MEP exploring private placement option for InvIT

Private placement option may offer MEP more flexibility to bundle their projects, the MD said

Infrastructure and toll management company MEP Infrastructure Developers Ltd is exploring private placement for its infrastructure investment trust (InvIT) against its earlier plan for a public listing of the InvIT, company officials said. 
 

“We are currently evaluating private placement as an option,” said Jayant Mhaiskar, vice chairman and managing director, MEP Infrastructure. 
 

Mhaiskar added that private placement option may offer the company more flexibility to bundle their under construction projects in the InvIT model. “InvIT through private placement, we understand this can be used for under construction projects, we are consulting bankers to explore if the HAM projects will also qualify for the same and then we can bundle them,” he said. 
 

HAM or hybrid annuity model projects were introduced a year back to address funding issues in the highway sector. These projects are funded through a combination of upfront grant and annuity payments made to the contractor.

On January 19, MEP said it successfully completed the financial closure for two of its Hybrid Annuity projects in Ratnagiri (Arawali–Kante section and Kante - Waked section). So far, MEP has won six projects across Maharashtra and Gujarat worth around Rs 3,837 crore under the HAM model. 
 

Mhaiskar added the company is also seeking clarity if there is any clause over the mandated completion percentage for under construction projects. “The only ambiguity is whether any under construction will qualify or there is a rider,” he said. 

However, a higher proportion of under construction projects may affect yield expectations. “Private placements do not have a cap on under construction projects compared to a public listing. However too many under construction projects may not be lucrative for investors from a yield perspective,” said Chintan Lakhani, associate director- Infrastructure Ratings, India Ratings and Research.
 

An analyst with a domestic brokerage firm who did not wish to be identified added, “An InvIT may not bring a great advantage to the company other than taking the debt of their books. I do not expect them to receive any significant proceeds beyond that.” In June 2016, MEP Infrastructure informed the stock exchanges that it has received a certificate of registration for MEP Infrastructure Investment Trust.
 

Infrastructure InvITs are trusts which invest in infrastructure projects either directly or through special purpose vehicles (SPV)s. These would allow companies to unlock tied capital in completed projects, while aiding in financing and refinancing on infrastructure projects. The intent to allow for InvITs in India for infra projects is to lower the domestic loan exposure to the sector and bring in more foreign capital.  
 

Reliance Infrastructure Ltd, IL&FS Transportation Networks Ltd (ITNL) and IRB Infrastructure are some of the companies which are in the advance stage of raising funds through this model.