Thursday, July 21, 2016

Investors queue up to rescue highway projects

Macquarie, Brookfield and Cube Highways are among a clutch of investors that have taken up equity in 10 nationalhighway projects worth Rs 4,150 crore from which private promoters have exited.

The government is also chalking out the entry of sovereign funds from Abu Dhabi and Qatar into such projects.

  • Macquarie, Brookfield & Cube Highways picked up equity in 10 national highway projects
  • Private promoters had exited these projects
  • Cabinet approved exit policy for developers in May 2015
  • Exit policy allows developers to divest 100% equity in projects 2 years after the completion of construction

To provide a thrust to the highway sector and to bring the private sector back on board, the Cabinet in May 2015 approved an exit policy that permitted concessionaires to divest 100 per cent equity two years after completion of construction.

According to Raghav Chandra, chairman, NHAI, all the 10 projects are cases of full exit. “We want promoters who have built roads to come in. They are more focused,” he said.

This Cabinet decision was taken in the backdrop of public-private partnership projects not attracting bidders because of lack of equity in the market. The move is also aimed at unlocking equity from completed projects.

Chandra said investment through sovereign funds was being discussed with the department of economic affairs in the ministry of finance. “These could go directly or through the National Investment and Infrastructure Fund (NIIF),” he added.

The government has conceived the NIIF as an institution to invest directly in infrastructure projects, sub-funds, or in the equity of infrastructure finance companies like the Indian Railway Finance Corporation and the National Housing Bank.

The NIIF will not borrow on its own but sub-funds in which the NIIF invests can leverage by borrowing funds and also attract additional equity investments from other investors, thereby increasing the total funds available.

“The NIIF has the potential to be a game changer for the Indian infrastructure sector. However, the model will take some time to establish. To begin with, investments are likely to be towards operational projects due to their lower risk profile. Nevertheless, this will help in releasing the capital of developers,” an ICRA report said.

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