Private placement for L&T InvIT likely
Lars en& Toubro is likely to opt for private placement of its infrastructure investment trust for an enterprise value of ~56 billion this month. I CR A expects the move would help cut ~34 billion debt related to the five special purpose vehicle companies by 62 percent.
Engineering conglomerate Larsen & Toubro (L&T) is likely to opt for private placement of its infrastructure investment trust (InvIT) for an enterprise value of ~56 billion this month, according to people with direct knowledge of the development.
Rating agency ICRA, which has a call on the InvITs, says it expects the fund raising would help cut the ~34 billion of debt related to the five Special Purpose Vehicle companies in question by 62 per cent.
ICRA has assigned a triple-A rating for IndInfravit, the InvITs sponsored by L&T’s subsidiary, L&T Infrastructure Development Projects (IDPL), with a stable outlook.
The relevant spokesperson for L&T declined to comment for this report.
On the debt reduction for the five project companies, ICRA says, “Consolidated external debt (excluding National Highways Authority of India's deferred premium) across the five SPVs was around ~3,400 crore (~34 billion) as on December 31, 2017. The issuer rating also takes support from the sizable reduction in the consolidated external (other than that from sponsor/group) debt of the trust and the SPVs by 62 per cent to
~13 billion, as a majority of the funds raised by the trust from unit holders will be used to retire external borrowings of the SPVs.
All the external debt in SPVs, except the debt from the infra debt fund in Devihalli Hassan Tollways, Krishnagiri Thopur Toll Road and Western Andhra Tollways, would be replaced by debt from the trust.”
In September 2017, L&T informed the stock exchanges that it had applied for registering its InvITs with the Securities and Exchange Board of India. In its results press conference this January, the company said it was on track with plans to launch its InvITs before the end (March 31) of this financial year. “The March deadline is likely to be met, as this would be a private placement and the potential investors are already in place for the InvIT,” said the person earlier quoted in this report.
According to the note, L&T has proposed to include Devihalli Hassan Tollways, Krishnagiri Thopur Toll Road, Krishnagiri Walajahpet Tollways, Western Andhra Tollways and L&T BPP Tollways under the InvITs. IDPL currently holds the entire equity in each of the underlying SPVs. The InvITs shall hold all the equity in each of the SPVs after acquiring it from the current shareholder.
Since the open signal on InvIT in 2016, two companies have listed these — Sterlite Power’s India Grid Trust and IRB Infrastructure Developers’ IRB InvIT fund.
InvIT were introduced as an instrument to help infrastructure companies unlock value in existing road projects and ensure more capital was available for future ones.
According to L&T IDPL’s website, the portfolio of road projects is a total of 17, of which 15 are operational and two are under implementation. L&T IDPL’s website has 15 operational road projects and one transmission line project.
ICRA gives triple-A rating; expects fundraising to reduce SPV debt by 62%