InvITs Propel Growth: Roads AUM to Add ₹1.43 Lakh Cr in FY25-26: CareEdge

Infrastructure Investment Trusts have gained traction as a means of asset monetisation, offering investors relatively stable returns and fostering Infrastructure development. As on March 31, 2024, the AUM of InvITs in India stood at Rs 5.39 lakh crore representing a significant 29% growth compared to March 31, 2023. AUM of InvITs further rose to Rs 5.87 lakh crore by September 30, 2024. Assets under InvITs represent diverse sectors, such as roads, transmission, telecom, pipeline, renewable and warehousing, with a leading share of telecom of more than 50% of the AUM, followed by roads at 35% and transmission at 7%. InvITs are anticipated to further contribute to India’s infrastructure development by offering fresh investment opportunities and unlocking growth capital for developers.

The monetisation of road assets through InvITs is reflected in the growth in AUM over the years. From an AUM of Rs 0.65 lakh crore in FY22, the roads InvIT AUM is expected to record a CAGR of 54% till FY25. This is further estimated to reach ~Rs 3.30 lakh crore by FY26 end, thus indicating a potential y-o-y growth of 37%. The strong asset monetisation pipeline by National Highway Authority of India (NHAI), the gaining monetisation popularity of NH-HAM projects and, the transfer of mature operational toll roads will continue to be the dominant reasons for this growth.

Over the past 7 years, ended December 31, 2024, operational NH-HAM projects valuing over Rs 70,000 crore have been monetized. CareEdge Ratings estimates that projects worth over Rs 1.5 lakh crore will be eligible for InvITs portfolio in the near to medium term, thus bringing the total monetisation potential to around Rs 2 lakh crore over FY25-FY27. However, challenges such as relatively higher leverage, competitive bidding with HAM projects awarding at lower premium or discount from authority cost and limited upside in bank rates from the bidding period may impact the valuation prospects of HAM projects, particularly those awarded post-FY23.

Maulesh Desai, Director, CareEdge Ratings said, “Infrastructure Investment Trusts (InvITs) in India have experienced substantial growth in their Asset Under Management (AUM). As of September 30, 2024, the total AUM of InvITs stood at Rs 5.87 lakh crore, spanning various sectors, including roads, transmission, telecom, pipelines, renewable energy, and warehousing. The roads sector continues to dominate, with an estimated AUM of Rs 2.40 lakh crore till March 31, 2025, with 167 road assets already transferred to 13 InvITs. CareEdge Ratings estimates AUM for roads InvITs to grow by 37% to reach Rs 3.27 lakh crore by FY26(P). Growth in roads InvIT portfolio is driven by strong asset monetisation pipeline by National Highways Authority of India (NHAI), transfer of mature operational toll roads and gaining monetisation traction of National Highways- HAM projects.”

Setu Gajjar, Assistant Director, CareEdge Ratings said, “The monetisation of NH-HAM projects has witnessed significant activity over the past seven years, with over Rs 70,000 crore worth of projects being monetized, which enabled sponsors to realize approximately Rs 11,500 crore. However, challenges such as relatively higher leverage, competitive bidding with HAM projects awarding at lower premium or discount from authority cost and limited upside in bank rates from the bidding period may impact the valuation prospects of HAM projects, particularly those awarded post-FY23. Despite the significant monetisation potential, the valuation multiples and investor appetite due to perceived risks in the quality of construction needs to be closely monitored.”