Mumbai: Oriental Structural Engineers Pvt. Ltd, a Delhi-based infrastructure firm, is planning to raise as much as Rs2,500 crore through an infrastructure investment trust (InvIT), said two people aware of the development.
InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects.
“Oriental Structural Engineers has a significant portfolio of build, own and transfer (BOT) road assets, which are operational. They have been exploring ways to monetize these assets and as part of that process they are currently in talks to appoint investment banks for managing an InvIT offering," said one of the two persons cited above, requesting anonymity as he is not authorized to speak to reporters.
“The fund-raise will help the company reduce its debt and also provide funds to invest in ongoing and upcoming projects," he said, adding that the company is likely to put around 3-4 significant road assets from its portfolio into the trust, which could see it raise around Rs2,500 crore.
According to the company’s website, it has invested over Rs10,000 crore in around seven completed and operational BOT projects. Some of the major road projects of Oriental Structural Engineers include Nagpur-Betul section of National Highway (NH)-69, Etawah-Chaheri section of NH-2 and Biaora-Dewas section of NH-3.
“Oriental Structural Engineers has currently got a lot of visibility for deployment of capital based on its four-decade-long expertise in building Indian infrastructure. With that target in mind, the company is actively considering pursuing a business trust as a tax-efficient vehicle for raising long-term capital," Sanjit Bakshi, director at Oriental Structural Engineers, said in an emailed response.
InvITs are only a recent phenomenon in the Indian primary markets, with just two companies having so far tested the waters with their offerings.
In May, IRB Infrastructure Developers Ltd raised Rs5,033 crore through the public offering of its infrastructure investment trust, IRB InvIT Fund. The offering was subscribed 8.5 times by public markets investors. IRB’s InvIT was the first such trust offering to hit the public markets.
Also in May, India Grid Trust, an infrastructure investment trust sponsored by Sterlite Power Grid Ventures Ltd, raised Rs2,250 crore through its initial public offering. The Sterlite InvIT offering saw a subscription of 1.35 times. Both the offerings were aimed primarily at helping the companies raise capital for deleveraging their balance sheets. However, both the IRB InvIT Fund and India Grid Trust are trading below their issues prices. IRB InvIT Fund has lost 5.36% from its issue price of Rs102, as of closing on 23 August, while India Grid Trust has lost 3.5% from its issue price of Rs98.40.
Several other companies too have been exploring the idea of raising capital through the InvIT route. In June, Mint reported that Delhi-based renewable energy firm Acme Group has appointed investment banks to start work on a plan to raise funds via an InvIT. The company is likely to raise up to Rs1,900 crore through the proposed offering. Earlier in August, ET Now reported that Larsen & Toubro’s infrastructure arm L&T IDPL, which is backed by the Canadian pension fund Canada Pension Plan Investment Board, is looking to raise up to Rs3,000 crore through an InvIT of its road assets.