Whalesbook
Crisil Ratings forecasts a robust pipeline of new assets entering the InvIT space, with an estimated ₹90,000 crore addition expected in fiscal year 2027. This growth is driven by toll-road acquisitions and the monetization of Hybrid Annuity Model (HAM) projects. However, the increasing reliance on debt to fuel this expansion is a key factor for investors to watch.
Asset Monetization Drives Sector Growth
Road InvITs are on track for substantial Assets Under Management (AUM) growth, with projections indicating a 30% increase to approximately ₹3.9 lakh crore by March 2027. This surge is fueled by accelerated monetization of highway assets by both the National Highways Authority of India (NHAI) and private developers looking to unlock capital and strengthen their balance sheets. The sector, which already includes 16 InvITs managing over 200 assets across more than 15,000 km, has shown consistent expansion, achieving over 25% annual AUM growth in the past two fiscal years. Crisil estimates an incremental AUM addition of about ₹90,000 crore in FY27, primarily from toll-road acquisitions and the monetization of Hybrid Annuity Model (HAM) projects.
Diversifying Assets and Investor Interest
Currently, toll-road assets make up 85% of total road InvIT AUM, benefiting from rising traffic volumes and inflation-linked toll adjustments that provide predictable cash flows. However, their share of new assets is expected to decrease to 60-62%, reducing their overall AUM contribution to 80-82%. This shift suggests a more diversified asset base entering the market. Investor confidence is bolstered by strong demand for good-quality road projects, which have generated equity multiples exceeding 1.5 times over the past five fiscals. The broader Indian infrastructure sector is also poised for growth, with construction output projected to exceed $1 trillion by 2027. Supportive macroeconomic conditions, with GDP growth near 6.5% and easing inflation, are boosting demand across infrastructure segments.
Concerns Grow Over Rising Debt Levels
Despite the optimistic growth outlook, a notable concern is the projected increase in leverage across the road InvIT sector. Crisil Ratings anticipates debt-to-enterprise value ratios to rise by 100-150 basis points from the current 45%. This trend is supported by reports showing that leverage for some InvITs that have been operating for 2-5 years increased from 43% in March 2023 to 47% by March 2025 due to acquisitions. For example, the Highways Infrastructure Trust (HIT) expects its net debt-to-EV to rise to 50-55% following planned asset acquisitions. Similarly, Indus Infra Trust plans to increase its leverage to approximately 49% after acquiring more assets. While debt service coverage ratios (DSCR) are expected to stay comfortable at 1.7-1.8 times, the growing debt burden warrants scrutiny, particularly if asset acquisition strategies continue to rely heavily on borrowed funds. This rise in leverage is a direct result of mature trusts acquiring assets that frequently carry higher debt levels. Additionally, while HAM projects offer stable cash flows, some reports have highlighted execution challenges, with nearly 60% of under-construction HAM projects experiencing average delays of 11 months. However, recent analyses show over 90% of HAM projects are on track for timely execution. Past instances of excess spending in Maharashtra under the HAM model, highlighted by the CAG, emphasize the need for diligent project monitoring.
Future Growth Drivers
The National Monetisation Pipeline 2.0, which targets ₹16.72 lakh crore between FY26 and FY30 with ₹4.14 lakh crore from highway assets, is poised to be a key driver for future monetization efforts. The successful listing of public InvITs like Raajmarg Infra Investment Trust (RIIT), which saw strong investor subscription, highlights the continued appetite for operational highway assets. Diversification across geographies and concession types is also expected to enhance portfolio resilience. Looking ahead, the potential development of India's first multi-sector InvIT, pooling assets from roads, power, and ports under NMP 2.0, could further reshape the investment landscape and create new avenues for capital deployment.