NHAI plans subsidiary company for highways, expressways to pave way for IPO

A labourer works at the construction site of the Delhi-Jaipur national highway in Manesar in the northern state of Haryana, India, July 9, 2015. To match insight INDIA-INFRASCTRUCTURE/ REUTERS/Adnan Abidi - RTX1KM9A

National Highways Authority of India (NHAI) is mulling various options, including setting up subsidiary companies for expressways and highways to pave way for its Initial Public Offer (IPO) by the end of March 2018.

“We are planning to form a subsidiary company of NHAI,” Deepak Kumar, chairman, NHAI told Moneycontrol.

He said that the organisation was planning four divisions, each for Expressways, Highways, International projects and Wayside amenities to reform the “board structure of NHAI”.

Union minister for road transport and highways, Nitin Gadkari, said in September that divestment of NHAI was in process even as he was waiting for “approval” from the Finance Ministry.

IPO is a process under which an organisation offers its shares to the public for the first time to be subscribed by them. While NHAI is already listed on stock exchange for issue of bonds, it has never issued shares under its name.

Also read: NHAI's IPO decision would need deliberation about its board structure, budgetary support

S&P Global and Moody’s investor service gave BBB- and Baa3 issuer rating respectively to NHAI earlier in October reflecting a “stable outlook”.

Statements issued by both the agencies said that NHAI's rating “primarily reflects” their sentiment that the “authority will receive support from the government in a distress situation”.

Rating agencies like CRISIL and ICRA have issued “AAA” rating to NHAI reiterating its “strategic importance to the government and its strong financial risk profile”.

Kumar said that NHAI can’t issue IPO in the absence of a “company”, thus it was planning to bring various subsidiaries.

“It (issue of IPO) cannot happen without a company... These divisions are in line with the IPO,” he said.

Also read: India will have 50,000 km highways network in 2 years: Govt

The chairman “hopes” to have these subsidiaries materialise “soon”, preferably by the end of this financial year to take things forward.

NHAI, recently, started ‘Highways Operations Division’ dedicated towards highways construction and maintenance.

“This division will focus on all non-commercial highway operational activities for efficient network utilisation and providing hassle-free services… The focus of the government is on building highway operations for rendering world-class services to the highway users,” NHAI said in a statement.

The highways division was made responsible for electronic tolling, road safety and security, incident management–helpline, tracking of ambulance, cranes on highways, highway traffic management system, wi-fi and other modern amenities on national highways.