India’s vast road network, spanning around 6.3 million km, forms the backbone of the transportation system, driving economic growth and regional connectivity. As a priority sector for the government, the sector has received strong budgetary support. In the Union budget for 2024-25, the Ministry of Road Transport and Highways was allocated Rs 2.78 trillion, an increase of 2.8 per cent over the Rs 2.7 trillion set aside for 2023-24. This represents 25 per cent of the government’s total infrastructure budget for the year. Since 2018-19, the sector has experienced a remarkable 260 per cent increase in budget allocation, growing from Rs 773 billion to Rs 2.78 trillion in 2024-25.
Of late, innovative financing models such as infrastructure investment trusts (InvITs) have also assumed a bigger role. With the uptake of these business trusts, the sector has become a focal point for private investment and asset monetisation.
Lending has remained consistent. Traditionally, banks led the lending activity for the sector. However, the share has gradually shifted in favour of non-banking finance companies, which accounted for over 55 per cent of the overall infrastructure financing credit as of March 2024.
All in all, the consistent funding inflow into the sector has reflected confidence in the sector’s stability and long-term potential.
Unlocking value through asset monetisation
The National Monetisation Pipeline (NMP) remains a cornerstone of the government’s efforts to unlock value from existing infrastructure. Using this framework, the National Highways Authority of India (NHAI) has monetised operational road assets to generate revenue, reduce debt and reinvest in
newer projects.
As of September 2024, road asset monetisation had crossed the Rs 1 trillion mark, raising around Rs 1.17 trillion via monetisation. Around Rs 489.95 billion has been raised via toll-operate-transfer (TOT) bundles, approximately Rs 259 billion through Infrastructure Investment Trusts (InvITs) and Rs 422 billion from the toll securitisation of the Delhi-Mumbai Expressway.
A key milestone in the government’s monetisation effort was achieved during 2023-24 with NHAI exceeding its annual target by raising Rs 160 billion through TOT bundles against a target of Rs 100 billion. Building on this momentum, in September 2024, TOT Bundle 16 was awarded to the Highway Infrastructure Trust for Rs 66.61 billion, marking a strong start towards achieving the monetisation targets for the year.
For 2024-25, NHAI has identified 33 highway stretches, covering 2,750 km, for monetisation. Of these, 21 stretches will be offered through TOT. The authority is targeting to raise Rs 80 billion through project-based financing and Rs 460 billion from TOT and InvITs during this period. These measures underscore an opportunity for investors to acquire operating assets with stable cash flow and, at the same time, generate funds through monetisation for future projects.
Robust lending continues
The lending environment in India’s road sector has gained momentum over the years, driven by the availability of sizeable infrastructure loan books due to continuous infrastructure push by the government. Gross bank credit to the sector surged to Rs 3,180 billion in March 2024, up from Rs 1,665 billion in March 2018, reflecting a CAGR of approximately 11 per cent.
In recent years, public sector banks have also actively issued infrastructure bonds to support long-term financing needs. Notably, in October 2024, the Mumbai Metropolitan Region Development Authority secured a Rs 316.74 billion loan from the Power Finance Corporation for nine key projects, including the Thane-Boriwali Twin Tunnel Project, Thane Coastal Road (Phase I) Eastern Freeway extension from Ghatkopar to Thane, elevated road from NH-4 to Katai Naka, as well as projects for the development of creek bridges, access and elevated roads across the city.
Multilateral development banks (MDBs) have also contributed to financing critical road infrastructure projects in the country. Recently, the World Bank approved a $500 million loan for the Green National Highway Corridor Project, spanning 781 km across Himachal Pradesh, Rajasthan, Uttar Pradesh and Andhra Pradesh. Additionally, the World Bank extended a $452 million loan for the Assam Resilient Rural Bridges Programme. Over the years, the Asian Development Bank (ADB) has consistently supported road projects in India. Other MDBs, such as the Japan International Cooperation Agency, New Development Bank and Asian Infrastructure Investment Bank, have also funded various infrastructure projects in the sector.
