RInfra evaluating InvIT for Metro, power transmission businesses

Anil Ambani-promoted Reliance Infrastructure may form an infrastructure investment trust (InvIT) for its assets like power transmission and Metro.

"For roads, we are clearly looking at a strategic buyer. We are also exploring InvIT for a host of infrastructure assets," said Lalit Jalan, chief executive officer, Reliance Infrastructure. He added that assets like power transmission and Metro could be looked at for InvIT.

RInfra's board on Monday approved a proposal to amend the memorandum of association of the company to allow for activities related to setting up any trust, including venture capital funds, InvITs, real estate investment trusts, the company said in a statement to BSE. The company will now seek shareholders' approval for the proposal through postal ballot.

The company operates 11 projects under its roads portfolio. Part of its power transmission business are assets worth Rs 7,000 crore and comprise about 6,280 circuit kilometres of transmission lines with a presence across seven states.

The company's Metro division operates the Mumbai Metro One line.

InvITs are trusts which invest in infrastructure projects, either directly or through special purpose vehicles. InvITs allow companies to unlock tied-up capital and also aid in financing and refinancing projects. The intent to allow for InvITs in India for infrastructure projects is to lower domestic loan exposure to the sector and bring in more foreign capital.

"The company wants to be a defence company, which is capital intensive. It has limited options to raise money. How successful an InvIT would be depends on the structure and which assets are part of it," said Santosh Yellapu, analyst with Angel Broking. RInfra entered the defence segment through an equity stake acquisition in erstwhile Pipavav Defence and Offshore Engineering Company.

The company's roads division reported revenue of Rs 259 crore in the quarter ending June 2016, 27 per cent higher than a year ago. The Mumbai Metro, which started operations in 2014, reported a loss of Rs 70 crore for the quarter.

Yellapu said, "Most of the road assets in the portfolio lack solid two-three year track record of regular operations with strong traffic growth. Also, the Metro and distribution businesses face regulatory issues. Investors looking at InVITs are mostly institutional investors with long-term horizon, and they would prefer to have more clarity on the pending regulatory issues," he said.

As on June 2016, the company had total standalone debt of Rs 14,000 crore. At a group level, Reliance has been on an asset monetisation spree to cut down its debt exposure. As part of the asset monetisation drive, RInfra sold its cement division to Birla Corp for Rs 4,800 crore in February.

The company in November 2015 also entered into a non-binding agreement with Canadian pension fund Public Sector Pension Investment Board (PSP Investments) to sell 49 per cent stake in its Mumbai power business. The company also continues to remain on the look-out for a strategic investor for its road portfolio but has failed to announce any deal so far.
AT A GLANCE

• RInfra operates 11 projects under its roads portfolio
• Part of its power transmission business are assets worth Rs 7,000 cr
• The company's Metro division operates the Mumbai Metro One line
• The company's roads division reported revenue of Rs 259 cr in the June quarter
• As of June 2016, the company had total standalone debt of Rs 14,000 cr
• RInfra sold its cement division to Birla Corp for Rs 4,800 cr in February
• InvITs are trusts which invest in infrastructure projects, either directly or through special purpose vehicles
• The intent to allow for InvITs in India for infrastructure projects is to lower domestic loan exposure and to bring in more foreign capital