InvITs struggle over tax clarification, low investor interest

Listings of infrastructure investment trusts (InvITs) have taken a back seat though the country’s first two InvITs were listed this financial year (FY18).


With investors still not bullish about the instrument and developers seeking taxation clarity, it may take longer for InvITs to gain momentum. IRB Infrastructure Developers was the first company to list its investment trust, while Sterlite Power Grid Ventures’ IndiGrid Trust was the second. Both are trading below their listing price on the BSE.


“Alternative funding avenues like InvITs have not picked up after initial issuance. The weak market response to the listed InvITs and pending clarity on tax liability arising at the time of transferring assets to the InvIT have made prospective InvIT issuers put their plans on hold,” said Shubham Jain, vice-president and sector head, corporate ratings, Icra.


According to industry sources, the required tax clarification is expected to come in the Budget session.


“Companies are seeking a clarification pertaining to certain tax structures, and the ministry is now expected to clarify in the budget session,” said a spokesperson for IL&FS Transportation Networks (ITNL).


In addition to tax issues, companies are struggling to get investor interest.


Certain others such as MEP Infrastructure Developers are evaluating bundling various other road projects. “Investors want to see what the yields and gains are from the current two InvITs. For MEP Infrastructure, we are evaluating if adding more road projects to the InvIT can make it attractive. We may evaluate an InvIT for the March quarter or next year,” said Jayant Mhaiskar, vice-chairman and managing director, MEP Infrastructure.


GMR Infrastructure, Reliance Infrastructure (RInfra), MEP Infrastructure, ITNL, and Larsen & Toubro (L&T) are companies that are in different stages of exploring InvITs. Queries sent to GMR Infrastructure and RInfra remained unanswered. Of these, L&T remains confident of launching an InvIT this financial year.


InvITs are trusts that invest in infrastructure projects either directly or through special purpose vehicles. These allow companies to unlock tied capital in completed projects while aiding in financing and refinancing infrastructure projects.


Almost a year ago, industry experts said InvITs had the potential to garner $5-7 billion in the next few years. So far, IRB has raised around Rs 5,000 crore through the InvIT and Sterlite has mobilised Rs 2,250 crore.

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