India Grid Trust start on a negative note, falls 6.3% on debut

India Grid Trust's shares fell as much as 6.3% on their debut on Tuesday, clouding the listing prospect for other infrastructure investment funds after raising Rs 2,250 crore ($349.68 million) in an initial public offering (IPO).

At 12:40 pm, shares were down 1.5% at Rs 98.45 on BSE, having dropped to a low of Rs 94 as compared to their issue price of Rs 100.

The company is only the second infrastructure investment fund to list in India after IRB InvIT Fund debuted in May with another lacklustre opening. Its shares are trading below the issue price after the fund raised $782 million in its IPO.

Traders and investment bankers attributed the weak performance to a lack of clarity in India about this new product, an entity that invests in rent-yielding assets and distributes most of their income to shareholders as dividends.

"There seems to be a perception issue with these instruments," said Arun Kejriwal, founder of Kejriwal Research and Investment Services.

"There was marketing fervour when the issues came, but now reality concerns are stepping in. Until the first round of interest and dividend is paid out and people understand how these instruments operate, any further issue is most unlikely."

At least $1.3 billion in listings from other infrastructure investment funds were expected in India this year, including from Reliance Infrastructure InvIT, MEP Infrastructure Developers and IL&FS Transportation InvIT.

The India Grid IPO was subscribed only 1.35 times versus 8.6 times for IRB InvIT Fund, and well below the responses seen at other IPOs earlier in the year.

The lack of investor interest in infrastructure investment funds comes as India heads to a bumper year in IPOs, including up to $1 billion listings by National Stock Exchange as well as SBI Life Insurance Co Ltd.

"This is a yield-generating asset so we should not evaluate these instruments right away at the listing. We can evaluate these instruments once they give their first pay out to the unit holder," said Abhishek Lodhiya, senior equity research analyst at Angel Broking.