Gawar Construction Limited (GCL), a highway construction player, is looking to raise Rs 2,000 crore for its maiden infrastructure investment trust (InvIT) in the coming months, Manish Satnaliwala, chief executive officer (CEO) of National Infrastructure Trust told Business Standard.
The trust is looking to put 10 operational road assets across the country in its initial offering for the total debt and equity raising of Rs 5,250 crore. These 10 highway stretches covering 707 kilometres have been constructed through the Hybrid Annuity Model (HAM).
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While the initial strategy is to focus on pushing HAM assets for the trust, the company is open to adding Build Operate Transfer (BOT-Toll) and Toll Operate Transfer (TOT) assets as well.
In BOT-Toll, the contractor is required to build the roads from its funds and bear the construction risk, which it can profit from by having toll collection rights.
In TOT, the operator pays the tendering authority for the exclusive toll rights on operational highways for a specific period.
The highway authority pays the contractor through annuities for projects in HAM.
InvITs have proven to be successful for highway developers, with a majority of total infrastructure trusts belonging to highways. The Centre’s National Monetisation Pipeline (NMP) has been pushed the most by the National Highways Authority of India (NHAI), partly through its own InvIT.
“InvIT is a ring-fenced structure and provides better accretive value to the unit holders and sponsor. It is also tax efficient and provides a great long-term monetisation strategy for the sponsor,” Satnaliwala said.
GCL has appointed SBI Capital Markets as the book-running lead manager (BRLM) for the proposed issue. SBICAPS started the process and InVIT is expected to be launched sometime in August.
“GCL wants to bid for higher value projects and diversify further into modes such as Build Operate Toll (BOT-Toll) projects, in the future, for which monetisation is an essential strategy. The company has 26 HAM assets,” Satnaliwala said.
Around 16 assets are likely to be put up for the InvIT in the coming three to four years, according to the CEO.
“We are talking to pension and sovereign funds, and are also reaching out to domestic mutual funds,” the CEO said in context of the fundraise. “We have not decided on whether the InvIT will be private or public, but will have more clarity once we have the anchor investor in place,” he added.
In October 2023, CRISIL Ratings said the share of HAM assets in highway InvITs will grow in the coming years.
“The share of HAM projects in InvIT AUM (assets under management) is expected to increase to 20-25 per cent by March 2025 from Rs 7% currently. This is because InvITs are looking to diversify their pool by adding HAM projects in the current toll-heavy portfolios. Additionally, InvITs comprising only HAM projects are also in the offing,” the rating agency had said.
“Having a diversified pool of HAM and toll assets will strengthen the business risk profiles of InvITs. HAM assets have the advantage of a steady revenue stream with price and interest rate indexation, thereby lending more stability to the cash flows of InvITs,” it added.