NHAI to earn ₹60,000cr in FY25 through road asset monetization
The National Highways Authority of India (NHAI) is set to significantly increase its revenue by monetizing road assets, with potential earnings reaching up to ₹60,000 crore in the fiscal year 2025. This projection was made by credit rating agency ICRA. The agency anticipates that the monetization of 33 road assets through toll-operate-transfer (TOT) and Infrastructure Investment Trust (InvIT) could yield between ₹53,000 crore and ₹60,000 crore.
NHAI's monetization strategy for 33 road assets in FY2025
In April 2024, NHAI announced a list of 33 road assets targeted for monetization in FY2025. These assets span nearly 2,750km across 12 states and generate an annual toll revenue of ₹4,931 crore. According to Ashish Modani, Vice President and Co-Group Head of Corporate Ratings at ICRA, "Over the last six years, the NHAI has monetized 29 assets across 10 TOT bundles with valuation multiples ranging between 0.44 times to 0.93 times, realizing ₹42,334 crore so far."
Potential lending opportunities and investor attraction strategy
Modani further stated that the monetization of these 33 assets could translate into a ₹38,000-43,000 crore lending opportunity for banks and capital markets based on the debt-to-equity funding ratio seen in past transactions. The NHAI plans to categorize these assets into large (over ₹6,000 crore), medium (₹3,000-4,000 crore), and smaller bundles (₹1,000-3,000 crore) to attract a diverse range of investors.
Role of asset composition in valuation multiple
Modani explained that "The composition of the bundles shall remain a determining factor for the valuation multiple as the presence of road stretches built under the annuity mode/ Hybrid Annuity Mode (HAM), will reduce the requirement for operation and maintenance expenses (for the new concessionaire) and hence, will carry a relatively higher multiple." This indicates that asset composition plays a crucial role in determining their market value.
