Disclaimer: Education only. This is a generic checklist, not advice on any transaction. Figures are as of the date shown at the end of the page.

In simple words (if you are in class 10)

Before buying a second-hand car, you check the engine, the papers, the service history and how many kilometres it has run. Buying a toll road is the same, but much bigger:

  • Engine check: is the road in good condition? (technical)
  • Papers: does the contract with the government allow the sale, and what happens if something goes wrong? (legal)
  • How many people will use it: will traffic grow or fall? (traffic study)
  • Service bills: how much will repairs cost? (major maintenance)
  • Loans on it: what debt comes with it? (financial)

The professional view

Workstream 1: Traffic and revenue

  • Independent traffic and revenue study: base-year counts, origin–destination surveys, elasticities, diversion risk, competing routes
  • 5–10 years of plaza-wise, class-wise traffic and revenue; reconciliation of reported toll to bank receipts (FASTag settlement reports)
  • Exempt and discounted traffic share; leakage; toll suspension history (agitations, COVID-era suspension)
  • Upcoming projects that add or divert traffic: expressways, bypasses, dedicated freight corridors
  • Policy risks: GNSS distance-based tolling, annual pass schemes, local exemptions (see Part 6)

Workstream 2: Technical

  • Independent engineer's report on pavement condition (roughness, rutting, cracking), structures, safety audit findings
  • MM history and forecast: next overlay timing and cost; remaining pavement life
  • O&M contract terms, performance penalties, damages imposed by NHAI
  • Hand-back requirements and expected cost at concession end
  • Pending change-of-scope works and claims
  • Concession agreement version (MCA vintage matters), amendments, side letters
  • Change-in-ownership or substitution rights; NHAI consent requirements and lock-in on the original developer
  • Termination payments for each default type; force majeure and change-in-law relief
  • Competing road and additional tollway clauses; concession extension rights (JSA on 2024 MCA)
  • Arbitration and claims: pending claims against NHAI (often material assets) and counter-claims
  • Land and right-of-way issues, encroachments, environmental clearances
  • Lender documents: consents for change of control, security package

Workstream 4: Financial and the financial model

  • Model integrity review: circularity, hard-coded numbers, sign errors, timing (half-yearly vs annual), WPI and 40% pass-through formula
  • Reconcile model opening balances to audited financials
  • CFADS, DSCR, LLCR in base and downside cases; covenant headroom
  • Working capital: FASTag settlement timing, NHAI dues, retention money
  • Reserve balances (DSRA, MMRA) and whether they are cash or guarantees
  • Quality of earnings: one-offs, claims income, related-party O&M pricing

Practise with the Toll road SPV financial model template.

Workstream 5: Tax

  • SPV regime choice (concessional regime vs normal), unabsorbed losses and depreciation, MAT credit
  • Impact of the change in shareholding on carry-forward of losses (check the current loss-continuity provision under the Income-tax Act, 2025)
  • GST: access to a road or bridge on payment of toll is exempt (Notification No. 12/2017-Central Tax (Rate)), so GST paid on O&M and EPC costs is largely a cost, not a recoverable credit
  • Withholding on interest to the InvIT; transfer pricing on shareholder loans
  • Stamp duty on transfer of shares and on security creation

Workstream 6: Accounting

  • Appendix C service concession model chosen and why; construction margin recognised historically
  • MM provision adequacy and reconciliation to engineer's forecast
  • Amortisation method and Ind AS 101 D22 eligibility
  • ECL on HAM receivables and NHAI claims
  • See Part 8

Workstream 7: InvIT-specific (if the buyer is an InvIT)

  • Related-party test: is the seller the sponsor or an associate? Unitholder approval and valuation requirements
  • Post-acquisition leverage against SEBI limits (25/49/70%) and rating
  • Effect on NDCF per unit (accretion / dilution)
  • Ability to meet the 80% completed-and-revenue-generating test (public InvIT)
  • Valuer independence and the valuation report's assumptions

Workstream 8: ESG and safety

  • Road safety record, black spots, accident data
  • Environmental compliance, tree-plantation obligations
  • Labour compliance at plazas (contract labour, minimum wages)
  • Community issues (local user complaints, protests)

The red-flag shortlist

  1. Traffic study base case above actual trend without a clear reason
  2. Next overlay due within 12–24 months with no MMRA cash
  3. Large disputed claims counted as assets in the model
  4. Short concession tail after debt maturity
  5. Lender consent not obtainable on acceptable terms
  6. Related-party O&M contracts above market rates

Sources

Previous: Part 9 · Next: Part 11: Risks in InvITs and toll roads

Education only. This page is not investment, tax, legal or accounting advice, and it does not recommend buying, selling or holding any security. Laws and rules change: check the linked primary source and consult a qualified professional before acting.

Last reviewed 25 October 2026. Spotted an error? Tell us and we will correct it.