In the third round of fundraising, the National Highways Infra Trust (NHIT) will let retail investors become equity partners in Indian infrastructure projects such as roads for the first time, the people said, requesting anonymity.

InvITs are instruments, on the lines of mutual funds, that pool money from investors and invest in assets that provide steady cash flows over time. InvITs typically enable infrastructure developers to monetize assets under a single entity (trust structure). Such infrastructure trusts are popular among investors, especially in the case of long-term revenue-generating assets, such as toll roads, as it helps provide stable and long-term yields.

So far, retail investors were not allowed to invest in these projects, and most road sector InvITs remained private, with participation from institutional investors, pension funds and banks. In NHIT’s just-concluded second round of funding, however, retail investors were given 25% reservation for the first time in the ₹1,500 crore debt issue, allowing the trust to go public.

Enthused by retail investors’ participation in the non-convertible debentures (NCD) issue (the retail portion of NCD got subscribed 3.16 times), NHIT may now allow equity participation, providing investors with a lucrative investment option in India’s growing infrastructure sector, one of the people cited above said.

NHIT managing director and chief executive Suresh Goyal said the third round of capital market funding proposed next year would be much bigger than the second round, where the InvIT raised close to ₹2,700 crore. It would be a combination of equity, debt and bank loans, but the quantum and timing would depend on the market conditions, Goyal said.

He said retail investors invested in NCDs of NHIT in large numbers, and in the next round of funding, even greater participation may be expected. He, however, did not disclose reservation details, saying a lot would depend on market conditions, selection of roads, viability and traffic projections.

It is expected that the next bundle of about three to four road projects of about 250km in length worth over ₹4,000 crore may soon be offered by NHAI to its InvIT, for which funding would need to be completed before the end of this fiscal. Some completed road projects have already come to the NHIT fold, and more are expected to be assigned before the end of the current calendar year.

“We will go to the market to raise funds for these new road projects to be acquired by NHIT,” Goyal said. Part of the money raised in the third round would go towards acquiring road assets from NHAI, while another part will be used to operate and maintain roads to generate higher revenues.

NHAI launched its InvIT in October last year, intending to mop up ₹5,100 crore as part of the government’s long-term plans to monetize road assets. The InvIT acquired five toll road assets of 390km, spread across Rajasthan, Gujarat, Telangana and Karnataka initially. Earlier in June, NHAI offered an additional three roads aggregating 247km to its Infrastructure Investment Trust (InvIT).

The road assets brought under the InvIT had an enterprise value of ₹8,000 crore. So far, NHAI has raised ₹10,000-11,000 crore via the InvIT route in two funding rounds. In the first round, money was raised largely from institutional investors, pension funds and global equity investment firms, including CPP Investments and Ontario Teachers’ Pension Fund. In the second round, NHIT raised over ₹2,500 crore through a follow-on market offer for institutional investors and an NCD issue which got listed on 28 October.

Questions sent to the spokespeople for NHAI and the ministry of road transport and highways (MoRTH), the nodal ministry for the highway developer, remained unanswered until the time of going to press.

NHAI is looking at monetizing highway stretches with a combined length of 1,750km in 2022-23 to raise around ₹20,000 crore. A lot of these assets will fall with NHIT.

Also, NHAI has a project bank of 20,000km of completed roads, and there are roads where traffic movement has stabilized over time. NHAI is offering these roads in bundles and will offer projects worth ₹40,000 crore in the next two financial years.

Former road transport and highways secretary Giridhar Aramane said in an interview earlier that two bundles of road assets of 500km (around 250km each) have been identified for monetization through NHAI InvIT this year. While the first bundle of around 250km of road assets has already been moved to NHIT and monetized in the second round, the next batch of around 250km of completed road assets worth ₹4,000 crore will be offered to the InvIT before December.

All these road bundles are operational NHAI highway assets with a track record of high toll revenues amid rising road traffic. More projects would be considered for monetization under the InvIT route this year, but a call would be taken in the last quarter, depending on the market appetite.

Roads form a significant portion of the national monetization pipeline. Last year, the central government had identified national highway and road assets worth ₹1.6 trillion to be monetized by 2024-25, of the total monetization target for the same period is ₹6 trillion.