India’s transport infrastructure is growing rapidly, backed by continued budgetary support, a favourable policy environment and an inflow of private sector capital. Flagship government programmes such as Bharatmala Pariyojana, Regional Connectivity Scheme (RCS)-Ude Desh ka Aam Naagrik (UDAN) and PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE), further highlight the government’s commitment to enhancing connectivity. Barring sector-specific budgetary allocations, innovative funding mechanisms such as infrastructure investment trusts (InvITs), bonds, viability gap funding (VGF) and multilateral loans by international banks have continued to support the growth.
Current sector-wise financing trends
Urban mass transit
With cities facing increasing congestion, the demand for sustainable modes of transportation has increased. This has positioned urban rail transit as a key pillar for urban development. Traditionally, metro projects in India have been funded through a 50:50 joint venture between the central and state governments. However, beyond government support, multilateral and bilateral loans have been instrumental in financing metro projects while also providing technical project expertise.
In December 2024, KfW Germany signed a loan agreement of Rs 30.45 billion for Phase II of the Bangalore Metro Rail Project, marking the financial closure of the project. Of the total senior debt funding of around Rs 120 billion, the remaining Rs 90.97 billion was secured via the Japan International Cooperation Agency (JICA), Agence Française de Développement, Asian Infrastructure Investment Bank and European Investment Bank. In another key development, in July 2024, JICA disbursed the fifth and final tranche of Rs 46.57 billion for Mumbai Metro Line 3, bringing its total assistance to Rs 212.80 billion. Back in December 2023, the Asian Development Bank approved a $250 million loan for the same.
Metro corporations are also utilising other non-fare revenue-generation options such as commercial, retail, rental and leasing activities in and around stations, property and real estate development, advertisements, and transit-oriented development. For instance, in 2023-24, Delhi Metro Rail Corporation generated Rs 5.73 billion in revenue through rental earnings alone. Similarly, Bangalore Metro Rail Corporation Limited generated a revenue of Rs 488.2 million by leasing space and Rs 12.3 million through non-fare revenue, including advertisements, space for events and naming rights.
Aviation
India’s aviation sector has experienced remarkable growth over the years. During 2024-25 (till October 2024) airports in India have handled over 230 million passengers, almost an 8 per cent rise compared to around 210 million during the same period in 2023-24. To accommodate this demand, the number of airports (including aerodromes and heliports) has more than doubled, increasing from 74 in 2014 to 157 in 2024. The government aims to further expand this to 350–400 by 2047.
The budget allocation for the aviation sector in 2024-25 stood at Rs 23.57 billion. However, funding for the RCS-UDAN scheme has been reduced by 60 per cent to Rs 5.02 billion, due to muted traffic under the scheme and the shutting down of many routes. Despite this cut, the VGF under the RCS-UDAN scheme has shown a consistent upward trend over the years, reaching Rs 38.42 billion as of October 2024. The VGF stood at Rs 6.26 billion in 2021-22, Rs 7.98 billion in 2022-23 and Rs 8.07 billion (provisional) in 2023-24.
Private sector participation and lending activity have emerged as critical enablers of growth for the sector. The aviation sector has secured attractive returns along with minimal non-performing assets, further attracting steady lending. As of July 2024, gross bank lending to airports stood at Rs 80.04 billion, a 3 per cent increase from July 2023.
Players such as GMR and Adani Airport Holdings Limited have actively tapped the debt markets. In October 2024, GMR secured
Rs 63 billion from the Abu Dhabi Investment Authority via optionally convertible debentures. Similarly, Adani Airport Holdings has tapped the bond market, raising Rs 19.5 billion in October 2024. Earlier in the year, the company issued multiple tranches of non-convertible debentures, most recently securing Rs 1.5 billion, in June 2024. Also, in February 2024, GMR raised Rs 22.5 billion through non-convertible bonds, attracting investors such as JP Morgan, Tata Capital and HSBC.
