Road sector seen attracting $10 b FDI in 2-3 years

Road sector seen attracting $10 b FDI in 2-3 years

Kamal Nath

“We expect massive inflow of FDI into our road sector in coming years. We hope to get foreign investment worth 10 billion dollars in the next 2 to 3 years,” Union Minister for Road Transport and Highways Kamal Nath said while participating at an interactive session organized by the Indian Chamber of Commerce here.

“Recently we held a road show in Singapore to attract FDI in our road and transport sector. We received good response. We are planning some more road shows in other countries too,” he said.

While pointing out that prospective foreign investors want more clarity about government policy towards foreign investment, Kamal Nath said “my ministry and the National Highways Authority of India (NHAI) are looking at certain issues raised by these investors who are looking at pumping in funds into unlisted Special Purpose Vehicles (SPVs).”

Lock-in mechanism
Transport Ministry officials said that the prospective foreign investors had raised concerns over the lock-in mechanism that these investments would have and the structure of the exit clause for such investments. The government has proposed a mechanism so that private equity firms and venture capital funds can pick up stake in SPVs of individual projects and exit after making their profits. Investors have suggested that the government consider the inclusion of a put option by way of which the NHAI may acquire stake of the foreign investor on exit.

Pension funds based in Singapore have also indicated their interest for investing in Indian road projects which carry a lower financial risk, industry sources said. Analysts say in view of massive potential of India’s road sector investment in road projects may come from some of the major private equity firms and funds located outside Singapore and Hong Kong.