Covid-19: InvITs may find it hard to meet 90% dividends distribution rule

Surplus generation will remain limited in Q1FY21 and NHAI compensation may take time, so till then, the liquidity buffer will be used for operating expenses and debt servicing, says Icra

Dividends from Infrastructure Investments Trusts (InvITs) may be one of the early ones to reflect the Covid-19 impact. InvITs distribute 90 per cent of the net cash flow to investors on a quarterly basis. Those with toll roads as assets, may feel the heat due to low collections.

“Surplus generation will remain limited in the first quarter, so dividend will get curtailed accordingly. National Highways Authority of India (NHAI) compensation may take time, so till then, the liquidity buffer will be used for operating expenditure and debt servicing,” said Shubham Jain, vice president and group head, Icra.  

The road ministry on March 25 announced a toll exemption for all vehicles across the country for a period of 21 days. The measure was taken to owing to the Covid-19 outbreak in the country. In a separate statement on Saturday, the power ministry placed a moratorium on payments from distribution companies to generation and transmission companies up to June end.

Regulatory mandates require InvITs to redistribute 90 per cent of the net distributable income it has received from its various special purpose vehicles (SPV)s. There are two InvITs in the listed space- Sterlite’s India Grid Trust and IRB Infrastructure Developers. India Grid’s SPVs are transmission assets, while for IRB these are road assets.

For IRB InvIT fund, the recently announced toll exemption for national highways may impact yield. “Dividend distribution process will not be impacted. Toll revenues were normal upto 18th -19th of this month, as mandated 90 per cent of that cash flow will be distributed,” said Virendra Mhaiskar, chairman and managing director for IRB Infrastructure. He added, the shortfall in toll collection for the last ten days of March will reflect on the yield of the InvIT.

IRB InvIT in a statement to BSE on Thursday also added, “We state that the prevailing condition may be treated as Force Majeure of Concession Agreement and Project SPVs are entitled for relief as per terms of the Concession Agreement.”

Executives from India Grid added collection for March is complete. “We have already earned the cash for Q4 in line with our expectations,” said Harsh Shah, chief executive officer for India Grid Trust. The executive refused to make any further forward looking statements.

IRB InvIT last announced a distribution payout in February of Rs 2.70 per unit, the third one in the current financial year. India Grid Trust in January announced a distribution of Rs 3.00 per unit for the third quarter of financial year 2019-20.