Indian toll roads: Investing in India’s infrastructure to boost economic growth
The investment: We invested a total of US$375 million in two separate transactions, including one with global investor KKR, to acquire a portfolio of toll roads in India. The roads span some 1,300 kilometers across 10 Indian states, linking some of the country’s critical industrial corridors.
India has a road challenge, but it’s not a lack of roads. The country’s road network extends some 6 million kilometers, making it the world’s second-longest. However, despite an ambitious multi-year national effort to improve India’s transportation infrastructure, modern and efficient highways still comprise just 3% of the total road network. As a result, a relatively small number of highways carry an outsized share of the country’s goods volumes. Shippers often face costly delays in getting their goods to market. And the country’s estimated 8 million truck drivers spend hours or days idling in traffic or traveling inefficient routes. Poor road conditions cost the Indian economy more than $20 billion a year from delays and additional fuel consumption, according to one study.
In an effort to accelerate the modernization of its highway system, India’s government has in recent years turned to private capital. The goal is to ease congestion and improve the mobility of both goods and people. India’s road strategy is also a major form of stimulus, since in India’s consumption-driven economy, providing direct and indirect jobs related to highway expansion boosts the incomes of millions. Partnering with global and private capital has also enabled India to bring global standards to its highway network in terms of maintenance, worker safety and governance.
We chose to invest in Indian toll roads for many reasons. (See details of the investments here and here.) The long-term nature of its toll-road concessions fits well with our financial obligation to pay pensions to teachers over several decades. We were also attracted to India’s economic growth prospects, and the fact that investing in the country’s highways directly supports many Indian workers. The ability to raise toll-road fees over time also makes investing in India’s infrastructure attractive in an inflationary environment.
Steady returns for our members. A GDP boost for India. Lower transportation costs for businesses. And for Indian truckers, less time behind the wheel. It’s another example of how we’re investing to make a mark.
“OTPP’s investment into NHAI InvIT is a perfect match of long-term capital with the growth-oriented, GDP-linked opportunity that the Indian roads sector provides. OTPP was able to secure an anchor investor position into one of the largest potential monetization of road assets in Asia. OTPP’s Asia team demonstrated its ability to be local while representing a global pool of capital. Given their wide experience in asset management across the world, we look forward to an active engagement with them in ensuring superior asset management of roads in NHAI InvIT.”
Suresh Goyal, MD and CEO
National Highways Infra Investment Managers Private Limited
“Roads are among the most significant and critical infrastructure assets that will continue to not only drive India’s rapid economic growth, but help to connect cities and citizens. As a long-term investor, we are delighted to extend our relationship with like-minded, thoughtful investors like Ontario Teachers’ to advance infrastructure creation and benefit local communities in one of the world’s largest and fastest-growing populations. We look forward to collaborating closely to accelerate infrastructure development in India’s transportation sector.”
Hardik Shah, Partner & Head of India Infrastructure