Asset-level investments are also gaining traction in the sector. Fairfax increased its stake in Bengaluru airport by acquiring an additional 7 per cent for $175 million, bringing its total shareholding to 64 per cent as of December 2023. Following this, Fairfax has announced plans to acquire an additional 10 per cent stake in airport for $255 million, raising the company’s stake to 74 per cent. Further, in January 2024, the GMR Group acquired an additional 11 per cent stake in Hyderabad airport for $100 million, taking the company’s stake from 63 per cent to 74 per cent.
Ports
For the port sector in India, budgetary support, bank credit and equity investments via foreign portfolio investment have been the key sources of funding. Private equity-routed investments in the sector have completely dried up.
Of late, there have been some asset sales in the sector. In March 2024, Adani Ports and Special Economic Zone Limited (APSEZL) entered into a definitive agreement for the acquisition of a 95 per cent stake in Gopalpur Port Limited. The acquisition is expected to be completed by March 2025 at an estimated cost of Rs 13.49 billion, with an enterprise value of Rs 30.8 billion. Following this, APSEZL signed agreements to acquire an 80 per cent stake in Astro Offshore for approximately $185 million.
Roads
Recognising the sector’s national importance, the government has allocated Rs 2.78 trillion to the sector. Under the National Monetisation Pipeline, the sector has already surpassed Rs 1 trillion as of September 2024. Around Rs 489.95 billion has been raised via toll-operate-transfer bundles, approximately Rs 259 billion through InvITs and Rs 422 billion from toll securitisation of the Delhi-Mumbai expressway.
Lending to the road sector has shown steady growth, with gross bank credit rising to around Rs 3 trillion in March 2024. Additionally, multilateral development banks have financed key projects. Notably, in August 2024, the World Bank approved a $500 million loan for the Green National Highway Corridor Project, which will cover 781 km across Himachal Pradesh, Rajasthan, Uttar Pradesh and Andhra Pradesh. The National Highways Authority of India has also announced plans to tap the green bond market to raise Rs 10 billion for the Delhi-Mumbai expressway.
Electric vehicles
India’s electric vehicle (EV) industry is experiencing rapid growth, driven by ambitious national goals and a strong emphasis on environmental sustainability.
In October 2024, the government introduced two major schemes, the PM E-DRIVE scheme, with an allocation of Rs 109 billion until March 2026, and the PM-eBus Sewa-Payment Security Mechanism scheme, with an allocation of Rs 34.35 billion.
Funding in the EV sector remains robust, attracting both domestic and international capital. Recently, start-ups such as Hala Mobility (Rs 510 million) MOOEV Technologies (Rs 40 million) and ZEVO (Rs 169 million) successfully concluded their initial funding rounds. In the battery manufacturing space, Neuron Energy raised Rs 200 million. EV and energy storage start-up Matter Group raised $35 million in a Series B funding round led by US-based investor Helena.
The surge in investments is not limited to start-ups. Established automotive giants are also capitalising on the EV boom. British International Investment committed $250 million to Mahindra & Mahindra’s four-wheeler EV division. Further, Tata Motors announced plans to invest Rs 160-Rs 180 billion in its EV division by 2029–30. This robust investment activity underscores the sector’s potential for long-term growth.
The two-wheeler segment remains competitive, with companies such as Ola Electric, Ather Energy and Ampere Vehicles taking the lead. Meanwhile, innovative start-ups focused on battery swapping and charging infrastructure further support the EV ecosystem, with Battery Smart recently raising $65 million, ElectricPe $8.29 million and Turno $6 million.
In sum
Over the years, conventional infrastructure sectors have garnered significant investor interest, helping reduce reliance on the budget and positioning them well for future advancement. Going forward, in order to guarantee sector growth and expansion, financial collaborations will play a crucial role. Further, government grants, international loans, private equity investments and innovative financing models will remain essential for scaling up projects and accelerating infrastructure development.
