Toll road firm MEP Infrastructure Developers Ltd (MEPIDL) plans to file a draft red herring prospectus (DRHP) for its infrastructure investment trust, or InvIT, to raise at least Rs1,200 crore, by the end of this month, said a top executive.
The firm has seen interest from two of Canada’s largest pension funds—Caisse de Depot et Placement du Quebec (CDPQ) and Canada Pension Plan Investment Board (CPPIB)—as well as US pension funds for its InvIT, J.D. Mhaiskar, vice-chairman and managing director, MEPIDL, said in an interview on Monday.
InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects. In 2014, the Securities and Exchange Board of India (Sebi) allowed Indian firms to launch real estate investment trusts (REITs) and InvITs to help cash-strapped developers get easier access to funds.
On Thursday, the Reserve Bank of India proposed allowing banks to participate in REITs and InvITs.
“No final meeting has taken place with the Canadian pension funds. We are looking at Rs1,200 crore to Rs1,600 crore in terms of actual realization from our InvIT,” Mhaiskar added.
In addition, MEPIDL, with a consolidated debt of Rs3,000 crore, is also looking at floating rupee-denominated bonds to reduce its cost of borrowing by 1% from the current levels of 10.45-11.25%.
“We are awaiting no-objection certificates from the authorities. We are expecting NHAI (National Highways Authority of India) clearance within a week,” Mhaiskar said.
A host of Indian infrastructure firms are in various stages of rolling out their InvIT plans.
These include Infrastructure Leasing and Financial Services Ltd, which has initiated the process of listing its wind energy and road assets as separate InvITs, Sterlite Power Grid Ventures Ltd, Reliance Infrastructure Ltd, IRB Infrastructure Developers Ltd and Larsen and Toubro Ltd.
A CPPIB spokesperson declined to comment; queries emailed to a CDPQ spokesperson on Wednesday evening remained unanswered.
Experts say there is a lot of interest in the Indian roads sector. “A lot of good has happened in the last two years in the road sector, with a lot of contracts being awarded,” said A.B.L. Srivastava, chairman, Almondz Global Infrastructure Consultants Ltd.
MEPIDL has inked a memorandum of understanding with CIDB Holdings, a fully owned subsidiary of Malaysia’s Construction Industry Development Board, for collaborating on road, port and railway station development projects in India.
“We are looking at around 8-10 railway stations that have marque value not only in terms of land but also offer a geographical advantage. We are looking at developing, operating and maintaining these railway stations. CIDB has good experience in this area,” Mhaiskar said.
The railway ministry plans to redevelop 400 stations across the country. The project involves the modernization and upgradation of passenger amenities at stations by raising money through the commercial development of railway land at these stations.
MEPIDL has 16 operational projects—12 toll-collection projects across seven states, three operate-maintain-transfer projects covering 1,361.32 lane km and one build-operate-transfer project covering 42 lane km. The firm has also been awarded six projects under the new hybrid annuity model (HAM), covering 1,060 lane km.
Under HAM, the government commits up to 40% of the project cost over a period and hands the project over to the developer, who has to fund the balance with debt and equity, and is paid annuity income in instalments. The model was designed to make funding projects safer for banks and investors.