The asset monetisation pipeline being targeted for the current fiscal year in India is INR 1.62 lakh crores (USD $20b; GBP $16b), which will be over a 60% jump over the previous year's performance. Last year's performance was led by the roads sector, with over INR 23,000 crores (USD $3b; GBP $2.5b) of road assets being monetised.
The models used for road asset monetisation included toll-operate-transfer (TOT) and NHAI's investment trust (InvIT) placements, both of which have now been established and have seen active participation of both domestic and international investors. The starting gun for this year's monetisation is to be fired shortly, with the next round of TOTs and InvIT placements expected to take place this side of Diwali or Christmas.
At Steer, we have supported our clients across both of these models and have seen a very active interest from investors keen to participate in the road sector monetisation. The macro-economic environment in the current year isn't quite the same as last year's, particularly with higher interest rates, weaker exchange rates and high inflation, which may influence bidding decisions. However, given the past experience and wide interest of both existing and new investors, it is likely that the road sector will again be the leader in this monetisation pipeline being converted to value. As one of our clients has noted, the road sector is
- a proxy of a country's growth;
- protected from inflation; and
- the user pays upfront.
It is these factors that are expected to continue driving the road sector to be the leader in the asset monetisation story of India.