InvITs may help unlock USD 5-7 bn from assets in roads, power

With the government and market regulator SEBI easing norms for setting up of InvITs, there is a potential to unlock USD 5-7 billion from assets in roads and power sectors in the next few years, says a recent report.
According to the report by FICCI-Centrum, in the next couple of years, infrastructure investment trusts (InvITs) are slated to pick up and have the potential of unlocking USD 5-7 billion from assets primarily in the roads, transmission and renewable segments.
"Companies with a strong portfolio, steady revenue stream and a resilient track record can be potential candidates for this type of investment. Firms in power, roads, transmission have applied for the SEBI registration," the report said.

Companies like IRB Infrastructure, MEP Infrastructure and GMR Infrastructure have so far received SEBI approval for listing InvITs.
According to the report, companies like IL&FS Transportation Networks, Sterlite Power Transmission, Adani Group and Mytrah Energy have possibly also got approval from the SEBI to set up InvITs.
However, the report notes that providing an attractive yield amid volatile interest rate is a major challenge for the issuers.

"Additionally, issuers may face challenge in obtaining a premium valuation for their assets which would depend upon a number of factors like sponsor credibility and experience, quality and revenue generation ability of underlying assets and government policies," the report said.

Moreover, InvITs would be competing with similar domestic products such as alternate investment funds (AIF) which offer more operational flexibility and allow investors to invest in all forms of infra assets.
With a view to help infra developers mop up funds for long-term projects in a more transparent manner, Sebi had in August 2014 introduced InvITs -- an investment vehicle that would enable promoters to monetise completed assets.
But the move failed to get enough attention of businesses owing to taxation issues, which have been resolved by the government.
Further, Sebi Board has also decided to relax norms for both REITs as well as InvITs.