NHAI, InvIT and its structure and How fund raising for upcoming Highway Projects - Infrastructure Investment Trusts as Fundraiser

National Highways Authority of India has setup National Highways InvIT Project Managers Private Limited (NHIPMPL) as a Project Management Company (PMC) for operating and managing InvIT assets. It is 100% subsidiary of NHAI under the umbrella of NHAI InvIT structure. PMC is solely responsible for the entire operations and maintenance of the roads, execution of improvement works and adherence to the Concession Agreements as well as SEBI’s InvIT regulations.??

Sponser :- NHAI is an autonomous body under MoRTH, and was established on June 15, 1989, by the NHAI Act, as a body corporate, having a perpetual succession and common seal. It was made operational in February, 1995, with the appointment of the Chairman and other Members. NHAI is responsible for the development, maintenance and management of the national highways in India entrusted to it by the Central Government.

NHAI has an all India presence through its different offices (regional offices/project implementation units/corridor management units) in different cities. The functioning of NHAI is governed by NHAI Act, and the rules and regulations framed thereunder.

Trustee :- IDBI Trusteeship Services Limited is the Trustee to the Trust. The Trustee is a registered intermediary with SEBI under the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993, as a debenture trustee. The Trustee's registered office and principal place of business is situated at Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai 400 001, Maharashtra. The Trustee is jointly promoted by IDBI Bank Limited, Life Insurance Corporation and General Insurance Corporation for providing corporate and other trusteeship services.

IDBI Trusteeship provides following services: (a) to act as (i) a debenture or bond trustee; (ii) a security trustee or facility agent; (iii) a securitization trustee; (iv) a share pledge trustee or share monitoring agent; (v) an escrow agent; (vi) a venture capital fund trustees, trustee of an infrastructure investment trust or a trustee to an AIF; and (b) providing services including (i) safe keeping or locker services; (ii) management of private trusts or execution of wills; and (iii) special corporate services.

For further information about Trustee, please visit its website at?https://idbitrustee.com/

InVIT was set up by the NHAI to monetise its assets and raise funds to build highways. Recently, the National Highways Authority of India (NHAI) has decided to use Infrastructure Investment Trust(s) (InvIT) as a vehicle for mobilising funds for constructing road infrastructure.

Infrastructure Investment Trusts: InvITs are instruments that work like mutual funds. They are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time. Part of this cash flow would be distributed as dividend back to investors. The minimum investment amount in an InvIT Initial Public Offering (IPO) is Rs 10 lakh, therefore, InvITs are suitable for high networth individuals, institutional and non-institutional investors. InvITs are listed on exchanges just like stocks — through IPOs. However, the Indian InvIT market is not yet mature and has supported the formation of 10 InvITs till date of which only two are listed. The InvITs listed on the stock exchange are IRB InvIT Fund and India Grid Trust. InvITs are regulated by the Securities and Exchange Board of India (SEBI) (Infrastructure Investment Trusts) Regulations, 2014. Structure of InvIT: Like mutual funds, they have a trustee, sponsor(s), investment manager and project manager. Trustee has the responsibility of inspecting the performance of an InvIT. Sponsor(s) are promoters of the company that set up the InvIT. Investment manager is entrusted with the task of supervising the assets and investments of the InvIT. Project manager is responsible for the execution of the project. 1/2 Need: In October 2017, the Centre had launched Bharatmala Pariyojana for the development of 24,800 km of roads at a total investment of Rs. 5,35,000 crore. In order to complete the projects, NHAI needs adequate funds and one of the options is to monetise the completed and operational National Highways assets and offer attractive schemes to private players to invest in construction of National Highways. Benefit: At a time when private sector investment in the economy has declined, fundraising by NHAI and spending on infrastructure will not only provide a fillip to the economy, but will also crowd-in private sector investment. NHAI’s InvIT offer, which is expected to come soon, is a way for the government to tap alternative sources of financing to boost public spending in the roads and infrastructure sector. An InvIT also offers the company the leeway to fulfil its debt obligations quickly. InvIT holders also benefit from favourable tax norms, including exemption on dividend income and no capital gains tax if InvIT units are held for more than three years. Safeguards for Investors: There are certain rules that the InvIT issuers have to follow designed to safeguard the investor. First, the sponsor has to hold a minimum 15% of the InvIT units with a lock-in period of three years. Second, InvITs have to distribute 90% of their net cash flows to investors. Lastly, the InvIT is required to invest a minimum of 80% in revenue generating infra assets.?

to know more visit at https://www.nhaiinvit.in/ and https://www.nhaiinvit.in/project_manager/sponser.html

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