Firms wait and watch as investors turn cautious on InvITs

Initial performance of the country’s first two infrastructure investment trusts (InvITs) has turned investors cautious on such investments. Companies, however, are hopeful that with the current InvITs stabilising, investor confidence will return.

IRB Infrastructure and Sterlite Power are the two companies that have listed InvITs; both are currently trading below their issue price. “The performance of these two InvITs has forced other companies, which were considering tapping this market, to go into a wait-and-watch mode. We may see more issuance happening only when there is stability to the two listed ones,” said an industry expert, who did not wish to be identified.

Lalit Jalan, chief executive officer of Reliance Infrastructure, said investors were on the back foot. He, however, added that the market had now stabilised. R-Infra is confident of launching its InvIT for seven road projects in the current quarter.

IL&FS Transportation Networks Ltd (ITNL), Reliance Infra, and MEP Infrastructure are the three companies which had plans for an InvIT at various stages.

“We have got an in-principle approval. We should be getting authority clearance, which is required as a precondition, in the next few days, post which we should be able to prepare the draft red herring prospectus (DRHP) and file it,” Jayant Mhaiskar, managing director for MEP Infrastructure said in an email response.

ITNL, which plans for a private placement for its InvIT issue, is also expected to take a few more months. “They may look at it before the end of the current calendar year. The main concern has been the investor response based on the post-listing performance of the first two InvITs,” said a person with direct knowledge of the development.

IRB InvIT Fund early this week also announced its first distribution of cashflow to the tune of Rs 90 crore. Industry experts say this could help bring back investor interest to some extent.

There is another set of companies across the renewable and infrastructure space which could look at this instrument next year based on how the initial InvITs perform. However, not everyone is yet writing off the instrument as a viable infrastructure financing model. “InvITs are long-term investments, investors cannot expect an upside in the first few months of listing. We are optimistic in the long run this will prove as a good instrument for infrastructure financing,” said Venkataraman Rajaraman, senior director and head of infrastructure and project finance at India Ratings.


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