Portfolio diversification on your mind? NHAI InVIT NCD issue yielding 8.05 opens on Monday. Is it for you?
Photo : BCCL
The National Highway Authority of India (NHAI)-sponsored infrastructure investment trust National Highways Infra Trust (NHAI InvIT) has filed papers with Sebi for the issuance of Non-Convertible Debentures (NCDs) to raise Rs 1,500 crore.
The issue opens on Monday, October 17, 2022 and closes on Monday, November 7, 2022 with an option of early closure.
The NCDs would carry a coupon of 7.90% payable semi-annually and would be available for subscription by both retail and institutional investors. The issue has a long dated maturity of 24 years. The minimum investment amount is Rs 10,000 and 25% of the issue is reserved for retail investors. The coupon is 7.9% payable half yearly, which works out to 8.05% interest for the year.
The minimum application size would be Rs 10,000 for 10 NCDs and thereafter in multiples of Rs 1,000 for 1 NCD thereof. For each NCD allotted, the investors will be allotted 3 STRPPs of different ISINs which are individually tradeable post listing. The NCDs are being issued in form of STRPP A with tenor of 13 years, STRPP B for tenor of 18 years, and STRPP C for tenor of 25 years. Interest payments is through various modes available.
“STRPPS offers part payment of principal along with the interest of the bond after pre-defined number of years. NHIT will offer NCD of Rs 1000 each which is divided into 3 STRPPS of (300, 300 and 400 each). The cashflow is as follows: For Rs. 300 STRPP: Six annual payments of Rs 50 each, starting from 8th Anniversary until Maturity. For Rs. 300 STRPP: Six annual payments of Rs 50 each, starting from 13th Anniversary until Maturity For Rs. 400 STRPP: Six annual payments of Rs 50 each, starting from 13th Anniversary until Maturity,” according to ICICI website.
The NCDs will list on NSE and BSE so potential investors can cash out in the seconday market, which addresses the issue of liquidity. But, please be warned that NCDs usually have low trading volumes in the secondary market.
Also, note that gains on debentures held for less than a year and sold in the secondary market attract short-term capital gains tax. NCDs held for a year or longer attract Long term capital gains of 10% without indexation benefits at the time of selling in the secondary market.
While the NCDs are not guaranteed by the government or NHAI, it carries AAA rating from CARE Ratings Limited and India Ratings and Research Private Limited. However, the NCD issued by NHAI InVIT are secured, which means that investors will be paid back in case of bankruptcy by selling assets kept as collateral.
What is NHAI InVIT?
InVIT trusts manage revenue-generating operational infrastructure assets such as highways, roads, pipelines, warehouses, power plants, etc. NHAI InVIT currently has road assets only. Through dividends, they offer regular income and long-term capital appreciation.
InvITs allow the pooling of money from multiple investors into a single trust Trust which is professionally managed by an Investment Manager who invests in infrastructure assets or special purpose vehicles (SPVs) holding such infrastructure assets.
“InvITs are market-traded investments that allow investors to get part ownership in infrastructure projects. They are professionally managed so they provide the ownership benefit to investors without any hassles related to managing the projects,” explained Aditya Shah, a SEBI-registered investment advisor.
The NHAI is a premier nodal government agency responsible for the development of national highways in India. National Highways Infra Trust (NHIT) is an infrastructure investment trust, formed under the Indian Trust Act, 1882 and registered as an Infrastructure Investment Trust (InvIT) under SEBI (Infrastructure Investment Trust) Regulations 2014.
NHAI InVIT was launched as part of the government’s National Monetisation Plan (NMP), a government plan to generate revenues from central government assets, with an aggregate monetisation potential of Rs 6 lakh crore over a four-year period from FY 2022 to FY 2025.
Canada Pension Plan Investment Board (CPP Investments) and Ontario Teachers’ Pension Fund each own 25% equity in the NHAI InVIT; CCP investments recently infused C$257 million more into the InVIT.
The NHAI InVIT currently owns five road assets: Abu Road - Swaroopganj section, Chittorgarh – Kota and Chittorgarh Bypass section, Kothakota Bypass – Kurnool section, Maharashtra/Karnataka Border (Kagal) – Belgaum section, and Palanpur/Khemana Abu Road section have been transferred to the InvIT. All five projects generate revenues through toll operations.
NHIT has also proposed bring additional three road assets with a total length of 247 Kms under InvIT. The projects include Agra Bypass, Borkhedi- Kelapur- Telangana state border, and Shivpuri-Jhansi section, and has entered into a Concession Agreement with NHAI for 20 years.
