National Highway Infra Trust's First Long-Dated Bonds Offer 8.05% Annualised Return

The infrastructure investment trust sponsored by the National Highway Authority of India is offering an annualised return of more than 8% through a first such long-dated bond issuance.

The upcoming non-convertible bond of National Highway Infra Trust will offer investors a coupon rate of 7.90% semi-annually. The return will be 8.05% on an annualised basis, said Mathew George, chief financial officer of the investment manager for the InvIT.

The bond issue will raise up to Rs 1,500 crore, and comprises a Rs 750-crore base issue and an additional Rs 750 crore for oversubscription. 25% is reserved for retail investors.

The NHIT, a private investment trust, is backed by the Government of India and investors including Canadian pension funds—Ontario and CPP, which own a combined 50%. NHAI owns around 15% and remaining held by domestic institutional investors like Insurance companies, provident funds, National Pension Scheme, wealthy investors and family offices.

The issuance has three components: 13-, 18- and 25-year bonds—each of which can be traded separately on the BSE and the NSE.

The NCDs offer a coupon rate that is better than the 10-year sovereign bond yield of 7.44%. And issuance targets investors looking for more than 8% near-risk-free return over 13 to 25 years tenure, besides those who consider the rate cycle may have peaked or is close to that.

The NHIT NCD is backed by the government and provides higher return over a long-term basis, said financial planner Harshvardhan Roongta. "It has better return than senior citizen savings scheme of 7.6%, which is for just five years compared to this bond which between 13 and 25 years."

• Issue Opens: Oct. 17

• Issue Closes: Nov. 7

• Coupon: 7.9% for each STRPP payable semi-annually; annualised 8.05%.

• Minimum application amount: Rs 10,000; in multiples of Rs 1,000 thereafter.

• Face value: Rs 1,000; each bond comprises of three separately transferable and redeemable principal parts or STRPPs—comprising 13-year bond of Rs 300 face value, 18-year bond of Rs 300 face value and 25-year bond of Rs 400 face value.

• Redemption: In equal instalments to begin in the 8th, 13th and 18th years for the three STRPPs.

The NHIT is raising close to Rs 3,000 crore in the second round of fundraising. This included sale of units to existing and new institutional investors for Rs 1,430 crore; and Rs 1,500 crore to public through the bond offering.

The money will be used for acquiring three additional assets from the NHAI: the Agra bypass, Borkhedi-Kelapur and Shivpuri-Jhansi roads that are part of the Golden Quadrilateral, east-west and north-south corridors.

The assets together will have close to Rs 300 crore in annual revenue, said Suresh Goyal, managing director and chief executive officer at NHIT, told BQ Prime.

The infrastructure trust will have eight asset on a toll-operate-transfer basis. Its revenue is expected to rise 7-10% annually on the back of in-built tariff hikes and traffic growth in the 20 to 30-year concessions.

The NHAI is transferring assets under the The National Monetisation Pipeline, which plans to 26% India's road and highway assets.

There is no plans to launch another InvIT in the near future, said Goyal, indicating more assets will be added to the InvIT and the government can taking it public.