Fastag adoption, new projects to improve NHAI cashflows: Report

Faster asset monetization, coupled with stricter implementation of Fastags and speeding up the pace of construction will help address the cash-flow issues plaguing NHAI, says a brokerage report.

It can be noted that NHAI has been facing funding and cash flow issues leaving many of its projects stalled. The national road builder’s debt has risen eight times between fiscals 2014 and 2019 to Rs 1.8 lakh crore, primarily due to spiralling land cost which generally makes up 30-35 percent of a project cost.

This had the PMO intervening in recently and forcing Nripendra Misra, the principal secretary to the prime minister, on August 17, 2019 writing to roads and highways secretary Sanjeev Ranjan questioning the operational performance of NHAI and suggesting that it stopped building new roads but focus on asset monetisation.

The government has made it mandatory on all vehicle owners to adopt electronic toll payment using Fastags or any other such means and not cash payment which will attract penalties from December 1.

In a report on Monday, Kotak Securities said financial condition of NHAI may improve from the fourth quarter, especially given the recent higher bids for ToT 3 projects at Rs 5,011 crore, marginally higher than the bid price, have come at 15x of FY2018 toll collection thereby meeting 50 per cent of its full year target.

It can be noted that Cube Highways, backed by the IFC, recently offered Rs 5,011 crore for a 30-year concession to NHAI whose reserve price was Rs 4,995.48 crore.

“Stricter implementation of FASTags across the country from December 1 and coupled with asset monetization through ToT, InVIT and securitisation models will ease cash flows for NHAI, resulting in improvement in awarding activity from NHAI,” Kotak report said.

According to the current plan, NHAI plans to monetise around 6,165 km till FY25 and we believe related sale of toll rights for a 30-year period at similar valuations would take care of 25-30 percent proportion of NHAI’s current debt.

“With a target to raise Rs 11,000 crore, Rs 12,100 crore and Rs 13,300 crore through ToT asset monetization for the fiscal 2020-22, respectively, and Rs 38,600 crore through securitisation, these proposals are in the right direction to bridge the financing gap,” the report said.