The lending activity by domestic financial institutions and international MDBs has created a robust financial landscape, facilitating funding for the development of newer projects.
Rising PE interest
Between 2014 and 2024 (till October), the Indian road sector witnessed over 100 asset sales, with a cumulative deal value exceeding Rs 1.7 trillion underscoring investor confidence in Indian road assets. The continuous investor confidence over the years shows the reliable and high-yield investment opportunities the sector has provided.
Private equity (PE) players have been active buyers of road assets, accounting for over 50 per cent of the total deal value between January 2018 and October 2024. PE investors have primarily focused on operational assets, which have lower risks than under-construction projects. This underscores investors’ preference for stable and revenue-generating assets.
However, of late, under-construction assets have garnered attention. Cube Highways has been a prominent player in this space, actively acquiring road assets since 2018. In 2023, the company acquired TOT Bundles 11, 12, and 14, valued at Rs 142.85 billion. Reportedly, it has also emerged as the front runner in acquiring the National Investment and Infrastructure Fund’s road portfolio, Athang Infrastructure.
In February 2024, Actis acquired four hybrid annuity model (HAM)-based road assets from Patel Infrastructure for Rs 15 billion, including two under-construction projects. Following this, in October 2024, Actis further expanded its portfolio by acquiring the Vindhyachal Expressway for Rs 7.75 billion, signalling its strategic focus on India’s road sector.
Companies have also been active in asset acquisition in recent years, engaging in high-value transactions. In November 2024, Ashoka Buildcon Limited entered into multiple share purchase agreements, acquiring a 34 per cent stake in Ashoka Concessions Limited (ACL) for Rs 15.26 billion. Further, its subsidiary, Viva Highways Limited, plans to acquire a 26 per cent stake in Jaora Nayagaon Toll Road for Rs 1.5 billion, signalling strategic consolidation efforts. In October 2024, Montecarlo Limited disclosed plans to divest nine HAM assets valued at Rs 30.25 billion.
InvIT uptake
InvITs have transformed the road sector’s investment landscape, offering a platform to invest in operational road assets and deliver stable returns to investors.
In September 2024, the Highway Infrastructure Trust acquired TOT-16 for Rs 66.61 billion, while Bharat Highways InvIT acquired GR Aligarh Kanpur Highway Private Limited for Rs 980 million. Moreover, in October 2024, the Indian Highways Concessions Trust (IHCT) signed a share purchase agreement (SPA) to acquire five road assets from ACL for Rs 25.39 billion, further expanding
its portfolio.
In November 2024, the IRB Infrastructure Trust submitted a non-binding offer to IRB InvIT to sell its five toll road assets valued at Rs 150 billion. Prior to this, in August 2024, Gawar Construction-sponsored National Infrastructure Trust filed a draft red herring prospectus with SEBI for an initial public offering to raise Rs 16 billion.
Sovereign wealth and pension funds have increasingly utilised the InvIT route to invest in road infrastructure. In September 2024, OMERS acquired a 13.48 per cent stake in Interise InvIT from Allianz Capital. Meanwhile, Larsen & Toubro’s (L&T) pension funds and institutional investors acquired an 8.03 per cent stake in Cube Highways Trust for Rs 12.43 billion.
Conclusion
In the near future, the need for financial closures is likely to increase considering road projects spanning over 45,000 km are in the pipeline. Meanwhile, completed and under-construction projects will offer opportunities for monetisation and acquisition to investors betting big on the sector.
The government is also actively looking to monetise through four TOT bundles currently under bidding (15, 17, 18 and 19), and has set a cumulative monetisation target of Rs 540 billion for 2024-25. This will offer sizeable monetisation opportunities for foreign and domestic investors.
The roads and highways sector in the country has experienced fast growth due to substantial public and private investment, and it is well on its way to support the development of a new and road-rich India.
