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IRB Infrastructure aiming to launch India’s first InvIT next month

LiveMint logoLiveMint 16-03-2017 Swaraj Singh Dhanjal

Mumbai: IRB Infrastructure Developers Ltd is planning to launch India’s first infrastructure investment trust (InvIT) in April, two people aware of the development said.

In its draft red herring prospectus (DRHP) for the InvIT filed in September, IRB had said it planned to raise as much as Rs4,300 crore.

InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects.

“They have been on multiple investor roadshows, globally and in the domestic market, in the last few months and been in constant engagement with investors. They are targeting to launch the public offering in April and are currently involved in assessing the demand for the book,” one of the two people cited above said, requesting anonymity, as he is not authorized to speak to reporters.

IRB has appointed IDFC Bank Ltd, Credit Suisse Securities (India) Pvt. Ltd, ICICI Securities Ltd and IIFL Holdings Ltd to manage the share sale, according to its DRHP.

According to the second of the people cited earlier, the InvIT has become viable given recent clarifications from regulators such as Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority (Irda).

“A few clarifications were awaited for rules on investing in InvIT and REIT asset classes for mutual funds and insurance companies. These have been issued by relevant authorities in the last couple of months,” this person said.

At its January board meeting, Sebi had permitted mutual funds to invest in REITs (Real Estate Investment Trusts) and InvITs. In February, it issued the norms for the same. On 14 March, Irda amended guidelines for insurance companies to invest in these asset classes.

A mutual fund is permitted to invest only up to 5% of its net asset value in units of a single issuer of REITs/InvITs, the Press Trust of India reported on 16 February. According to Irda guidelines, an insurer can invest not more than 3% of the respective fund size of the insurer or not more than 5% of the units issued by a single REIT/lnvIT, whichever is lower.

“While overseas investors are used to these trust products and are expected to be big investors in trust listings in India, having a strong interest from domestic institutional investors is a must to have a robust secondary market for these instruments,” added the second person cited earlier.

“We do not believe in the market speculations. Sebi has already given its go-ahead to file offer document and accordingly, we are in the process of filing,” an IRB spokesperson said in an email response.

IRB has a portfolio of 20 road projects. Its consolidated debt as on 31 March 2016 was Rs13,840.35 crore.

Its InvIT offering will consist of a fresh issue of units, aggregating up to Rs4,300 crore, by the trust, and an offer for sale of units by the company and certain of its subsidiaries, namely Modern Road Makers Pvt. Ltd, Aryan Toll Road Pvt. Ltd, ATR Infrastructure Pvt. Ltd and Ideal Road Builders Pvt. Ltd, according to the draft document.

In 2014, Sebi allowed Indian firms to launch REITs and InvITs. These products are expected to help cash-strapped developers get easier access to funds while also creating new investment avenues for institutional investors and high-net-worth individuals.

Other infrastructure companies that have filed the draft offer documents for their InvITs include transmission line developer Sterlite Power Grid Ventures Ltd and roads developer Reliance Infrastructure Ltd.

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