Infra investment trusts hit new NHAI hurdle
As the financial year comes to a close, the first of the promised infrastructure investment trusts (InvITs) are yet to be launched.
These were held back, say bankers in the know, on issues from the National Highways Authority of India (NHAI). “NHAI is reluctant to allow transfer ownership of road assets to an InvIT for those assets where two years of operations have not been completed,” said one, who did not wish to be identified. Of the various assets that road developers wish to monetise through the InvIT route, some are recently commissioned ones.
In his last public statement as Securities and Exchange Board of India (Sebi) chairman, U K Sinha said one of his significant regrets was no launch of real estate investment trusts (REIT) or InVIT during his tenure. He hinted at problems with other regulators.
The wait for regulatory approvals and clarity has also led some others, like Reliance Infrastructure, to consider parallel sale discussions for its road division. “Some of Reliance Infra’s projects do not qualify for the two-year operations period and hence there is still ambiguity of how their (proposed) InVIT will go about. They are also holding parallel talks to look for a sale option for these assets, including with some Canadabased pension funds,” said the banker first quoted.
In an e-mail response to a query on sale of assets, Reliance Infra said, “We do not comment on speculative questions.” It had filed a draft prospect for the proposed trust and awaiting approval.
InvITs are trusts which would invest in infrastructure projects either directly or through a Special Purpose Vehicle. These would allow companies to unlock tied capital in completed projects, while aiding in financing and refinancing on infra projects. The intent to allow for InvITs in India is to lessen the domestic loan exposure to the sector and bring in more foreign capital.
In addition to the NHAI hurdles, most InvITS are still awaiting regulatory approvals at different stages, raising concern on whether any of these would hit the market in the March quarter. “We are not seeing any action in terms of InvITs so far,” said a second investment banker, on condition of anonymity.
Reliance Infra, IRB Infrastructure Developers, IL&FS Transportation Networks (ITNL), Sterlite Power Grid Ventures and MEP Infrastructure Developers are some companies which have an InvIT planned for their assets. E-mail queries to Sterlite, MEP and ITNL also remained unanswered.
Of these, IRB Infra is in the most advanced stage with its InvIT process. “We have received approval from Sebi and are in process for filing an offer document,” said its spokesperson.