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Business News/ Companies / News/  Sterlite Power, IRB Infrastructure inch closer to InvIT launches
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Sterlite Power, IRB Infrastructure inch closer to InvIT launches

IRB Infrastructure may file DHRP by mid-August, Sterlite by September; InvITs expected to encourage more foreign investment in India

Power transmission line developer Sterlite is looking to raise between Rs2,000-2,500 crore via the public offering of its InvIT. Photo: Premium
Power transmission line developer Sterlite is looking to raise between Rs2,000-2,500 crore via the public offering of its InvIT. Photo:

Mumbai: IRB Infrastructure Developers Ltd and Sterlite Power Grid are gearing up to list their Infrastructure Investment Trusts (InvITs), and one of them will be the first in India to do so, according to three people aware of the development.

Toll road developer IRB is looking to file its so-called draft red herring prospectus for its InvIT as early as around the middle of August, said one of the three people cited above.

InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yields and a liquid way to invest in infrastructure projects. InvITs are expected to encourage higher foreign investment in India’s infrastructure sector, reduce the burden on bank funding and allow developers to unlock tied-up capital.

“IRB has identified around six to eight BOT (Build, Operate, Transfer) road assets that it will put under the trust, which could be valued at up to 6,000 crore....the final decision on the extent of equity dilution that the company will look at in these assets is yet to be finalized," the first person cited above said.

IRB has 16 operational road assets (BOT), with total investment of 11,767.5 crore, according to the firm’s website. IDFC Securities Ltd and Deutsche Bank have been hired as the lead advisers for the InvIT listing.

In September, the company said its board approved the formation of the investment trust and transfer of the company’s undertakings to the trust.

In February, Mint reported that IRB was one of the first companies to file an application for creation of a trust with Sebi.

ALSO READ: IRB, GMR seek Sebi nod for first infrastructure investment trust

In March, the Securities and Exchange Board of India (Sebi) approved IRB’s trust application, allowing the company to work towards the launch of its InvIT.

Spokespersons for IRB and Deutsche Bank declined to comment. Emails sent to IDFC Securities did not elicit any response.

Power transmission line developer Sterlite Power Grid is looking to file its draft prospectus by the end of August or early September, said a second person.

“They have identified three operational assets that will be put under the trust. These include their Bhopal Dhule transmission project, Jabalpur transmission line and East North Interconnection transmission line," he said, adding that the company has a total of five operational projects.

According to the company’s website, Sterlite has built a portfolio of eight projects spanning nearly 6,000 circuit km, entailing an investment of about 10,000 crore.

The company is waiting for Sebi’s approval for its trust application, which is expected in the next few weeks, he added. Sterlite applied for Sebi’s approval in June.

Sterlite is looking to raise between 2,000-2,500 crore through the public offering of its InvIT, he said.

Morgan Stanley and Edelweiss Financial Services Ltd are advising Sterlite on its InvIT.

Spokespersons for Sterlite Power Grid and Morgan Stanley declined to comment. Emails sent to Edelweiss did not elicit any response.

Other infrastructure companies such as IL&FS Transportation Networks Ltd, GMR Infrastructure Ltd and MEP Infrastructure Developers Ltd are also looking to raise money and cut debt via structures such as InvITs.

In May, Mint reported that the Adani Group, the conglomerate with interests in resources, logistics and energy, had initiated preliminary discussions with investment bankers for the creation of infrastructure investment trusts across its businesses such as power, ports and transmission lines.

ALSO READ: Adani in talks with bankers to create infrastructure investment trusts

The idea of InvITs was first proposed in the Union budget in 2014.

InvITs received a much needed push in this year’s Union budget when finance minister Arun Jaitley announced that any distribution made out of the income of special purpose vehicles (SPV) to InvITs having specified shareholding will not be subjected to dividend distribution tax (DDT).

In May, Sebi released norms for public issue of units of InvITs—the final set of major rules that had been awaited before companies could start to market their issues.

According to industry experts, InvITs being a new class of products in the domestic markets, companies will have to focus a lot on marketing of the product.

“InvITs being a new product companies approaching the market first will have to spend more time on marketing and investor education, especially for domestic investors, for whom this is a new product," said Harish H.V., partner at Grant Thornton. However, he added that while foreign investors will be significant buyers of these products, domestic investors too are not shy of taking up new opportunities.

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ABOUT THE AUTHOR
Swaraj Singh Dhanjal
" Based in Mumbai, Swaraj Singh Dhanjal is responsible for Mint’s corporate news coverage. For the past eight years he has been writing on the biggest deals in private equity, venture capital, IPO market and corporate mergers and acquisitions. An engineer and an MBA, he started his journalism career in 2014 with Mint. "
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Published: 27 Jul 2016, 02:31 AM IST
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