Roadstar InvIT may onboard strategic partner to acquire large road assets

The InvIT wants to keep all options open, with acquisitions purely based on value. However, it may preferably target assets from the NHAI

Roadstar Infra Investment Trust (RIIT), an infrastructure investment trust (InvIT) backed by debt-ridden Infrastructure Leasing & Financial Services (IL&FS), may onboard a new strategic partner to acquire large road assets in the future, an executive said.

 

The InvIT’s 22 per cent units are held by IL&FS Group entities.

 

“One of the mandates of IL&FS is to monetise its assets. With the permission and consultation of the Securities and Exchange Board of India (Sebi), there may be an opportunity where IL&FS may want to exit, which will open up an opportunity for a strategic partner to buy into those units and then take on the role of the sponsor,” said Danny Samuel, chief executive officer, Roadstar Investment Managers Limited.

 

The firm is open to bidding for toll operation transfer (TOT) projects, “subject to finding the right partner who can bring in capital to acquire those assets, as they require a large amount of capital.”

 

IL&FS recently concluded its largest interim distribution payout of Rs 5,000 crore, bringing the total debt discharged by IL&FS Group to Rs 43,000 crore, representing 70 per cent of its total debt resolution target of Rs 61,000 crore. This distribution comprised Rs 3,500 crore in InvIT units and Rs 1,500 crore in cash.

 

“Interest (for strategic partnership) has been shown in the past by some entities, but the process has not yet started. IL&FS will decide on it and initiate the process in due course,” Samuel added.

 

Currently, there are no asset acquisitions under process, Samuel said. However, he stated that the InvIT will look for value-based acquisitions and may acquire smaller assets without needing a fundraise.

 

“We have some headroom available if there are smaller assets in the market that we can acquire because our leverage is currently at around 38 per cent, which will keep declining every year. But for any large acquisitions, we would need to look at fundraisers and possibly a strategic partner coming into the trust at some point,” said Samuel.

 

The InvIT is managing six assets worth Rs 8,592 crore, all from the sponsor. Of the six assets, four are toll roads, while the rest are annuity projects. The InvIT’s four assets are from the National Highways Authority of India (NHAI), while two are state projects.

 

“Going forward this year, we should see it (assets under management) at similar levels,” Samuel added.

 

The InvIT wants to keep all options open, with acquisitions purely based on value. However, it may preferably target assets from the National Highways Authority of India (NHAI).

 

“Non-NHAI or Ministry of Road Transport and Highways projects will always have a slightly higher weighted average cost of capital (WACC). But if we can find value in those projects with those risks and WACC, then we are agnostic to other factors,” Samuel added.

 

The InvIT’s sponsor firm, IL&FS, is now left with five operational road assets.

 

“Three of those assets are already being sold. One has received a bid, and one is in the process of closure with the National Company Law Tribunal (NCLT). So, we do not foresee too many sponsor assets coming in,” Samuel said.

 

The InvIT’s units were listed on the National Stock Exchange (NSE) on Tuesday, March 11.