Pawan Kant, CEO, Interise tells CW about the entity’s evaluation, plans, USP, risks and much more.How do you view the opportunities for growth in Indian road infrastructure given the recent government push for connectivity and road expansion?Interise is focused on the growth story of Indian infrastructure, identified by the Indian Government as the key enabler of Indian GDP growth. It is anticipated that about Rs 200,000 crore worth of highway assets are likely to come up for monetisation over the next few years.From the current portfolio size of 17 highway projects spanning 7,300 lane km, Interise plans to scale the portfolio multi-fold in the near term through a renewed focus on organic and inorganic modes of acquisitions by participating in monetisation programs of operational highway projects with an established tolling history and focusing on secondary acquisitions of projects awarded on a PPP basis under BOT (toll and annuity) or HAM models.A commensurate offshoot of improving infrastructure connectivity in the country is likely to be a reduction in logistics costs, which in turn would foster the competitiveness of the manufacturing/export sector of the country in the global landscape, providing a fillip to Indian GDP growth in the medium to long term. Hence, with the traffic flow on the highways being highly correlated with the real GDP of the country, the push for improvement in infrastructure connectivity across different modes of transport would inherently aid the traffic flow on Indian highways. With a strong database of network evolution pattern in the country over the past two decades and with the increasing dissemination of information from NHAI / MoRTH on the development of new expressways, highways, railway corridors and waterway networks, investors in the highway sector are well positioned to price in the diversion risks to upcoming multimodal developments, with an embedded hedge against inflation (due to WPI linked toll rate escalations). What is the USP of your InvIT versus other road-focused InvITs in the market?The companies and the functions of the trust adopt consistent processes that are ISO-certified. Interise Trust is the first in the sector to achieve compliance with international standards in quality, environment, health and safety, information security, road traffic safety, and risk management across all our 17 SPVs and two offices. With six ISO processes and systems being implemented across our offices, SAP is utilised to provide real-time financial information on assets, further strengthening our asset management and delivery systems. Interise is India’s first self-sponsored InvIT, setting a precedent for the industry and signalling a transformative shift towards independent and professionally managed InvITs.  In FY2024, we embarked on a transformative digital journey, implementing advanced analytics tools and smart digital platforms across our highway network. These platforms provide real-time data on traffic patterns, road conditions, and asset performance, enabling us to make data-driven decisions for proactive maintenance and enhanced safety of our highway assets.Another key focus area for Interise has been the implementation of a robust ESG framework aimed at climate conservation through reduction of carbon footprint and fostering the local communities situated around our projects. This framework is embedded in all our investment decisions and business operations. Across our projects, we have a total installed solar panel capacity of 1,070 kw; we have upgraded our lighting systems by replacing traditional HPSV lights with energy-efficient LEDs at 16 of 17 portfolio companies; and we have planted 387,000 trees. Additionally, Interise has been able to ensure a disciplined and innovative capital structure management through efficient debt structures, resulting in upfront yield maximisation and unlocking of value for unitholders.What are the main criteria you consider when selecting road projects for your portfolio?We imbibe tenets of sustainable investing – assessing the ground-up impact of ESG practices as well as ability to mobilise local resources through communities. We remain focused on expanding our portfolio with a strategic mix of toll and annuity assets by leveraging our operational expertise and innovative capital structure management. Our asset appraisal framework for toll assets focuses on high-growth and resilient traffic corridors connecting the top demand centres in the country; assets offering geographical/traffic corridor diversification to the existing portfolio; assessment of diversion risks to new expressways or multimodal developments; and assessment of commodity concentration risks. A fair share of annuity assets in the portfolio boosts stability and predictability of the topline. Our strategic roadmap to scale up the Interise portfolio prioritises a disciplined acquisition strategy by focusing on conducting a 360° assessment of risks in relation to an asset through a comprehensive due diligence framework and mitigation of the identified risks through a robust risk-sharing mechanism with the