Bharatmala bonds to debut in October

The first retail bond to raise funds for Bharatmala Programme is likely to hit the domestic market in October this year.

The bond will be issued by the National Highways Authority of India (NHAI) and titled as ‘Bharatmala Bond’ to raise around Rs 3,000 crore.

“NHAI has AAA rating. I will be going to the US to raise funds. I will be coming to Mumbai in October to launch bonds in the domestic market. My wish is that if foreign investments are coming in, its good, but I want common people to contribute too. I want to make highways from your money (investments),” said Minister of Road Transport and Highways (MoRTH) Nitin Gadkari.

With a coupon of 8.50%, the ministry is confident to raise approximately Rs 3,000 crore in size.

“For retirement purposes, people invest in banks where you get 6% interest on your deposits. I will give you 2.50% more. I will give you 8.50% interest per annum for a period of five years and the interest will be paid out monthly,” said Gadkari.

Around one-and-a-half years ago, the finance ministry had cleared NHAI to raise funds Rs 70,000 crore through infrastructure bonds. This Rs 3,000 crore will be part of the overall Rs 70,000 crore that is to be raised to implement and execute the Bharatmala Programme.

Earlier this month, NHAI and the State Bank of India (SBI) signed a Memorandum of Understanding (MoU) for an unsecured loan of Rs 25,000 crore. This is the largest funding secured by NHAI in a single tranche. Observers and analysts have shown concern over this unsecured loan stating that it may even result in a downgrade of NHAI’s rating.

In October 2017, the Union Cabinet had approved Bharatmala Programme involving the construction of around 83,000 kms (including Bharatmala Programme’s first phase of 24,800 kms) with a timeline of FY2022.

The government is also raising funds through another mode of putting up road assets for auction under the Toll-Operate-Transfer (TOT) model. Already, the first TOT bid in March had drawn an aggressive response from the foreign entities. Macquarie Asia Investment Fund with Ashoka Buildcon as a maintenance partner bagged the first 30-year concession from NHAI for Rs 9,681.50 crore as against reserved price of Rs 6,258 crore. Now, the second TOT package has been floated having a reserved bid price of Rs 5,362 crore.

The funds are needed for Engineering, Procurement and Construction as well as Hybrid Annuity Model (HAM) road projects that the government has been bidding out. Under HAM, the government or its agency pays 40% of the project cost during the initial five years through annual payments (annuity) and the balance 60% is to be invested by the private player thereby helping in reducing risks involved with the project as well as lesser funding required by the private road development companies.