Infra companies shelve plans to raise funds via InvITs

MUMBAI: Infrastructure companies are putting plans of raising funds through investment trusts (InvIT) on the backburner after lacklustre performance by the sector’s first two trusts has dampened sentiments, industry executives said. The Sterlite Power-sponsored India Grid Trust’s units are trading 5.5% below its listing price, while those of the trust floated by IRB Infrastructure are trading 20% lower than listing price.
IL&FS and Reliance Infrastructure are believed to have scrapped their InvIT plans while L&T is reviewing it, industry executives said. “The way prices of the first two InvITs fell and yield expectation has gone up, it doesn’t make sense for us to go for it now,” said K Ramchand, chief executive, IL&FS.

An InvITs offers an opportunity to promoters of projects to sell their stake in completed projects to the trust, which, in turn, can raise long-term and tax-free funds from unit holders. The financial instrument generated a lot of interest among investors but since it is a new instrument, they are yet to be confident of its risk-return profile.

WAIT & WATCH
Last year, yield expectation from these InvITs was pegged at 9-9.5% but now nothing less than 12.5-13% is expected, two industry experts said. Reliance Infrastructure got the National Highways Authority of India’s approval for its `3,000-crore InvIT a year ago and had plans of hitting the capital markets in June. But it dropped the plan after witnessing the muted performance of the first two InvITs. Engineering major Larsen & Toubro’s infrastructure development arm, IDPL is also believed to have put its `4,000-crore InvIT plan under review, according to industry sources.