State Bank of India , India’s largest lender, is “examining” a proposal from the National Highways Authority of India (NHAI) to lend as much as ₹ 35,000 crore through securitisation of toll receipts to part-fund highway projects this year, Chairman Rajnish Kumar has said.

“We are examining NHAI’s proposal to raise funds through securitisation of toll proceeds. We are looking at ₹ 30,000-35,000 crore, but not all of that will be funded by SBI,” Kumar told BusinessLine on the sidelines of a road show organized by NHAI on Monday.

“NHAI has huge cash flows. We are ready to give money to whoever needs it. It depends on how much and which route/model needs money,” he said.

Part of NHAI borrowings this fiscal could also be funded by LIC and EPFO, a top LIC official said. During the last three years, the state-run insurer has lent about ₹25,000 crore to NHAI for a 30-years tenure, the LIC official said adding that being an insurer with long-term funds, LIC was not handicapped by the asset-liability mismatch which banks typically face in funding long-gestation infrastructure projects.

Road Transport & Highways Minister Nitin Gadkari said that NHAI will securitise/monetise toll receipts from projects and raise funds.

“We have prepared a proposal to raise long-term loans by securitising toll proceeds. My proposal was for 30 years, but the SBI chairman has reduced it to 20 years. We can raise ₹100,000 to ₹ 150,000 crore from SBI alone and from other banks also we can go for a similar arrangement. It is a secured thing, NHAI has AAA rating,” Gadkari said during the road show in Mumbai.

Gadkari optimistic

“Currently, NHAI is tolling about 12,000 km and another 1,300 km of BOT Toll highways will be transferred back to us by FY22,” said Ashish Sharma, Member (Finance) NHAI.

“The toll collections from these projects are very high; our toll income will increase to about ₹4,000 crore a year when these BOT Toll projects as returned to us at the end of the concession period,” Gadkari stated.

“Toll is never going to end. Even after the cost has been recovered from the projects, the toll collection will continue. NHAI getting toll income in perpetuity is a very good proposition,” Gadkari said.

“If banks are convinced about the cash flows of highway projects, what is their net present value (NPV), then funding is not an issue. At least from SBI, we have been supporting the programme of NHAI, whether it is the Hybrid Annuity Model (HAM) and securitisation. We are willing to put the money,” Rajnish Kumar said.

The tenure also can be taken care of through a refinancing structure where we need not commit for 20 years, it is not necessary that the loan has to be refinanced every five years, banks can manage their asset-liability through a suitable structure.

InvITs

NHAI’s Sharma said that the agency would be coming out with its infrastructure investment trusts or InvITs. “That is something which has been proposed and we are waiting for cabinet approval which is expected by the middle of this month,” Sharma said adding that NHAI will also raise funds through masala bonds this year.

“We can also participate in infrastructure investment trusts, but that is something which is still under the consideration of the Reserve bank of India (RBI),” SBI’s Kumar said.

“As of now money is available and road sector is probably the only sector where at least good investment is happening,” Kumar said, advising NHAI to put safeguards in place while re-introducing the BOT Toll model for highway development.

“In the past, the BOT Toll model has not succeeded for various reasons. When the policy (revised BOT Toll model) comes, at that stage we will examine and see what would be our response. But, when you do BOT Toll projects, keep EPC contractors out of it. They should only construct not operate, it has been a very bad experience,” he added.

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