First Thai infra fund IPO a $2.2bn hit

The fund is backed by the BTS Group’s concession to operate a portion of Bangkok’s mass transit rail network and is Thailand’s largest-ever listing.

BTS Group, a Thai passenger services company that holds the concession to operate part of Bangkok’s mass transit rail network, has given birth to Thailand’s first infrastructure fund and its largest-ever initial public offering (IPO). 

The BTS Rail Mass Transit Growth Infrastructure Fund raised THB62.5 billion (€1.7 billion; $2.2 billion) on the country’s stock exchange with BTS investing in one third of that offering itself. The vehicle is expected to yield 5.8 percent by March 2014. 

“This groundbreaking IPO was almost twice the size of the previous largest IPO in Thailand,” commented Crawford Brickley, a partner at law firm Clifford Chance, which advised BTS on the listing. “The surge in infrastructure projects in Southeast Asia presents a lot of opportunities for investors and infrastructure funds are a good vehicle for tapping into this growth,” added Fergus Evans, managing partner of the Bangkok office. 

Some 43 percent of the fund is said to be owned by foreign investors. One business day after the IPO, the fund is trading slightly below its original total, according to the Stock Exchange of Thailand’s website. BTS, which originally hoped to launch the IPO in February, declined to comment, in compliance with Thailand’s listing laws. 

The fund now owns the remaining 17-year concession for the Bangkok SkyTrain, which comprises 32 stations in central Bangkok running over 33 kilometres. The line carried 176 million passengers in the fiscal year ended March 31, 2012 and recorded sales of THB4.3 billion. BTS has exclusive rights to operate and retain all farebox revenue from the line. 

In addition, dividends paid out to individual unit holders are exempt from personal income tax for the next 10 years and, as a mutual fund, the vehicle is also exempted from paying corporate tax. 

Listing the infrastructure fund is essentially a fundraising exercise: by selling the fund, the proceeds of the IPO can be used to fund infrastructure investment projects in a later stage. Specifically, BTS plans to capitalise on the Thai government’s announced plans to develop 508 kilometres of mass rail by 2029. 

Bangkok, for example, currently has 80 kilometres of mass transit railways.