Home Debt instrument CPPIB and Ontario Teachers’ Pension Plan acquire NHAI’s first InvIT

CPPIB and Ontario Teachers’ Pension Plan acquire NHAI’s first InvIT

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Two major global investors – the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan – will be key investors in the highly anticipated National Highways Authority Infrastructure Investment Trust (InvIT) of India (NHAI). Each will collect 25 percent of the equity.

The InvIT, launched on October 29 and closed on November 2, is a private placement instrument intended for international and national institutional investors.

In addition to key investors, NHAI would retain a minimum of 15 percent equity and the remainder will be offered to domestic institutional investors.

The authority launched its InvIT as part of the national monetization plan to monetize its road projects, with an initial portfolio of five toll roads in operation with a total length of 390 km. These routes are located through the states of Gujarat, Karnataka, Rajasthan and Telangana. NHAI has granted new 30-year concessions for these roads.

InvIT is an investment trust that operates like a mutual fund and is regulated by the Securities and Exchange Board of India (Sebi).

In such a model, the assets are placed in an InvIT where investors invest money and the income generated by these assets is paid out as dividends.

Given the long-term nature of the assets, shares of NHAI InvIT have been offered to international and domestic institutional investors. The total value of the 5 routes business has been set at Rs 8,011.52 crore.

NHAI InvIT is funded by a debt of Rs. 2000 crore from the State Bank of India, Axis Bank and Bank of Maharshtra.

The balance is funded by issuing units of Rs.6011.52 crore to international and domestic institutional investors, and NHAI as a sponsor.

NHAI InvIT has been successful in attracting international pension funds and a diverse group of domestic institutional investors including pension funds, insurance companies, mutual funds, banks and financial institutions, who submitted their offers for Rs. 6203 crore.

“NHAI InvIT is part of the Indian Government’s National Monetization Pipeline announced earlier this year and has significant potential for expansion in the future with additional routes monetized through the NHAI InvIT. NHAI InvIT is expected to offer attractive long-term returns to its investors. The participation of renowned international and national investors will also benefit NHAI InvIT in the areas of governance, transparency and maintaining the quality of national assets, ”said Giridhar Armane, Secretary of MoRTH and President of NHAI.

NHAI’s InvIT became a victim of the Covid 19 crisis after a nationwide lockdown was imposed on March 25, 2020. It was previously scheduled to launch its first InvIT in May 2020.

In December 2019, the Union Cabinet approved the proposal from the Ministry of Road Transport and Highways to allow NHAI to set up InvITs to monetize completed national highways that have a toll collection history of at least a year.

The money collected through this monetization will be used for other investments in the road sector. Part of the toll revenue will however be used for operation and maintenance.

It also gave the NHAI the ability to hold assets directly as part of the trust or through a special purpose vehicle / NHAI holding company.

This InvIT is NHAI’s second asset monetization model, after the earlier model of placing projects under the Toll Transfer (TOT) regime.

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