IRB’s InvIT IPO targets Rs5,000 crore, maiden fund opens on 3 May2 min read . Updated: 25 Apr 2017, 06:08 PM IST
IRB's InvIT IPO, which is the first in this segment, closes on 5 May, and commands a price band of Rs100-102 per unit
Mumbai: Engineering company IRB Infrastructure on Tuesday became the first firm to announce a public offer in the InvITs space with a Rs5,000 crore plus public issue of its fund opening on 3 May.
The IPO, which is the first in this segment, closes on 5 May, and commands a price band of Rs100-102 per unit.
InvITs or infrastructure investment trusts are those debt instruments which be traded in the market and can act as investment vehicles for the sponsors.
The listing of instruments enable promoters of infrastructure to monetise completed assets and raise funds for other long-term projects.
IRB’s InvIT fund expects to raise Rs5,035 crore comprising fresh issue of units aggregating to Rs4,300 crore and an offer-for-sale of nearly 3.48 crore units by IRB Infra Developers and its arms — Modern Road Makers, Aryan Toll Road, ATR Infra and Ideal Road Builders, the company said today.
The InvIT trust has six operational road assets to begin with covering 3,000-lane km spread across five states.
The proceeds from the IPO will be utilised mostly to repay the debt of its special purpose vehicles (SPVs) created for the toll-road projects.
“The majority of the IPO proceeds, amounting to Rs3,350 crore, will be utilised to repay the external debt of the underlying SPVs and the balance remaining Rs1,700 crore will be utilised to pay back the sponsors’ sub-debt and equity.
The ₹ 1,700-crore payback will improve IRB’s net debt-equity ratio to 1.8:1 from 3:1," chairman and managing director Virendra Mhaiskar told reporters in Mumbai.
He said post issue, the trust is likely to offer a 12% return to mutual funds and foreign institutional investors and 10%to high networth individuals and retail investors. “We are announcing the launch of trust’s IPO heralding in an era that enables us to unlock capital and reinvest in new projects and simultaneously providing investors and opportunity of benefiting from the cash flows generated from the completed projects," Mhaiskar said.
In the InvIT fund, at an enterprise value of Rs5,992 crore, IRB as a sponsor, will be holding Rs900 crore worth of units, which is 15% of the enterprise value, he said. Mhaiskar further said post-IPO, IRB will bid for new projects and also realise the construction margin and once its cash flow stabilises, will offer it to the trust, which can then get a stable and strong yield on these operational assets for its unit holders.
“Since our Amritsar-Pathankot road project has also completed two years of operations, we will include it in the trust over the next six months, making it the seventh asset under the InvIT fund," he said.
IDFC Bank, Credit Suisse Securities and ICICI Securities are the lead managers to the issue while Karvy Computershare is the register to the issue.
The trust has been assigned a ‘AAA’ (stable) rating by both Care and India Ratings upto debt level of Rs1,000 crore.
IRB’s total road portfolio comprises 22 projects covering 10,000-lane kms across eight states of which 14 are already operational. GMR Infra, MEP Infra and IL&FS Transportation also have investment trusts registered with the Sebi.