHAI has raised around Rs 17,000 crore through the TOT model by granting on long-term lease three road bundles out of the five attempted so far. The sixth bundle will be out soon.

Another exercise for asset monetisation by NHAI will be through toll securitisation where the authority gets paid for investment in road construction and private investor gets to collect toll.

Proceeds from the asset monetisation programme are used to repay debt and develop highways. As on March, 2021, NHAI had around Rs 3 lakh crore debt. It is permitted to borrow Rs 65,000 crore in 2021-22, same as in 2020-21.

The expectation of asset monetisation (by NHAI and other developers including EPC developers) is also supported by the past performance of road EPC companies. Between fiscals 2016 and 2021, sale of assets to InvITs or to private equity funds helped unlock Rs 80,000 crore of enterprise value for the sector (Rs 50,000 crore for the road EPC companies analysed), according to a Crisil report. Around 60% of this was through four InvITs. The funds released strengthened their balance sheets.

The leverage (calculated as total outside liabilities to tangible net worth) of these companies is estimated to have improved to 1.25 times as on March 31, 2021, from 1.87 times as on March 31, 2016, largely supported by asset monetisation.

The Union Budget 2021-22, laid a lot of emphasis on asset monetisation as a means to raise innovative and alternative financing for infrastructure. In her Budget speech, Finance Minister Nirmala Sitharaman had said that monetising operating public infrastructure assets was a very important financing option for new infrastructure construction. Now a Rs 6 lakh crore monetisation pipeline has been announced for bringing in private investment in brownfield Central government projects in various sectors where assets are idling.