India’s first infra trust ready to start engine

The IRB Infrastructure-sponsored trust, backed by road assets, will seek to raise as much as $780m to repay debt.

Indian road developer IRB Infrastructure intends to raise up to 50 billion rupees ($780 million; €716 million) through listing a portfolio of road assets as the first infrastructure investment trust (InvIT) on the country’s stock exchange. 

InvITs are structures which manage income-generating infrastructure assets. Similar to REITs, they are expected to provide stable yield to investors and are required by the Securities and Exchange Board of India to distribute at least 90 percent of the cash generated by assets to shareholders.

The company has set a price band of 100-102 rupees per share, according to its initial public offering documents released this week. The offering, comprising 43 billion rupees of fresh equity and the remaining balance from existing shares held by IRB and its four subsidiaries, is set to open for bids on May 3 and close on May 5. 

An analyst with broker research Moneycontrol wrote in a note: “While the actual quantum of dividend might differ in amount, estimates suggest (based on projected cashflow on the basis of estimated growth in traffic and inflation-linked increase in toll charges), at an upper price band of IPO (102 rupees), the dividend yield to be close to 12 percent.”

The IRB InvIT has six operational road assets, covering 3,000-lane km of roads across five states, while the company owns a portfolio of 22 projects, including operational and under development assets. Proceeds from the IPO will be used mostly to repay the assets’ outstanding debt of 47.5 billion rupees, estimated as of 30 April.   

IRB Infrastructure filed its application for its InvIT in September 2016, following updated guidelines from the SEBI. The guidelines allowed companies to kick-start marketing these InvIT in May 2016. The Indian government has been seeking to unlock capital for infrastructure projects, revising regulations in 2014 to create the infrastructure trust market. 

Other infrastructure companies, including Sterlite Power Grid Ventures, Reliance Infrastructure and MEP Infrastructure, have registered to list InvITs.