Road Invits AUM to Revenue To Grow 68% By March 2026
Real Estate

Road Invits AUM to Revenue To Grow 68% By March 2026

Assets under management (AUM) of infrastructure investment trusts (InvITs) in the road sector are expected to increase by 68% from Rs 1.9 trillion to Rs 3.2 trillion between September 2024 to March 2026 in revenue, according to CRISIL ratings . Growth will be driven by the creation of new InvITs and the diversification of the assets held by current InvITs. As per the reports, in the last three fiscal years, road InvITs have grown significantly, and this trend is predicted to continue in the medium term. This is supported by a review of 11 current road InvITs, which include 145 assets for a total length of almost 12,500 km. “Growth in AUM of road InvITs will have two key drivers. One, existing InvITs adding new assets. “In order to increase resilience, the AUM growth will be accompanied by geographic and concession type diversification. Since toll assets now make up more than 85% of the AUM of road InvITs, the anticipated asset addition will further diversify current portfolios and lessen volatility related to local interruptions. The reports further said diversification in terms of concession type and geography will also result from the AUM expansion. Road InvITs benefit greatly from geographic diversification since it allows them to meet demand from a variety of sources, such as ports, tourist locations, metropolitan conglomerates, and a variety of industries. Since toll assets now make up more than 85% of the AUM of road InvITs, the anticipated asset addition will further diversify current portfolios and lessen volatility related to local interruptions. However, as road InvITs significantly diversify their portfolios by purchasing hybrid annuity model (HAM) assets from engineering, procurement, and construction (EPC) firms, the proportion of toll roads is anticipated to decrease to about 75%. Asset pools that are more diverse, including HAM projects that give cash flow stability and toll projects that present growth prospects, are better able to tolerate relatively high levels of leverage. The reports predicted, by March 2026, it is expected that road InvITs' average leverage will still be under control, below 49%, maintaining excellent credit profiles. The slight rise from about 44% in September 2024 can be ascribed to some debt-financed purchases made by road InvITs. The quality of the assets being purchased, the corresponding improvement in the road InvIT managers' operational capabilities, the debt financing for these purchases, and their effect on leverage will all need to be monitored. Anand Kulkarni, director of CRISIL Ratings Ltd said, “Road EPC companies have completed many HAM assets over the last few fiscals, translating into an estimated value of monetisable assets at Rs 1.3 lakh crore. Moreover, this asset class has built a track record of generating stable and timely cash flows over the years. Addition of HAM assets can offer stability to InvIT cash flows as they are unaffected by traffic volatility and there are inherent inflation and interest-rate hedges in these assets.”

Assets under management (AUM) of infrastructure investment trusts (InvITs) in the road sector are expected to increase by 68% from Rs 1.9 trillion to Rs 3.2 trillion between September 2024 to March 2026 in revenue, according to CRISIL ratings . Growth will be driven by the creation of new InvITs and the diversification of the assets held by current InvITs. As per the reports, in the last three fiscal years, road InvITs have grown significantly, and this trend is predicted to continue in the medium term. This is supported by a review of 11 current road InvITs, which include 145 assets for a total length of almost 12,500 km. “Growth in AUM of road InvITs will have two key drivers. One, existing InvITs adding new assets. “In order to increase resilience, the AUM growth will be accompanied by geographic and concession type diversification. Since toll assets now make up more than 85% of the AUM of road InvITs, the anticipated asset addition will further diversify current portfolios and lessen volatility related to local interruptions. The reports further said diversification in terms of concession type and geography will also result from the AUM expansion. Road InvITs benefit greatly from geographic diversification since it allows them to meet demand from a variety of sources, such as ports, tourist locations, metropolitan conglomerates, and a variety of industries. Since toll assets now make up more than 85% of the AUM of road InvITs, the anticipated asset addition will further diversify current portfolios and lessen volatility related to local interruptions. However, as road InvITs significantly diversify their portfolios by purchasing hybrid annuity model (HAM) assets from engineering, procurement, and construction (EPC) firms, the proportion of toll roads is anticipated to decrease to about 75%. Asset pools that are more diverse, including HAM projects that give cash flow stability and toll projects that present growth prospects, are better able to tolerate relatively high levels of leverage. The reports predicted, by March 2026, it is expected that road InvITs' average leverage will still be under control, below 49%, maintaining excellent credit profiles. The slight rise from about 44% in September 2024 can be ascribed to some debt-financed purchases made by road InvITs. The quality of the assets being purchased, the corresponding improvement in the road InvIT managers' operational capabilities, the debt financing for these purchases, and their effect on leverage will all need to be monitored. Anand Kulkarni, director of CRISIL Ratings Ltd said, “Road EPC companies have completed many HAM assets over the last few fiscals, translating into an estimated value of monetisable assets at Rs 1.3 lakh crore. Moreover, this asset class has built a track record of generating stable and timely cash flows over the years. Addition of HAM assets can offer stability to InvIT cash flows as they are unaffected by traffic volatility and there are inherent inflation and interest-rate hedges in these assets.”

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