IRB InVIT to raise Rs 2,667 crore via term loans to refinance existing debt

Post refinancing, roads SPVs to be free of external debt

IRB Infrastructure Investment Trust (InVIT), a vehicle set up to manage road assets, is planning to raise Rs 2,667 crore through term loans to refinance existing debt. This will free its six Special Purpose Vehicles (SPVs) of any external debt, elongate the duration of debt, and reduce cost of funds.

Its five operational toll assets\SPVs are managing road assets in Karnataka, Punjab, Rajasthan, and Maharashtra. In FY23, IRB InvIT acquired VK1 Expressway Private Ltd, which has Rs 9.55 crore debt at the SPV level and an acquisition finance loan of Rs 188 crore raised at the InvIT level.

The company did not respond to the queries from Business Standard.

Rating agency India Rating (Ind-Ra) had rated the proposed loan “AAA\stable”. The rating is supported by an elongation of the loan tenor and lower financing cost after the debt refinancing. For the new term loan, Ind-Ra has fully consolidated the cash flows of all six SPVs.

IRB InVIT’s gross income rose two per cent year-on-year (Y-o-Y) to Rs 275.2 crore in the quarter ended June 2024 (Q1FY25) from Rs 268.7 crore in the same quarter previous year (Q1FY24). However, its profit after tax (PAT) fell 15 per cent Y-o-Y to Rs 85.8 crore in Q1FY25 from Rs 100.6 crore in Q1FY24, in line with analyst expectations.

According to Ind-Ra, ratings are constrained by the moderate debt structure due to highly back-ended repayment. The risks associated with the toll road projects, including that of low traffic growth, traffic diversion, and alternate route, also have an impact on performance.

IRB InvIT was expected to maintain robust coverage metrics. With a moderate growth rate over the debt tenure, its debt service coverage ratio would be comfortable in the medium term. 

The overall operational track record of the combined portfolio (around nine years) and highly fungible cash flows of the IRB InvIT structure bolster its overall credit profile, the rating agency added.