Have a 3-pronged approach to handle safety issues on the road assets: NHIT MD Suresh Goyal

Q. Road safety has once again come to the forefront with regard to Indian roads. Since NHIT is also involved in maintaining the road assets it holds, what are some steps you have taken to ensure safety on the road assets you control?

A. We, unfortunately, are a country with one of the highest deaths through road accidents in the world.

There are a few things that need to be done and some of those things are not very difficult to implement.

Under the concession agreements that we have entered into with the NHAI, there are requirements that we have to meet; certain standards around operations, maintenance, signage, and quality of the road in terms of making roads safer.

These are all related to the inputs that we provide on the road itself to make it safe. Inputs like avoiding potholes, and ensuring that there are proper markings, lighting and blinkers that can be seen by drivers.

That is one level of intervention as far as safety is concerned, which we adhere to on the road assets we control.

The second thing we do is that on the road assets we control, we have hired some safety personnel on the ground.

They are trained individuals who travel every day on the road assets we control and look for potholes, and breakages on the banks and median strips, and also try and point out some of the bad driving patterns on our road assets.

And then we have a safety team under the COO at the corporate level, which ensures that we are running a safety programme which includes, daily toolbox talk, safety drills, and carries out training for our safety personnel on the ground.

The third level is the identification of black spots. The NHAI is running a fairly extensive campaign to identify black spots, because the good thing is that now when accidents happen, one is able to identify the black spots.

This information is being collected and then it becomes our responsibility to build mitigation around those blind spots.

We are working on engineering intervention and better traffic management to work around any black spots identified on our road assets.

We also have cameras which are monitored at our control centres. These help us monitor our road assets and intervene in case of an accident.

Q. How would the valuation of your road assets and investor confidence in your company suffer if an unfortunate safety issue is identified on the assets you control or if there is a bad safety incident?

A. Our endeavour is to be able to control the tangibles on our road assets. There are still intangibles which are outside anybody's control, such as driving behaviour, quality of the driver, fatigue that the driver is facing, quality of the vehicle, quality of the tires, etc. which may lead to unfortunate incidents.

But we are being meticulous and diligent in controlling the tangibles, and thereby ensuring that the probability of such incidents is low.

Q. How much have you managed to raise from NHIT’s NCD issue?

A. We have been able to raise Rs 5,021 crore as per the information available from the stock exchange on October 18, which means that our NCD issue have been oversubscribed 6.69 times.

We had offered our NCDs in four equal categories to institutional investors, non-institutional investors, high-networth individuals, and retail investors, and all four categories have oversubscribed.

The highest oversubscription came from the corporate category, that's about 11 times, followed by institutional investors at about 10 times, then retail, and lastly high-networth individuals.

Q. How many assets would NHIT be looking to control in the next few years?

A. NHIT currently controls five road assets. Our fund-raising through the NCDs is to acquire three new roads from the National Highways Authority of India. This will take our portfolio to eight assets.

After this we will start working on raising funds to acquire more road assets from the NHAI by March next year.

Overall, in the next three years, we will aim to control 1,900 km of road assets.

Q. The road minister and NHAI have often talked about opening up NHIT to retail investors and listing it as a public InvIT on the stock exchanges. By when can we expect NHIT to be open to retail investors?

A. Our decision to open up NHIT to retail investors will be based on a variety of factors, including the position of the stock exchanges, the performance of our current portfolio, and the pricing of the units under NHIT.

It is very important to protect the investment of retail investors. While the NCD being offered to retail is relatively safe when it comes to allowing retail investors to invest in the units owned under the InvIT, that comes with a lot more risk.

NCDs sit highest on the waterfall that comes from the cash flow of the company. NCDs have very low leverage and an AAA rating which makes them quite a safe investment for retail investors.

As for investing in units under the InvIT, that comes with risk around the business, traffic on the road, and a variety of other factors.

Having said that, given the size and scale of the fund-raising expected under the national monetisation pipeline, we will have to approach retail investors in the not-so-distant future.

Q. What is attracting institutional investors to NHIT? Do you think a global slowdown is making your offering even more attractive to investors?

A. I'll answer your question in two parts.

One is the attraction of institutional investors, whether domestic or foreign, to this asset class. And the second is specifically around foreign investors.

Regarding the first part, interest from these investors is very high due to a combination of two-three factors.

One is that the InvIT is sponsored by NHAI, which gives people a lot of confidence.

The second is, within institutional investors most investors are not comparing this asset class to equities or other asset classes. This investment is coming out of their allocation towards infrastructure investing. They are under regulation or otherwise as part of their investment strategy to make the such allocation.

Now, we move to the next part of your question, which is about global investors.

Road assets always demonstrate a high degree of correlation to the GDP of a country and usually have inflation pass-through, sitting within their revenue line.

And when you look at exposure to GDP, clearly foreign investors would love to have exposure to India’s GDP because it is currently the fastest-growing in the world and likely to remain at a fairly high tip over a long period of time.

Q. The government, last month, launched the National Logistics Policy under which it aims to transport around 50 percent of the country’s cargo through the Indian Railways. Do you think this will have an impact on the traffic predictions on the road assets you control under NHIT?

A. I would approach this question slightly differently.

The government, through the National Logistics Policy, is trying to reduce logistics costs and bring efficiency into the logistics sector.

Now, that does not mean that the traffic moves from one mode to another mode. Rather, with efficiency, the nature of the movement of commodities changes, and vehicle sizes could change.

A wholesale move, away from this, I don't think is either expected or reasonable for us to expect.

For instance, back in the 80s, India used to operate twin-axle trucks.

But now you see multi-axle trucks, box trucks and even light commercial vehicles, for smaller journeys across India.

So, road traffic has actually grown, and our traffic predictions have been made taking all these factors into account.