Mumbai: Reliance Infrastructure Ltd (R-Infra) has applied to the capital markets regulator to register an infrastructure investment trust (InvIT) for its toll road projects, two people aware of the development said.
InvITs manage income-generating infrastructure assets, offering investors a regular yield and a liquid method to invest in infrastructure projects. Developers can use the long-term funds raised to unlock value in completed projects or repay debt associated with them.
“The firm is looking to place its entire road portfolio of 11 assets, valued at almost Rs10,000 crore, under the trust,” said one of the two people cited above, requesting anonymity, as he is not authorized to speak to reporters. The company submitted its application last week, he added.
The application follows that of IRB Infrastructure Developers Ltd, which on 9 September filed the draft red herring prospectus (DRHP) for its InvIT with regulator Securities and Exchange Board of India (Sebi) to raise as much as Rs4,300 crore.
On Monday, R-Infra had informed the stock exchanges about its intention to float the InvIT. The firm is amending the object clause of its memorandum of association to include “setting up of any trusts, funds including venture capital funds, infrastructure investment trust and real estate investment trust and other alternative investment funds,” it said.
The InvIT move comes at a time when the Anil Ambani-led company is also trying to sell its road assets.
In February, Mint reported, citing people who requested anonymity, that the company was talking to global pension funds and investment firms, including Brookfield Asset Management Inc. and CPP Investment Board (formerly the Canada Pension Plan Investment Board) of Canada to sell its road assets. In May, the company’s chief executive officer, Lalit Jalan, said it was planning to sell its 11 toll road assets to an overseas buyer for more than $1.5 billion by September.
Reliance Infrastructure will continue to look at selling the portfolio as a whole while proceeding with the InvIT plan, the second of the two people cited above said.
In an emailed response, Reliance Infrastructure pointed to its proposal to amend its memorandum of association, adding it will seek shareholders’ approval for the same. “RInfra is evaluating InvIT for various businesses it operates like metro, power transmission, etc. It is an enabling provision and nothing has been finalized as yet,” the company said.
Brookfield declined to comment.
Reliance Infrastructure has invested Rs9,000 crore in its 11 toll road projects spanning 1,000km across seven states. More than Rs5,000 crore of this is debt. The company’s stand-alone debt (excluding its units) was about Rs15,500 crore as on 31 March. Consolidated debt stood at Rs25,000 crore in the same period.
In 2014, Sebi allowed Indian firms to launch real estate investment trusts and InvITs to help cash-strapped developers get easier access to funds while also creating a new investment avenue for institutions and high net-worth individuals. In May, Sebi released norms for the public issue of units of InvITs—the final set of major rules that were awaited before firms could start marketing their issues.
Reliance Infrastructure's plan to monetize its road assets follows its recent agreement to sell its cement assets to Birla Corp. for Rs4,800 crore and a non-binding term sheet to sell 49% in its Mumbai power business to the Canadian pension fund Public Sector Pension Investment Board, or PSP Investments.
(Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.)