Road assets worth Rs 20,700 cr on block for monetisation: ICRA

Revenue-generating road assets worth Rs 20,700 crore have come on block for monetisation, says ratings agency ICRA.

The agency, in a report, said that M&A deals in road sector over the past three years (CY2019-YTD CY2021) have been mainly driven by developers` intent to monetise operational assets to unlock capital.

The capital generated out of the sale has enabled developers to bid for new projects, reduce debt, or improve their liquidity position.

During past three years, a total of 30 assets were sold with a total project cost of Rs 35,988 crore compared to 52 assets sold during CY2015-CY2018 with a total project cost of Rs 37,019 crore.

"Around 57 per cent of the projects sold between CY2019 to YTD-CY2021 were to relieve the liquidity stress of promoters and 13 per cent were sold as part of the debt reduction plans of the promoter. Currently, about seven projects have signed definitive share purchase agreements while fourteen other assets worth Rs 20,700 crore are on the block for monetisation," said Rajeshwar Burla, Group Head, Corporate Ratings, ICRA.

"Further, around 70 hybrid annuity model (HAM) projects with a total bid project cost of Rs 87,494 crore are expected to become operational by the end of FY2023 and are ideal candidates for takeover where investors prefer revenue-generating assets."

According to the report, out of the 30 projects monetised between CY2019 to YTD-CY2021, 16 were toll, eight were HAM, and four are annuity road projects.

For the eight HAM projects sold, forward sale agreements were in place with the complete transfer of ownership expected to be concluded post fulfilment of certain regulatory requirements.

"While five out of the 30 are state road projects, 21 out of the 30 projects have been operational for more than four years and the median balance concession period stood at 14 years," the report said.

"In case of toll road projects, assets with at least four to six years of operational track record provide more comfort to the investors as the base traffic, growth rates and expenditures pertaining to regular/periodic maintenance would have been established."

In addition, the report pointed out that Infrastructure Investment Trusts (InvITs) have emerged as an important vehicle for unlocking capital of infrastructure developers deployed in operational assets.