IRB InvIT Fund erases gains to close below issue price on stock market debut
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IRB Infrastructure Developers Ltd’s infrastructure investment trust, IRB InvIT Fund, on Thursday erased all listing gains and closed slightly below its issue price.
The stock opened at Rs103.25 on the BSE and touched a high and a low of Rs105 and Rs99.65, respectively, before closing at Rs101.79, down 0.21% from its issue price of Rs102.
“The listing opens up the window for other road developers to exit completed projects and churn their equity/deleverage balance sheet and would also spur interest from the NHAI (National Highways Authority of India) to award more BOT projects vs. EPC/HAM as bidding interest would be higher since developers would now have an exit option,” Emkay Global Financial Services said in a 24 April note to its investors.
IRB Infrastructure ended at Rs243.10, down 5.4% from its previous close, while India’s benchmark Sensex index fell 0.73% to close at 30,434.79 points.
The Rs5,033-crore issue was open for bidding between 3-5 May and got subscribed 8.57 times. The portion reserved for institutional investors was subscribed 10.81 times, while the portion reserved for high net-worth individuals and other non-institutional investors was subscribed 5.89 times.
On 2 May, the trust allotted shares worth Rs2,094.5 crore as part of the so-called anchor book allocation. Institutional investors who participated in the anchor book allocation included foreign investors such as the government of Singapore, Schroder Asian Asset Income Fund, Deutsche Global Infrastructure Fund and Jupiter South Asia Investment Co. as well as domestic investors such as Birla Sun Life Mutual Fund, HDFC Standard Life Insurance Co. Ltd and Birla Sun Life Insurance Co. Ltd.
The issue comprised a fresh issue and an offer for sale. The public offering was aimed to help IRB raise around Rs5,033 crore, including primary capital of Rs4,300 crore.
IRB will use about Rs3,300 crore to repay external debt and the remaining Rs1,700 crore will accrue to IRB as repayment of sub-debt/equity-invested.
This will provide the firm Rs1,700 crore of cash flow, which it can utilise to fund the equity requirement of current/future projects.
It will also reduce the gross debt at the consolidated level by Rs5,000 crore, reducing the leverage to 2 times from the current 3 times, thereby possibly improving its credit rating and borrowing cost.
At the same time, the company keeps 15% in the InvIT, ensuring it gains from the cash flows and potential upside in the InvIT units’ price.
IRB’s InvIT consists of six projects spread across five states. All projects are operational and adhere to the criteria defined in InvIT regulations.
Total capital invested in these projects is Rs8,080 crore, with equity investment at Rs2,150 crore.