NHAI To Go Aggressive On TOT Model; Plans IPO

by Vinaya HS on September 25, 2017

in Finance

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The latest share market news points out that the National Highway Authority of India (NHAI) could soon go public and come up with their IPO.

To increase the funds for the construction of the highway in the times when the private investment is weakening, the NHAI has come up with a plan of an aggressive monetizing of their projects by transferring these on a long-term lease to global funds. It has been strategizing to hit the capital market by upcoming IPO or initial public offering. Though the process might take a few months to be finalized.

NHAI has the Budget support like they have a share of the road cess proceeds and also the toll revenue but the NHAI has conventionally raised debt through taxable and tax-free bonds. NHAI has said that If the road transport and highways ministry helps, they will hit the equity market but for that they seek corporatization.

IPO have been doing good lately and hence many companies want to join the league to take an advantage of it. There were almost 20 new listings in the year 2017 till now and many companies are in pipeline with their IPOs for the remaining year. Among other public-sector entities, IRCTC and IRCON are also expected to raise funds from the capital markets. SBI Life Insurance, ICICI Lombard are also going to hit in the Indian equity markets.

It was witnessed that in the months between the April to August’2017, the speed of the construction was only 21 km/day. The NHAI has been asked to construct 6,000 km highways in the year 2018 and award 10,000 km projects. The central government has been targeting to increase the highway construction to 41 km/day. But, NHAI has only constructed 972 km and awarded an unimpressive 315 km in the first five months of this year. In the financial year 2017, NHAI has constructed 2,628 km and awarded 4,355 km.

The experts share that it might not be easy for NHAI to have a convenient IPO process and it also might be a time taking process. NHAI may have a tough time catching up the compliance and disclosures. Currently, even their annual reports have come with a delay of one year. Also, because NHAI is not a profit-making organization and they had already suffered the losses amounting to Rs 221 crore in the year 2015-16, hence NHAI will have to explain to the potential investors and assure them on the returns on equity and profits they would make.

As per the chairman of NHAI, Deepak Kumar, he sis not comment much on the upcoming IPO, but revealed that they are hoping to raise Rs. 7,000 Cr. by giving 9 nine projects in the first tranche under the toll-operate-transfer (TOT) model soon. This TOT model, through which the government is planning to lease out 75 operational national highways to the private players that also includes the global funds with long-term capital, will be creating a business opportunity for existing players and for the new entrants as well.

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