Company Overview
Bharat Highways InvIT (Bharat InvIT) is an infrastructure investment trust established to acquire, manage, and invest in a portfolio of infrastructure assets in India and to carry on the activities of an infrastructure investment trust, as permissible under the SEBI InvIT Regulations. They were settled through the Original Trust Deed, by GRIL (GR Highways Investment Manager Private Limited) – the Settlor, and registered as an infrastructure investment trust with SEBI on August 3, 2022. The Sponsor – Aadharshila Infratech is engaged in testing services in the field of transportation engineering and has expertise in NSV survey, FWD survey, pavement design of roads and airports, physical and chemical testing of soil, lime, cement, road roughness testing, concrete and bituminous mix design of road projects. Nagaur Mukundgarh Highways Pvt. Ltd. (NMHPL), the Associate of the Sponsor is a road engineering, procurement, and construction company, with an experience in the design and construction of various road/highway projects. NMHPL has over six years of experience in the execution of infrastructure projects since 2017. Bharat InvIT’s initial portfolio consists of seven road assets, all operating on a HAM (hybrid annuity model) basis, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra, and Uttar Pradesh. As of January 31, 2024, the projects, which are owned, operated, and maintained by the Project SPVs, comprise the InvIT assets consisting of around 498 km of constructed and operational roads across the above five states in India. These roads are operated and maintained under concession rights granted by the NHAI and are owned and operated by the Project SPVs, which are currently wholly owned by GRIL. Further, the Bharat InvIT proposes to enter into a ROFO (right of first offer) agreement with GRIL, under which GRIL will grant a right of first offer to the InvIT to acquire certain other assets owned and developed by GRIL. All of the InvIT assets are HAM projects awarded by NHAI and its revenue stream is primarily through annuity payments from the NHAI. GRIL is monetizing future annuity payments (including interest payable thereon) and O&M (operations and maintenance) income receivable from the NHAI by transferring the InvIT assets to the Bharat InvIT. The net distributable cash flows of the InvIT (Distributable Income) are based on the cash flows generated from the underlying operations undertaken by the Project SPVs. In terms of the SEBI InvIT Regulations, the Project SPVs shall distribute not less than 90% of the net distributable cash flows to the InvIT, proportionate to the InvIT’s holding in the Project SPVs. In addition, each Project SPV has entered into a long-term Concession Agreement with the NHAI, with each agreement having a residual operations period of between 11.1 and 13.5 years as of January 31, 2024, thereby providing long-term cash flows to the Bharat InvIT. On a collective basis, the InvIT assets had a weighted average (based on bid project cost) residual project life of approximately 12.0 years as of January 31, 2024.
Objects of the issue:
The net proceeds will be utilized by the InvIT towards the following objects:
- Providing loans to the Project SPVs for repayment/ pre-payment, in part or in full, of their respective outstanding loans (including any accrued interest and prepayment penalty); and
- General corporate purposes.
Investment Rationale:
Sizeable portfolio of stable revenue-generating assets and long-term predictable cash flows
Bharat InvIt owns an initial portfolio consisting of seven InvIT assets having an aggregate length of approximately 498 km located on national networks across five states in India. The projects are located on national highway networks that experience both commercial and passenger vehicular traffic. In addition, each project SPV has entered into a long-term Concession Agreement with the NHAI, with each agreement having a residual operations period of between 11.1 and 13.5 years as of January 31, 2024, thereby providing long-term cash flows to the InvIT. On a collective basis, the InvIT Assets had a weighted average (based on bid project cost) residual project life of approximately 12.0 years as of January 31, 2024. Given that all its InvIT assets are on a HAM basis, its entire revenue is expected to continue in the future from annuities paid by the NHAI, which signifies the steady nature of income for the InvIT. In a HAM project, the concessioning authority shares a portion of the total project cost during the construction phase. As a mix of EPC and annuity models, HAM reduces the financial burden of a concessionaire during the project construction phase and provides assured revenue in the form of annuities, interest on reducing balance of completion cost (BCC), and O&M payments linked to inflation in the operational phase. Annuity payments eliminate the risk of income fluctuations resulting from changes in traffic volume. The geographically diverse project portfolio and its expertise leveraged from existing projects provide them with an advantage in capitalizing on new opportunities available in the roads and highways sector.Through the proposed ROFO Agreement, Bharat InvIT will have a right of first offer to acquire certain assets of GRIL, their proposed significant Unitholder, and the current majority shareholder of the Project SPVs, including the projects currently owned by GRIL or which may be acquired or developed by GRIL or its existing or future subsidiaries.
Consistent track record in operating and maintaining projects in the road sector
Bharat InvIT intends to leverage the experience and expertise of its sponsor, and its associate NMHPL, to gain a competitive advantage within the road and highways industry. NMHPL is a road engineering, procurement, and construction company, with experience in the design and construction of various road/highway projects and has over six years of experience in the execution of the projects. NMHPL has undertaken the development and augmentation of road projects in the state of Rajasthan, by two-laning / intermediate laning on an annuity basis, under a concession agreement dated March 3, 2017, entered with the Public Works Department, Rajasthan. The Sponsor has an established track record of assessing the roughness and balance life of road projects, which enables it to determine the appropriate maintenance activity to be undertaken on the road projects. The Sponsor will also act as the Project Manager of the InvIT. The Investment Manager intends to expand its initial portfolio by identifying and acquiring additional road projects that meet the investment objective in accordance with the provisions of the Amended and Restated Trust Deed.
Valuation and Outlook:
Bharat InvIT intends to leverage the experience and expertise of its sponsor, and its associate NMHPL, to gain a competitive advantage within the road and highways industry. NMHPL is a road engineering, procurement, and construction company, with experience in the design and construction of various road/highway projects and has over six years of experience in the execution of the projects. NMHPL has undertaken the development and augmentation of road projects in the state of Rajasthan, by two-laning / intermediate laning on an annuity basis, under a concession agreement dated March 3, 2017, entered with the Public Works Department, Rajasthan. The Sponsor has an established track record of assessing the roughness and balance life of road projects, which enables it to determine the appropriate maintenance activity to be undertaken on the road projects. The Sponsor will also act as the Project Manager of the InvIT. The Investment Manager intends to expand its initial portfolio by identifying and acquiring additional road projects that meet the investment objective in accordance with the provisions of the Amended and Restated Trust Deed.
