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MUMBAI : Roads developer GR Infraprojects is planning to house some of its operating road assets under an infrastructure investment trust and raise as much as 1,200 crore through a public listing of the InvIT, said three people aware of the development.

This will be the first initial public offering (IPO) of an InvIT since 2017. IRB Infrastructure Ltd in 2017 did the first IPO of a road InvIT, which was followed by an IPO of power transmission assets by Sterlite Grid.

Since then, even as InvITs have seen a rise in popularity, companies and investors have preferred to set up them up privately.

InvITs manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects.

“GR Infra is in talks to appoint investment banks and lawyers and the conversations right now are happening on a public InvIT structure. The InvIT will house some of their operating hybrid annuity model (HAM) road assets," said one of the persons cited above, requesting anonymity.

As of June 2021, GR Infra had seven operating road assets, as per an investor presentation by the company.

“There is a lot of interest in Indian road projects from global investors seeking yield. There is a pool of global capital seeking higher returns, and roads are one of the few sectors in India that have a linkage to inflation, so there is a sort of inflation protection that is not the case with other sectors such as power. So, from a yield point of view, if you are getting inflation protection, then it makes it very attractive. Plus, the whole InvIT structure is more tested in roads and transmission than in renewables," said the second person.

The inflation link comes about because a large portion of the earnings from HAM road projects is through interest on future annuity payments to be received. The interest rate is linked to the average MCLR of the top five scheduled commercial banks, plus 1.25%.

If inflation moves up resulting in a hike in interest rates by the central bank then interest payments also go up as per the above formula, protecting the returns.

Emails sent to GR Infraprojects on Thursday remained unanswered.

InvITs have emerged as a preferred structure for investors, and are being set up to hold operating projects across roads, transmission lines, renewable projects, telecom towers and gas pipelines.

While companies such as Reliance Industries, Sterlite Power, IRB Infrastructure, L&T and others have set up InvITs to monetize their operating infra assets, even state-owned entities have warmed up to these structures.

In May 2021, PowerGrid Corp. of India Ltd raised over 7,700 crore through an InvIT of transmission lines. NHAI, too, recently raised Rs6,000 crore through an InvIT.

Mint reported on 3 September that the government’s ambitious 6 trillion monetization programme will be kicked off by leasing out more than 2,229km of gas pipelines of GAIL (India) Ltd to the private sector under the InvIT structure.

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