counterparty, while pricing in residual risks.How does your InvIT balance between toll-based and annuity-based road projects to optimise returns and reduce risks? Toll projects provide access to the growth story of India and hence have the ability to offer high risk-adjusted returns, while annuity projects provide a steady stream of revenues delinked from the traffic performance of the asset. Having a strategic mix of toll and annuity assets in the portfolio improves the stability of the topline of highway portfolio. Additionally, hybrid annuity assets (awarded by NHAI under HAM model) also offer a partial hedge against interest rate fluctuations and high yields for unitholders upfront, and hence are a meaningful addition to an InvIT portfolio.What are the key risks associated with Indian road assets and how does your InvIT manage them? The key challenges an InvIT generally faces for its portfolio of operational highways assets are development of alternate modes of transportation or new expressways; construction quality issues; on-ground toll collection issues posed by local communities; volatility in prices of raw materials for undertaking construction or maintenance of highways; fluctuations in interest rate on senior debt; and timely resolution of compensations with the authorities. InvITs generally undertake comprehensive due diligence before acquisition of any highway asset to assess and mitigate all the aforesaid risks upfront as well as implement a robust internal control framework, continuously reviewed by the management team and the board of directors, post-acquisition for comprehensive monitoring and mitigation of the aforesaid risks.What is your perspective on InvITs for other sectors like railways or ports? Do you view them as diversification opportunities for your InvIT?Over time and with maturity of other sectors, expansion of Interise InvIT into other allied infrastructure sectors would be a natural next step for us in the medium to long term, to build a fully diversified infrastructure portfolio. While the other infrastructure sectors like railways or metros are yet to witness the kind of private-sector participation harnessed by the Indian highways sector, the Government is likely to encourage private-sector participation in these sectors in the near term to enable it to meet its expansion plans. How do you include ESG practices in your projects? Please share more about your initiatives in this regard.Our ESG mission is to be a leading player in the infrastructure space meeting and exceeding standards for quality, sustainability, governance and ethics. To promote sustainability and environmental consciousness, projects are utilising alternative energy sources like solar panels and energy-efficient LEDs in addition to adopting water conservation methods like rainwater harvesting, surface run-off harvesting and drip irrigation techniques. If nurtured with care, we believe infrastructure plays a critical role in a sustainable future. Our various ESG initiatives have resulted in us achieving 2,867 tCO2eq reduction in FY23-24 under scope 1 & 2 against a target of 1,000 tCO2eq. We are committed to minimising our environmental impact by adopting sustainable construction methods, digital practices and implementing energy-efficient operations. Our efforts to create a sustainable future include rigorous plantation drives, solar panel installation initiatives and water conservation initiatives, among many more. We have partnered with IIT Bombay and IIT Chennai for research on enhanced material and technologies in line with our ESG initiatives.A significant initiative was implemented at our road projects in Rajasthan, where the temperature increase over the past decade has significantly damaged roads. Initially, VG 30/40 bitumen was employed to address this issue. However, this did not guarantee the long-term viability of roads. Consequently, the need for innovative technologies became more apparent. To address this, Interise collaborated with IIT Chennai and IIT Mumbai to bring in new cutting-edge technologies. Alternative materials like polymer-modified bitumen were used. This process of experimentation has been crucial for analysing effective strategies to address environmental challenges. We have created and are maintaining Miyawaki forests at three of our portfolio companies –KTTRPL, BPPTPL and SUTPL – and are among the first companies to test smart irrigation or plantation watering systems. Further, we plan to introduce EVs into our fleet management vehicles across our projects, in line with our various other green initiatives.What is the company’s future plan in terms of collaboration in this competitive landscape?We believe in being flexible in our long-term strategy and proactively scouting for assets. Through constant assessment of the dynamic external environment, we are able to fine tune our strategy according to evolving market trends. Hence, if an attractive opportunity comes our way to collaborate with other InvITs in the highway or other sectors, we will evaluate the opportunity holistically and take a decision aligned with our long-term goals.