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MOSL : INFRASTRUCTURE: Project Awarding muted in 1H FY23; NHAI looks to fast track asset monetization process

Infrastructure: Project Awarding muted in 1H FY23; NHAI looks to fast track asset monetization process

• Project awarding by agencies such as NHAI has been soft in 1H FY23 with 810 kms of projects awarded. Road construction by NHAI in 1H FY23 stood at 1,471 km. With a target of 6,500 Kms in FY23, 2H would require massive project awarding to achieve the targets.
• Toll collections have been on an upswing with FASTag-based toll collections clocking INR 255.4b in 1H FY23 with a daily run-rate of ~INR1.4b.
• Asset monetization is the key focus area for NHAI to raise funds outside of budgetary resources. National Highways Infra Investment trust (NHAI InVIT) has successfully closed its second fund raise of INR 14.3b for part funding of three road assets, stretching 246 kms. Since its launch in Nov-21, NHAI InVIT has raised INR 94.3b in two tranches with a total portfolio of eight road assets of 636 kms. However, the movement has been slow as far as Toll operate Transfer (ToT) projects are concerned.
• NHAI has prepared a pipeline to monetize 1,750 kms of assets in FY23 but a faster execution is required to meet the monetization targets.
• DFCCIL has revised the timeline for Dedicated Freight corridors projects and they are now expected to be completed by mid-2024.

 

NHAI awards 810 kms of projects in 1H FY23; targets 6,500 kms in FY23

1H FY23 has been muted with only 810 kms of projects awarded till date. Owing to the weak 1H, NHAI would have to accelerate project awarding in 2H FY23 in order to meet its target of 6,500 kms in FY23. In terms of construction, NHAI is looking to construct 5,000 kms of projects in FY23 and has completed 1,471 kms in 1H FY23.

Fastag toll collections continue on its upswing

The onset of the festive season and pickup in economic activity led to ~54% YoY growth in daily average Fastag toll collection in 1H FY23. Fastag volumes grew 58% YoY to 1.63b, taking the total Fastag toll collection to INR 255.4b in 1H FY23. Improved toll collections are critical for faster monetization of road assets by the Road Ministry and would also help companies looking to monetize their existing toll assets.

 

Asset Monetization picks pace

• After hitting a slow track in monetization of road assets through ToT bundle route, NHAI has been able to monetize its road assets via InVIT. NHAI InvIT has raised a sum of INR 14.3b in Oct-22 from domestic and international investors through placement of its units, for part funding its acquisition of three additional road projects stretching 246 kms. In Nov-21, NHAI InvIT had raised INR 80b in its maiden round with initial portfolio of five operating toll roads of aggregate length of 390 kms. Additionally, NHAI InvIT has filed prospectus with SEBI for issuance of NCDs to raise INR 15b. The NCDs would carry a coupon of 7.9% payable semi-annually and would be available for subscription by both retail and institutional investors.
• The Ministry of Road transport has identified a list of projects aggregating to 1,750 kms to be monetized, through ToT and InVIT, in FY23. The authorities need to ensure faster execution to meet the monetization targets.