Reliance Infrastructure has decided to put all its 11 road assets into an infrastructure investment trust (InvIT), which it expects to launch during the January-March quarter of the current fiscal, company sources told FE.
The company had been in talks for quite some time with Canada-based alternative assets manager Brookfield Asset Management to dispose of its 11 toll-based road assets. However, according to industry sources, it will now place all its road assets in the InvIT. The company may also put its metro and power distribution businesses into the InvIT at a later date. R-Infra has so far invested Rs 9,000 crore in its road projects, of which around Rs 5,500 crore is via debt, spanning 1,000 km across seven states. During the July-September quarter of the current fiscal, the roads business earned a revenue of Rs 237 crore, which was an increase of 13% year-on-year.
The listing of the InvIT will shift the debt burden from R-Infra to the specific road assets at the project level. “In general, an InvIT will help the sponsor de-leverage. The sponsor would then be in a stronger position to complete its existing under construction projects and also invest in new projects,” said Alok Deora, analyst at IIFL Wealth. “InvITs are likely to use the funds raised mostly to replace the high-cost debt of the SPV (special purpose vehicle) which would improve the viability of the project under the SPV,” Deora added.
The draft red herring prospectus (DRHP) for the InvIT will be filed in the next 15 days followed by other necessary documents, leading up to the launch in the fourth quarter, the company source said. Analysts said the market is looking for an 11% yield which would give R-Infra’s roads business a valuation that is higher than the book value of about Rs 10,000 crore.
Earlier in the day, the Securities and Exchange Board of India granted the certificate of registration to both the sponsor of the fund — R-Infra — and its trustee — Reliance Nippon Asset Management — to launch the Reliance Infrastructure InvIT Fund.