Government plans to fund highways by issuing bonds with attractive returns

As per the Union government contends with financial challenges, it intends to fund-raise by issuance of bonds at attractive returns and support greater private investment in the road segment, as per Union Highway Minister Mr Nitin Gadkari.

The National Highways Authority of India (NHAI) needs to raise 21 per cent more in 2019-20 as the government prepares an outline for executing Bharatmala projects in a time bound way. The authorities have the endorsement to raise Rs 75,000 crore (US$ 10.73 billion) during the current year. In FY19, Rs 62,000 crore (US$ 8.87 billion) was raised through a mix of obligation from banks, toll income and a road monetisation scheme. In FY18, the NHAI's IEBR was Rs 50,532.41 crore. It went up to Rs 62,000 crore (US$ 8.87 billion) in FY19 and further up to Rs 75,000 crore (US$ 10.73 billion) in FY20.

The government’s budgetary help of Rs 36,691 crore (US$ 5.24 billion) has been endorsed for the current year. As per a post-Budget ICRA report, timely monetisation of mature road assets is imperative to get funding to support the aspiring execution targets set for the Bharatmala project.

NHAI wanted to raise Rs 10,000 crore (US$ 1.43 billion) through Bharatmala taxable bonds in 2018-19, yet the highway authority did not issue any bonds last year.

NHAI has got an unsecured loan of Rs 25,000 crore (US$ 3.57 billion) from the State Bank of India for 10 years with 3 years of ban on repayments. This is the biggest measure of loan to have been endorsed to NHAI by institution. This is likewise the biggest long-term unsecured loan authorized by SBI at a time to any entity. SBI has expanded the loan based on one month MCLR.

NHAI has generally depended on borrowings through long term bonds issued to different investors, including LIC, EPFO and other qualified investors. It had fund-raised through masala bond issue (rupee denominated), which turned out in May 2017, and pulled in offers worth over Rs 3,000 crore. The proceeds from the rupee-denominated offshore bonds were utilised for NHAI project.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.