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Road InvIT AUM to Surge 68% to US$ 37.62 Billion by March 2026, CRISIL Forecasts
Team Finance Saathi
20/Dec/2024
What's covered under the Article:
- Road InvITs' AUM projected to grow 68% to US$ 37.62 billion by March 2026.
- Expansion driven by existing InvITs and new projects with geographical diversification.
- Controlled leverage ensures strong credit profiles and sustainable growth in road sector InvITs.
The assets under management (AUM) of Infrastructure Investment Trusts (InvITs) in the road sector are expected to experience significant growth, with projections indicating an increase of 68%, reaching US$ 37.62 billion (Rs. 3,20,000 crore) by March 2026. This surge, according to CRISIL Ratings, marks a significant rise from US$ 22.34 billion (Rs. 1,90,000 crore) in September 2024. This growth trajectory is driven primarily by the expansion of the existing road InvITs' asset pool, complemented by the emergence of new InvITs in the sector.
Drivers of Growth in Road InvITs
The growth in AUM will be supported by the expansion of the asset pool within established InvITs and the introduction of new trusts. Geographical diversification and the inclusion of various concession types will enhance the resilience of these investment trusts, positioning them for long-term growth. As more toll projects and Hybrid Annuity Model (HAM) projects are integrated into the portfolios, these new additions will provide greater opportunities for growth and ensure cash flow stability, respectively.
Projected Leverage and Credit Profiles
One of the key factors ensuring the sustainability of this growth is the controlled leverage in road InvITs. CRISIL estimates that the average leverage of road sector InvITs will remain under 49% by March 2026, supporting the credit profiles of these trusts and ensuring their financial stability. The diversification strategy—in terms of geographical reach and project types—is central to their ability to withstand market fluctuations and provide consistent returns to investors.
Role of Toll Projects and HAM in Road InvITs' Success
The inclusion of toll projects within the road InvITs' portfolios is expected to play a significant role in their growth. These projects offer promising growth prospects due to increasing traffic volumes and toll revenues. On the other hand, Hybrid Annuity Model (HAM) projects, which provide fixed government payments along with project completion risk-sharing, ensure cash flow stability for these investment trusts. Together, these elements create a well-balanced portfolio that positions road InvITs for sustainable growth over the next few years.
Road InvITs’ Market Resilience and Long-term Prospects
The combination of strategic geographical diversification, targeted investment in high-potential toll and HAM projects, and effective leverage management makes road InvITs one of the most resilient and promising investment options within the Indian infrastructure sector. With an emphasis on diversified assets and strong credit profiles, road InvITs are poised to deliver solid returns to investors, while contributing to India’s growing infrastructure sector.
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