India’s first and only Infrastructure Investment Trust (InvIT) in the renewable energy sector, Virescent Renewable Energy Trust (VRET), is banking on the fast growth of the sector in India and latest round of fundraising would boost their chances to meet their target of 2 Gw of assets by FY24.
VRET was floated by Virescent Infrastructure, which is backed by global investment firm KKR. Virescent was set up in 2020 which subsequently floated the VRET in February this year. Last week, the company raised Rs 460 crore from foreign and domestic investors in its first round of funding.
Speaking to Business Standard, Sanjay Grewal, CEO, Virescent Infrastructure said that while the current funding was in line with SEBI regulations, it was enough to support their investment strategy.
“The current round of fundraising was to meet the SEBI regulations for a privately listed InvIT which required a minimum Rs 400 crore dilution and to bring in a minimum of five investors outside the sponsor KKR. We witnessed an oversubscription and we had to increase the size of the offering to Rs 460 crore to accommodate the minimum investment requirements of certain investors,” Grewal said.
The offering was led by AIMCo, one of the largest pension funds from Canada.
Grewal said the current round of fundraising and a AAA rating will help them reach their 2 Gw target much sooner than FY24. “We are the first RE platform to get a dual AAA rating. Our AAA rating will allow us to raise debt funding from multiple sources such as banks, Financial Institutions, pension funds, insurance firms etc at competitive rates and terms,” he said.
VRET’s initial portfolio comprises 9 operational solar projects, with an aggregated capacity of 395 MW. These projects are located in Maharashtra, Tamil Nadu, Uttar Pradesh, Gujarat and Rajasthan. The company said it is in "advanced discussions" to acquire a 55 Mw portfolio from Focal Energy. It has been assigned a ‘AAA/Stable’ rating for its loan facilities from CRISIL and India Ratings, S&P and Fitch’s India affiliates, respectively.
Grewal said there is a great opportunity in the Indian renewable market and he expects close to 6-8 GW of assets coming to the market in the next six months. “There are several types of sellers currently in the market - financial sponsors who wish to exit the RE market, conglomerates who have RE projects as their non-core business, corporates having de-leveraging considerations and developers who work on a capital churn or a ‘build and flip’ model,” he said.
In the past two years, several InvIT and REITs have been floated after regulations were eased. On April 26, 2021, the Insurance Regulatory and Development Authority of India (IRDAI) gave its nod to insurance firms to invest in debt securities of infrastructure and real estate investment trusts.
“PFRDA, RBI and IRDA have carried out the necessary amendments in current policies and regulations to facilitate increased quantum of investments in the RE sector and for InvITs. With these steps, the environment has been made more conducive for more investments in InvITs,” Grewal said, adding more InvITs in several sub-sectors would come up as the investment climate keeps improving.