MUMBAI: The initial public offer (IPO) for IRB Infrastructure Owner, India’s first infrastructure investment trust fund, will open for subscription on May 3 and close on May 5 with the price band fixed at Rs 100-102. Through the offer the trust is aiming to raise up to Rs 5,035 crore from investors which include the main offer aggregating Rs 4,300 crore, an offer for sale by IRB Infrastructure Developers and a green shoe option to retain up to Rs 435 crore worth of over-subscription.
IRB Infrastructure Owner – The offer, however, is not open to small and retail investors. Since InvITs are a new financial product that is yet to be tested in the Indian market, Sebi has not allowed retail participation in InvITs and has fixed the minimum application size for these units at Rs 10 lakh. Once the units are listed, these could be traded in lot sizes worth Rs 5 lakh or more, Sebi rules say. The trust’s units are rated ‘AAA’ by ratings agency CARE.
According to Venkatraghavan S, MD & Head – ECM, IDFC Bank, InvITs attractive investment propositions that lie between equity and debt. IRB Infrastructure Owner Virendra Mhaiskar says – “These are not as risky as equity (since projects have a track record and cash flow stability has been established) but with higher than debt returns, there’s still the slight amount of traffic risk etc., and distribution is based on actual cash flows,” Venkatraghavan said. IDFC Bank is the lead banker to the IPO.
The units would be listed on the bourses in about two weeks after the IPO closes. This is because after the money comes into the trust, the assets will be transferred to it and funds will be paid to the current owners of the projects which are slotted to come to the InvIT trust. According to the offer document, the trust will primarily own, operate and maintain six toll-road assets in Maharashtra, Gujarat, Rajasthan, Karnataka and Tamil Nadu. Currently these toll roads are operated and maintained under agreement with NHAI – IRB Infrastructure owner mr. Mhaiskar
IRB Infrastructure Developers, one of the largest roads and highways construction and development firm in the country, is the sponsor the InvIT. “IRB, the sponsor and promoter, is an entity with a track record of delivering projects and profitability. There’s good research coverage and people know about the assets. This product will enable the sponsor to monetise established assets so as to redeploy in new projects (which it has won), thereby ensuring efficient utilisation of capital and enhancing the growth of infrastructure in the country,” Venkatraghavan said.
How InvITs work?
In case of IRB Infrastructure MD, because the trust is the owner and operator of six toll roads around the country. The money that the operator will collect from vehicles that use these toll roads will be passed on to the investors holding InvIT units. According to Sebi rules, at least 90% of the funds collected, after paying for the expenses, taxes and repayment of external debts, should be passed on to investors every six months. IRB InvIT is expected to pay about 12% return to investors.