IRB Infra to list investment trust fund

IPO to raise Rs 4,300 crore through six road assets

Mumbai-based IRB Infrastructure Developers is closer to listing the country’s first infrastructure investment trust (InvIT) fund. The company on Thursday said it had filed the draft prospectus for an Initial Public Offer (IPO) of equity for such a trust, to raise Rs 4,300 crore through six road assets. In a filing with the BSE exchange, it said it had done so on Wednesday. In September last year, IRB Infra's board of directors had agreed to form an InvIT. Permission to do so came in March this year from the Securities and Exchange Board of India (Sebi).

The trust, said IRB Infra, would hold some of its own units and of some of its subsidiaries — Modern Road Makers, Aryan Toll Road, ATR Infrastructure and Ideal Road Builders. The IRB InvIT fund lists six operational road assets – IRB Surat Dahisar Tollway, IDAA Infrastructure, IRB Jaipur Deoli Tollway, IRB Tumkur Chitradurga Tollway, IRB Talegaon Amravati Tollway and  MVR Infrastructure and Tollways.

As of end-June, these six project Special Purpose Vehicles (SPVs) owned, operated and maintained toll road assets comprising 3,635 km of highways. The net proceeds, the company said in its draft prospectus, would be made in these project SPVs by way of issue of Rs 4,200 crore of debt.  “The project SPVs, in turn, intend to utilise the proceeds of such investment towards the partial repayment or prepayment of certain loans and facilities availed of by the project SPVs,” according to the document.  

In addition to the Rs 4,300 crore to be raised, IRB Infra reserves the option to retain over-subscription up to 25 per cent of the IPO issue size, it has said.  In its budget for 2014-2015, the government first allowed for infrastructure investment trusts, to ease financing in the sector. However, there has not been any significant development on these, for want of various clarifications and changes in the policy.  Sterlite Grid Power Ventures is another company which has filed with Sebi to form an InvIT.

In simpler terms, infrastructure InvITs are trusts which invest in infrastructure projects either directly or through SPVs. 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.

“The growth rates assumed for traffic and toll rate revision for these projects is highly optimistic. We need to see if those interested would go with such estimates and, hence, these assets might see some resistance. If the InvIT goes through, it is positive for IRB, as its debt/equity ratio improves, allowing the company more scope to invest in future projects,” said an analyst who did not wish to be identified.